By Anjali Thakkar on Jul 1, 2020 6:03:16 PM
1) What Are The Documents Needed To Apply For A Home Loan?
The documents required for home loan application differ from bank to bank on the basis of your loan scheme and also on the occupation of the applicant. Here is a - list of documents for home loans:
- Home loan application form
- Identity proof
- Residence proof
- Passport size photographs
- Income tax returns from the past three years
- Bank account statements of the last three months.
The loan applicant must provide the income proof with details if he is self-employed or a salaried employee.
There is also a set of property documents required to be collected from the property seller like -
- NOC from the builder or the society
- Registered sale deed
- Allotment letter
- Maintenance bills
- Electricity bills
- Property tax receipts
- Original receipts of advance payments done for the purchase of flat
- Detailed estimation of construction cost
- An approved plan of building plan and floor plan
Apart from this list of documents needed for a home loan, banks have the right to ask for some other document if they feel it is necessary to complete the home loan process.
2) What Are The General Eligibility Conditions For Availing A Home Loan?
Once you are keen to buy a real estate property, the first thing to wonder about is - what is the home loan eligibility criteria?
Home loan eligibility criteria in India is determined by several factors of the home loan applicant. Few essential factors are - age bracket, CIBIL Score- 750 is the minimum rating required to qualify for a home loan, Occupation, Minimum earnings, LTV and Property value.
If the property's market value is higher, the chance of getting a higher loan amount is more. One easy way to check home loan eligibility is by using an online calculator. Home Loan Eligibility Calculator instantly computes the amount you are eligible to borrow.
This tool helps in better financial planning by reducing the chances of application rejection. This tool also saves you from the hassle of manual calculation completely. You can access the home loan calculator anytime as it is free of cost. This home loan eligibility calculator helps in identifying your home loan eligibility criteria. Check home loan eligibility criteria from various home loan providers.
3) Can I Sell A Property, Even If The Home Loan Is Outstanding?
If you are thinking about how to sell a house against which loan is outstanding, you can sell the property.
1. There are two cases when selling a property with an outstanding home loan;
a. The property buyer takes a loan from the property seller's bank and
b. The other case when the property buyer takes a loan from a different bank lender.
2. The property sale transaction requires a NOC or approval from the bank to complete the transaction.
3. The seller has to request the bank for a loan certificate if the buyer already has a pre-approved loan from another lender. If the loan gets approved, the buyer's bank is eligible to issue the outstanding loan amount for the seller's bank.
4. If the buyer has taken a loan from the same bank, all three parties, seller, buyer and lender, they all three enter into a tripartite agreement.
5. The loan eligibility of the buyer is taken into consideration by the bank. If it is approved by the bank, the total amount required to settle the loan of the property seller is taken care of, and the residual amount is handed over to the seller. You must consider various factors before buying a property on which loan is outstanding.
4) What is the Tax Rebate On Home Loan?
If you have taken a home loan, you must know about the rebate that can be claimed on your home loan.
1. According to section 80C, you can claim tax deduction up to 1.5 lakhs for repayment of principal amount on home loan which is availed for purchase or construction of the residential property.
2. In Section 24B of the Income Tax Act, Interest repaid on a home is classified into two categories: pre-construction period and post-construction period.
Tax deduction up to 2 lakh rupees on the interest paid in the post-construction period. The tax deduction can be claimed only for the year in which the construction is completed. For the pre-construction period, borrowers can claim tax deductions up to 5 years in five instalments. The amount that can be claimed for both pre and post-construction periods interest repayment remains capped at the limit of 2 lakh per year.
3. The first home buyers can be benefited from Section 80EEA with additional interest deduction of up to Rs 1.5 lakh under affordable housing for home loans which were sanctioned between 1st April 2019 and 31st March 2020.
4. Under Section 20 C, charges which are directly related to the transfer of property like stamp duty, registration charges and other expenses can be claimed.
