What is Home Loan?
“The nature of helping each other make the country and society progress”. “GHAR” i.e home is the basic necessity and inevitable need of any human being and everyone is having a DREAM to have one of its own but sometimes that dream becomes a nightmare because of lack of availability of funds.
There are financial institutions in the country who help these people in funding their financial needs. This type of credit extended by the financial institutions is known as “HOME LOAN”
Benefits of availing Home Loan:
- Principal repayment deduction u/s 80C of Income Tax Act, 1961 upto Rs. 1,50,000
- Interest repayment deduction u/s 24(b) of Income Tax Act, 1961 upto Rs. 2,00,000
- Subsidy under Pradhan Mantri Awas Yojana upto Rs. 2,67,000
- The value of property increases day by day so owning a house helps in Capital Appreciation and reduction of rental cost
Documents required for Home Loan:
|Identity Proof (Any two)||Address Proof (Any two)|
|PAN Card (Mandatory)||Utility bill (Example: Electricity bill, Telephone bill etc.)|
|Aadhaar Card||Aadhaar Card|
|Voting Id Card||Rent Agreement|
|Driving Licence||Lease Agreement|
- Copies of all property documents that can establish the chain of ownership for the past 30 years
- Encumbrance certificate for 30 years
- Property tax paid receipt in case you reside in the property being mortgaged
- Loan Application form duly filled and signed
- Passport size photographs of applicant and all co-applicants
- Signature proof
Salary slip of last 6 months.
IT Return of last 3 years along with copy of Profit & Loss A/c and Balance Sheet.
IT return of last 2 years.
GST Registration Certificate
Form 16 of latest Financial Year
Business Establishment Certificate
Banking of last 6 months
Banking of last 12 months.
Partnership deed in case the business is a partnership firm.
Certificate of Incorporation in case of companies
Other charges of Availing Home Loan:
- Processing Fees: Processing fees generally ranges between 0.25% to 2.00% of loan amount. Some financial institutions charge flat processing fees irrespective of the loan amount
- Insurance: Both types of Insurance is to be taken by the applicant i.e Life Insurance for self and General insurance of the property to be purchased
- Foreclosure Charges: Generally, there are no foreclosure charges after completion of six months of loan. Rest it all depends on the financial institution
- Pre – Payment Charges: Generally, there are no foreclosure charges after completion of six months of loan. Rest it all depends on the financial institution
Frequently Asked Questions (FAQ’s)
1.Why should one avail home loan facility?
Repaying all the cost of owning house at a single go reduces the wealth of the person and the person remains deprived of the benefits which it can avail by accessing the credit
2. What is the maximum loan amount any applicant can get?
Generally Financial Institutions funds 75% to 90% of the property value. Rest amount is to be contributed by the owner of the house.
3. What is Encumbrance certificate and from where it can be obtained?
Encumbrance’ refers to any liability that is created on a property. An encumbrance certificate (EC) for a specific requested period, is a note of all the registered transactions pertaining to the property for that period. This certificate can be obtained from the sub-registrar’s office, where the property is registered.
4. Why an encumbrance certificate is required?
Encumbrance certificate is an assurance that the property to be purchased or sold, is free from any monetary or legal liability, such as a loan that has not been cleared, or a mortgage on the property.
5. What is the maximum tenure for which home loan can be availed?
Home loan is received for maximum tenure of 30 years subject to maximum age of 65 years for self-employed and 60 years for salaried employees
6. What are the different types of interest rates?
In this type interest rate charged by financial institutions is MCLR+ Spread.
MCLR is Marginal Cost of Lending rate i.e the cost of funds for the financial institutions and Spread is additional cover charged by financial institutions as per the customer’s profile.
The change in Floating Interest Rate is dependent on RBI’s change in Repo Rates.(ii) Fixed Interest Rate:
In this type interest rate is fixed for the whole tenure of loan. Fixed Interest rate is usually 1.50% – 2.00% higher than Floating Interest Rate.