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What is Home Loan

A House Loan or Home Loan simply means a sum of money borrowed from Banks or NBFCs to purchase a house. People generally take a home loan for either buying a house/flat or plot of land for construction of house or renovation, extension and repair to the existing house. The property is mortgaged to the bank or the lender as a security till the repayment of the full loan amount. The Banks and NBFCs will hold the deed to the property till the loan has been paid back with the interest due on it. HDFC Bank provides Home Loan for Central Government Employees which includes HDFC Home Loan for Maharatna Companies, Mini Ratna Companies, PSUs etc. SBI provides Home Loans for Salaried, Professionals, Self Employed etc through various schemes.

We at LoanPakka offer Home Loan of various Banks and NBFCs to compare & choose cheapest i.e Home loan with lowest interest rates, processing fees and lowest foreclosure charges among all the Banks & NBFCs.

Our experts will reply you with a quote very soon

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Types of Home Loan

Home Purchase Loan

A home purchase loan is a type of loan specifically designed to help eligible individuals or families buy a home, whether it’s a flat, house, or any other type of residential property. These loans are typically offered by banks, financial institutions, or housing finance companies. The primary purpose of a home purchase loan is to assist people in buying a property they may not be able to afford upfront, allowing them to pay for the home over time through monthly installments.For first-time buyers, this loan can be particularly helpful, as it makes homeownership more accessible.

Home Construction Loan

A home construction loan is a type of loan offered to individuals who already own land or a plot and wish to build a house on it within a specific period of time. Unlike a home purchase loan, which is used to buy an already constructed property, a home construction loan is designed to cover the costs associated with building a new home from the ground up.The loan amount is typically based on factors like the estimated cost of construction, the borrower’s income, creditworthiness, and the value of the land on which the house will be built.This type of loan is ideal for those who want to build their dream home but do not have enough funds to cover the construction costs upfront. It provides the financial support necessary to turn the land they own into a fully constructed home within a defined timeframe.

Home Extension/Renovation Loan

A home extension/renovation loan is a type of loan provided to individuals who wish to extend, upgrade, or renovate their existing house or property. This loan is ideal for homeowners who need extra space, want to remodel certain parts of their home, or need to improve the property’s overall condition, such as adding a new room, modernizing the kitchen, repairing structural issues, or enhancing the property’s value.Overall, a home extension/renovation loan provides the financial support needed to improve or expand an existing home, offering homeowners the ability to customize their living space without needing to sell their property and buy a new one.

Balance Transfer Home Loan

A Balance Transfer Home Loan is a financial option that allows homeowners to transfer the remaining balance of their current home loan from one bank or financial institution to another, typically when the new lender offers a lower interest rate. This process can help borrowers reduce their monthly EMI (Equated Monthly Installment) payments or potentially shorten the loan tenure, thereby saving money on interest over the life of the loan.A balance transfer home loan is an effective way for homeowners to save money by switching to a lender offering better terms, but it’s important to carefully evaluate the total cost of switching and the long-term financial impact.

Home Loan Topup​

A Home Loan Top-Up is a facility offered by some banks and Non-Banking Financial Companies (NBFCs) that allows existing home loan borrowers to borrow an additional amount on top of their existing home loan. This top-up loan is generally offered at a lower interest rate than personal loans or other types of unsecured loans, since it is still secured against the property.In summary, a Home Loan Top-Up is a useful facility for homeowners who need extra funds for various purposes but want to avoid higher interest rates and lengthy approval processes associated with other types of loans. It allows them to borrow more while leveraging their existing home loan, offering a convenient and cost-effective solution.

Land/ Plot Purchase Loan

A Land/Plot Purchase Loan is a type of financing provided to individuals who wish to buy a piece of land or plot with the intent of constructing a house on it within a specified period. This loan allows borrowers to purchase land without having to pay the full amount upfront, helping them secure the property they plan to develop. The loan amount is typically based on the value of the land being purchased, and borrowers may need to make a down payment, with the loan covering the remainder of the cost. The loan usually comes with fixed or floating interest rates, and the repayment tenure can range from several years, depending on the loan amount and the lender’s terms. Lenders often require that construction on the land must begin within a certain time frame, typically 2-3 years, or else penalties may apply. 

HOME LOAN ELIGIBILITY

Your chances of getting loan will be decided by the following factors

  • Income/ Other incomes
  • Age
  • Qualification
  • Credit Score
  • Property Value
  • Work Experience of Borrower
  • Bank Balance
  • Number of Dependants
  • Assets/ Liabilities
  • Location and Age of Property

Documents Required for Home Loan

  • Complete Home Loan Application form with 2 passport size photographs
  • Photo Identity Proof: Passport/PAN card/Driving Licence/Voter ID.
  • Residence Address Proof: To Whomsoever It May Concern/Utility Bill/Quarter Allotment letter/Aadhaar Card.
  • Income Proof: Salary slip & Form 16
  • Bank Statement: Last 6 months statements.
  • Property Documents: Sales Deed, Transfer of Ownership
  • Advance Processing Cheque: a Cancelled Cheque for validation of Bank Account.

Documents Required for Home Loan Transfer

  • Filled Application form for loan transfer.
  • Passport size photographs
  • Latest 3 Months salary slips
  • Six months Bank Statements (Salary Account).
  • Identity Proof: Pan Card/Voter ID card/Driving Licence.
  • Proof of address: Utility Bill/To Whomsoever Concerned/ Aadhaar Card.
  • Proof of Age: 10th or 12th Certificate/ Pan Card/ Birth Certificate
  • Bank Statement from wherein the home loan EMIs were deducted amounting to last 12 months of the account
  • The loan statement copy & complete set of documents relating to the property that is currently in possession of the present home loan lender.