5. You can claim tax benefits on the amount paid during the purchase of the house property up to the limit of 1.5 lakhs.
Related Post- How to Save Tax on Real Estate Investment?
5) Can I Repay My Loan Early?
Many banks allow you to repay the loan ahead of schedule by paying a lump sum amount.
When you decide to repay the loan ahead of the payment schedule, you are entitled to pay the penalty if the loan is prepaid. In case of the early repayment of home loans, banks charge the prepayment penalty up to 2-3% of the principal amount outstanding.
The prepayment penalty can vary from the reasons and the sources of funds you have available. If you deposit more than your EMI payable on a periodic basis, then most banks do not charge a prepayment penalty. While availing the loan, you must check all such stipulations.
Related Post- How to Save for Buying Your First Home?
6) What Are The Different Types Of Home Loans Available?
To help customers buy residential property, financial institutions offer different types of home loans.
To know which home loan suits you the best according to your needs, you need to understand what types of home loans are available.
1. Loan on Land Purchase- Banks offer loans to buy land or a plot to construct a house on it. Generally, banks lend up to 80-85% of the cost of the land.
2. Everyone knows about Loan for Home Purchase; this loan is available to purchase a new or pre-owned home. Almost 85% of the amount is offered as a loan by many banks.
3. Loans for Home Construction is approved to those who want to construct a house on the owned land.
4. House Extension Loans are taken by individuals who lack funds for expansion and extension of their house.
5. Loans for Home Improvement are taken by those who want to renovate and repair the internals and externals of the house like painting, waterproofing, electrical wiring, etc.
6. NRI Home Loans is specialised. To assist the non-resident Indians to buy a property in India. The application procedure for this type of loan is different from the others.
7. To buy a new house, existing home loan borrowers can avail Home conversion Loans.
7) How to Foreclose Home Loan are there any Charges?
A person can choose to foreclose the existing home loan by simply paying off the home loan way before the term of the mortgage was done and be debt-free.
Anyone can foreclose the loan for various reasons like refinancing, saving on interest and much more. After the loan holder decides to foreclose the home loan by making the full prepayment of the loan, some simple steps should be followed.
1. You need to inform the bank in writing or via email about the full payment made for foreclosure and the status of your home loan.
2. All the documents should be returned back to the bank and make sure you collect the NOC (No Objection Certificate) claiming that there are no outstanding charges due to be paid on your end to the bank.
3. After the bank and the borrower, both agree to pay off the loan, both the parties must avail another NOC by the bank.
4. Before pre-closing, one must consider the changes required to pre-close the home loan, which is charged by the bank. The foreclosure penalties can be in the range of one to four per cent on the outstanding principal amount.
8) Who Can Be A Co-applicant In My Home Loan?
An individual who has an equal responsibility in repaying the home loan equally like the main borrower is a co-applicant in the home loan. It is not required that a co-applicant should be the co-owner of the property purchased. But in the case of any legal disputes and for the repayment of the loan, the applicant is held accountable. The lending institutions allow up to 6 co-applicants in buying a property on loan.
The rules of the banks state that the co-applicant must be a blood relative or must be an immediate family member to be eligible. Also, the co-applicant cannot be a minor. The most valid combination for a co-applicant is of a husband and wife. The income of both partners is considered for home loan eligibility.
The tenure of the home loan depends on the retirement of the older person. A father and his son can be co-applicants if there is only one son. In the case of an unmarried daughter and father or mother, either the father or mother can be co-applicant, but their income can't be considered together.
The unmarried daughter can only be the owner of the property. Two brothers can be co-applicants if they are living together in the same property. A brother and sister cannot be the co-applicants of a home loan. Similarly, two sisters cannot be co-applicants
9) What Is The Maximum And Minimum Loan % A Person Can Get On A Property?
10) How Much Loan Someone Can Buy Against The Property?
It depends on the loan amount and the person's credit score. According to our previous data we have seen that loan percentage varying between from 97% loan to 25%.
11) Can I Transfer My Home Loan To Another Bank?
