Frequently Asked Questions for Housing Finance
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Frequently Asked Questions and Answers for Housing Finance
1. Who can apply for a home loan?
Any Indian Resident, Non-resident
Indian or Person of Indian Origin can apply for a home loan if they
are 21 years of age at the origin of the loan and 65 years or below
at loan maturity. Housing Finance Companies (HFCs) usually give home
loans for properties located in India to people who are employed or
self-employed, with a regular source of income.
2. When can a home loan be applied for?
An individual can apply for a home
loan even before the property has been selected. The loan amount is
sanctioned based on the ability to repay. This helps in planning a
budget while purchasing the house.
3. How does the lender calculate eligibility?
Loan eligibility is calculated based
on the ability to repay. Factors such as income, age, qualifications,
number of dependants, spouse's income, assets, liabilities, stability
and continuity of occupation and savings history are taken into consideration.
4. How do I repay the loan?
You can repay the loan in Equated
Monthly Installments (EMIs) comprising principal and interest. Repayment
by EMIs commences from the month following the month in which you
take full disbursement. Till then, you only need to pay the interest
on the amount disbursed.
5. What is pre-EMI interest?
Before final disbursement, you may
have to pay interest on the portion of the loan disbursed. This is
called pre-EMI interest. Pre-EMI interest is payable every month from
the date of each disbursement up to the date of EMI commencement.
6. Is there a fixed interest rate for the duration of the loan?
Most HFCs offer the fixed rate as
well as the variable rate options to customers.
7. What is a fixed rate loan?
A rate of interest that is constant
throughout the duration of the loan is known as a fixed rate loan.
8. What is a floating rate loan?
A floating rate is when the interest
rate on the loan changes according to the rates in the market during
the period of the loan.
9. It is better to opt for a fixed or a floating interest rate?
If interest rates are falling, a
floating rate loan is a better option. But when interest rates are
rising, opt for a fixed rate loan, because you will then know in advance
what your EMIs will be.
10. Is there a difference between monthly rest & annual rest?
On the basis of the principal at
the start of every month, the interest is calculated in monthly rest.
For annual rest, this is done at the beginning of every year.
11. What are the other areas of expenditure before I get a home loan?
Processing and administrative fees,
pre-payment charges and delayed payment charges, legal fees, technical
fees, stamp duty and registration of mortgage deed are all likely
areas of expenditure.
12. Is a guarantor required?
A guarantor is insisted on by the
HFC so as to ensure that the loan is paid back in full and in time.
The guarantor is responsible for the repayment of the loan if the
borrower is unable to do so.
13. Can I repay the loan before the set date of repayment?
You could do this, but some HFCs
require a pre-payment fee to be paid. Check with your HFC.
14. How do I select my HFC?
Various considerations would help
you zero down on the HFC most suitable for your loan requirements.
Analyse the following points before taking your decision:
15. Can a loan be switched over if I have obtained it at a high rate
of interest, but another HFC is offering a better interest rate?
You could do this. After discussing
the reasons with the current HFC, they may even reconsider the interest
rate.
16. What is the maximum amount of housing loan available?
The maximum amount is 80% of the
cost of the property, including the cost of land, subject to a maximum
amount of Rs 1 crore.
17. What is the amount I can borrow and what are the criteria?
Generally, the amount is up to 2.5
times your gross annual income. But your equated monthly installments
usually should not exceed 35 per cent of your gross monthly income.
Besides this, HFCs will assess your eligibility based on your ability
to repay.
18. What is the period in which I will have to repay the loan?
Usually in a period of between 5
to 15 years, but definitely before you retire. A few HFCs also offer
a 20-year repayment period, usually at a higher interest rate.
19. How is the interest calculated on my loan?
Most HFCs follow the yearly reducing
balance method, which accounts for your principal repayments only
at the end of their financial year. Thus you pay interest on the principal
that you have already returned to the HFC during the year. The effective
interest rate is thus higher than the quoted interest rate by around
0.7 per cent. Banks and some HFCs, in contrast, follow the daily or
monthly reducing balance method, which results in a lower interest
burden.
20. How do I apply for a loan?
21. Who can be co-applicants for the housing loan?
Usually a spouse can be a co-applicant.
Other immediate family members are also acceptable to some companies,
depending on merits. If both partners are working, it is better to
have your spouse as a co-applicant since this will entitle you to
a much larger loan.
22. What security do I have to provide?
A first mortgage of the property
to be financed. The title should be clear marketable. Some HFCs may
also require collateral security like the assignment of life insurance
policies, pledge of shares, NSCs, units or mutual funds, bank deposits
or other investments.
23. Does the Agreement for Sale have to be registered?
Yes. In many Indian states, the
agreement between the builder and purchaser has to be registered.
This can be done at the office of the sub-registrar appointed by the
State government.
24. Does the property have to be insured?
The property should be insured against
fire and other hazards and the HFC will have to be the beneficiary
of the policy.
25. How long does it take to get my application processed and my loan
sanctioned?
It will take around 15 days for
the processing of your application if your documents are in order.
Make an application only if you are eligible for the loan since the
HFC will not return the application-processing fee. It will take another
week for the company to check out your property papers and make the
disbursement.
26. When do I have to make my share of the contribution to the purchase
price of the property?
You will have to make your payments
towards the property price up-front before the HFC disburses any installment
of the loan.
27. What do I have to do when my housing loan is sanctioned?
You must submit the property papers
and pay an administrative fee (approximately 1 percent). When the
HFC clears these papers, you must take the first disbursement of the
loan within a stipulated period (usually three months) and avail of
the entire loan within about a year's time.
28. In how many installments can the loan be disbursed?
The loan can be either disbursed
in full for outright-purchase / ready properties or in a few installments
for under construction properties. The disbursement will be made taking
into account the requirement of funds and the progress of construction.
29. Do I get tax benefits on the loan?
Yes. You are eligible for certain
exemptions on both the principal and interest components of the loan
as per the Income Tax Act, 1961. The principal repayment of the loan
up to Rs 10,000 is eligible for a rebate @ 20 per cent U/s 88 of the
IT Act. The income tax exemption limit for interest paid on housing
loans is Rs 75,000 per annum on self-occupied houses. Therefore an
interest payment of up to Rs 6,250 per month can be deducted from
taxable income in arriving at the total income tax payment of an individual.
30. Can I get a loan for extension / upgradation / renovation of my
house?
Yes, these loans are available from
some HFCs. However the loan terms may be different from the usual
housing loans.
31. Can I sell the property on which I have taken the loan?
Yes. But the loan will have to be
repaid before the sale is effected. Some HFCs allow the transfer of
loan to the buyer of the property, depending on his eligibility for
loan.
32. Can I rent the property on which I have taken the loan?
Yes, this is allowed by HFCs.
|