Other Documents Required

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  • Copy of plan approved for the proposed construction/extension.
  • Cost estimation/valuation report from Banks authorised surveyor/ evaluator.
  • Allotment letter of housing board/NOC of the Society/Builder etc. as well as any other land use certificate/other.

Points to Compare before you apply Home Loan

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Compare Interest Rates

Interest rate are one of the most important factors while taking the Home Loan. The Banks and NBFCs offer home loans in fix floating and mix rate packages. Fix rate come with specific interest rate for the entire tenure of the loan while floating rate are link to MCLR or PLR , which means that they can change during the tenure. Mix rate offer a fix rate for a specific period and floating rate thereafter. Therefore choose wisely, as they will determine your monthly EMI and overall interest amount you pay to the bank.

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Prepayment & Foreclosure charges​​​

This charges are levied as a percentage of the outstanding amount when you repay your loan amount prior to the stipulated home loan tenure. Presently, RBI baned prepayment or foreclosure charges or penalties so make sure you do not pay anything extra while foreclosing or prepaying your home loan amount.

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Compare Processing Fees

Every bank charges certain percentage on the total loan amount as processing fees also known as administrative charges. This is one time payment and it is not refundable. Processing fees can either be a fix amount or a certain percentage of the loan amount. Therefore compare and select lowest fees on platform “LoanPakka.com”.

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Miscellaneous Charges

One must compare other charges like late payment charges, legal fees, conversion charges, administrative charges etc. before selecting the Banks or NBFCs for Home Loan.

FREQUENTLY ASKED QUESTIONS ON HOME LOAN

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Is a Co-applicant Necessary for Home Loan?

Yes, It is mostly mandatory to have a Co-applicant. If someone is the co-owner of the property in question, it is necessary that he/she also should be Co-applicant for the Home Loan. If you are the sole owner of the property, any member of your immediate family can be your Co-applicant.

What is the Maximum Amount I can Borrow?

Most lender requires 10-20% of the home purchase price as a down payment from you. It is also called ‘one’s own contribution’ by some lenders. The rest which is 80-90% of the property value is financed by the lender. The total financed amount also include registration, transfer and stamp duty charges.

How will be the disbursement takes place?

The loan amount can be disburse in full or in instalments which usually does not exceed three in number. In case of a under contraction property, the disbursement of loan amount is based on the progress of your construction as assessed by the lender and not necessarily according to the developer’s agreement. Make sure to enter into an agreement with developer wherein the payments are linked to the construction work and not predefined on a time based schedule. In case of fully constructed property, the disbursement is made in full.

What are the Interest Rate Options?

Home Loan rates can either be fixed or flexible. In the former, the interest rate is fixed for the loan entire tenure. While in the later, the rate does not remain fixed.

How does One Make EMI to Banks?

Generally the lenders offer various modes for loan repayment. One may issue standing instructions to the bankers to pay the instalment through ECS (Electronic Clearance System), opt for direct deduction of the monthly instalments by your employer or issue post-dated cheque from a salary account.

Can you Prepay your Loan Ahead of Schedule?

One may prepay the loan ahead of its original tenure. If you are on a floating interest rate, no charge will be applicable. If you are on a fix rate, there may be a charge applicable.

What is the partial prepayment of the home loan? Does it helps to repay the loan?

Partial prepayment refers to any payment made by the borrower in addition the regular EMI. It directly reduces the outstanding principle amount and the interest gate calculated on the reduced principle amount. Prepayment helps in reducing the total interest outgo as the loan tenure get reduced. The higher the prepayment amount and the longer the period, the more will be your savings.

What documents should be received from the banks each year against the EMI I pay?

Every Home Loan lender is supposed to furnished you with a statement, at the beginning of the year, showing how much of the total interest and principal is expected to be repaid during the year. This statement helps you to declare the figures to your accounts departments as a declaration of investment proof for tax deduction.

Should one take insurance to cover home loan liability?

It is always better to cover your Home Loan liabilities and not let it fall on your family in your absence. He may either buy a pure term insurance plan or mortgage insurance plan for amount equal to loan amount for a specific tenure. One is allowed to pay a single premium or a regular premium to buy any such plan. It is however not compulsory to buy such insurance plan while taking a Home Loan from the lender.

I already have a home loan? Would I get home improvement loan?

A home improvement loan is offered to facilitate improvements of self-owned property to existing or new customers. This loan may be used for repairs, renovation improvements & extensions of the home. The loan works like, the borrower will have to work out a cost estimate of the work & give it to the lender, who will take a quotation from the contractor to verify to estimate submitted. The loan amount is released at the rate of the construction work to the contractor to whom it is due.

What are the tax benefits on home loan?

Of the total annual EMIs, the principal amount component gets tax benefits under Section 80C of the Income Tax Act. Even the partial prepayment amount qualifies for the same but within the limit of 1.5 Lacs under Section 80C. Further, if it is self-occupied property, the interest paid is deductible upto Rs. 2 lacs in a year under section 24. However, to get the deduction under Section 24, the buyer must get possession of the property within 3 years of taking the loan. If the 3 years deadline is not met, the deduction benefits reduces from Rs 2 lacs to only Rs 30,000 a year.