You can transfer a home loan to another bank if you find more benefits in other banks like a reduced rate of interest and reduced monthly EMIs. You can check all the terms and conditions along with the interest rate and processing fee of the bank. If you are satisfied with the scheme, you can then apply for a balance transfer.
On the banks' website, you can check the loan offer. Accordingly, you can pay all the necessary fees mentioned and upload the documents. The bank will then give approval for your home loan transfer application. The basic eligibility criteria to opt for home loan transfer is age, income, employment history and loan to value ratio.
Once you provide all the necessary documents to the bank, the new lending bank will then pay off the balance due to your old lender and your old home loan bank account will be closed. Further, all the payments will be paid to the new bank as the official home loan transfer procedure is done. There is lesser documentation involved in the home loan transfer, and it is easier to attain when compared to a home loan. You can compare the home loan transfer charges of all banks on My Loan Care website.
Related Post- What is the procedure for applying for a Home Loan?
12) Can I Pay Part Of My Home Loan In Cash Mode?
Cash payments up to rupees 2 lakh done in each instalment is possible in any housing finance company or Non-banking finance company. As per the new income tax rule introduced in 2017, Cash Payments more than Rs 2 lakh is illegal and will have to face a penalty.
Cash payment would only apply to repayment of a single loan instalment in cash and not to the aggregate amount of the home loan. This was done to discourage the use of large amounts of cash to control the black money.
You can just pay a part of your home loan in cash. This is not valid for the prepayment of the home loan as most of the banks have restricted it. To clear the confusion, the finance minister has clarified the confusion through a circular, the rule to pay in cash is applicable for a single instalment and not for the whole loan amount.
13) Do We Need To Pay Service Tax On Prepayment Of Home Loans?
Earlier Service tax was levied on the repayment of home loans at a rate of 15% Now the service tax on the prepayment of home loans is replaced by GST. So now, instead of paying a service tax, we need to pay GST on prepayment of home loans. The processing fee of the prepayment Of Home Loans can be 1%-2% of the loan amount.
The prepayment charges remain at 2%-6% of the principal outstanding amount. After calculating these charges, the GST of 18 % is added. A Lot of people are confused with the GST and service tax rate. GST is levied only on the processing fee and any other charges paid to the bank. GST is not levied on the repayment of a home loan or on the payment of interest on the loan. As a major chunk of repayment of loan comprises principal repayment and interest payment, the impact of GST is comparatively negligible.
14) What Is Loan Refinancing? Or What Is Refinancing In Real Estate?
It is replacing an existing loan with a new loan to pay off the debt of the old loan. If you have a loan that is too expensive to make payments you can opt for refinancing your home loan with a second loan to obtain a better interest rate and term.
The borrowers with a good credit history can do refinancing in a good way to convert a variable loan rate to a fixed loan rate, and obtain a lower interest rate. If you have a bad credit score or less than perfect, then refinancing can be risky.
Refinancing can be done in order to lower monthly loan payments, typically by extending the term of the loan. If your home loan is approved by the new bank, the new loan pays off the existing debt completely. You have to make payments on the new loan until you pay it off or refinance it. Refinancing occurs when an individual revises the payment schedule interest rate and terms of a previous credit agreement.
15) Are Interest Rates For Commercial Properties The Same As Housing Loans?
Housing loan lenders offer commercial property loans as credit options against the mortgage of a commercial property. When you compare the interest rates of commercial properties with the housing loans, unfortunately, the loan borrowers of commercial property have to pay a few per cent higher rate of interest than the borrowers paying for housing loans.
Those availing a commercial property loan get a lesser Loan to Value which is limited to about 55% and those availing home loans range between 75-90% The interest rate for commercial property ranges in between 8.5-10%.
The rate of interest varies from bank to bank. One can apply for the commercial property loan either individually or jointly. Close family members, as well as the joint owners of the property, can apply for the loan together. The maximum repayment period of commercial property loan is 15 years.