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A home loan is a loan taken for buying or constructing a home or to make improvements to a residential property. You can get a loan from from banks and registered housing finance companies. Your home loan is secured against the property that you buy. This means that in case you are unable to repay the loan, the lending bank will have the right to take possession of your home.
Q1. What are the types of Home loans available?
Ans.: The following different kinds of home loans are available:
Home Purchase Loan
Home Improvement Loan
Home Construction Loan
Home Extension Loan
Land Purchase Loan
Balance Transfer Loan
Loans for NRIs
Q2. What is an EMI?
Ans.: EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal.
Q3. What are the eligibility conditions for a home loan?
Ans.: To qualify for a home loan, most of the lending institutions in India require you to be:
Q4. What are the interest rates offered for home loans? What are: Daily Reducing, Monthly Reducing and Yearly Reducing?
Ans.: Interest rates are different from institution to institution and generally range from about 8.75% to around 12 %. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing basis is also adopted.
Q5. What is a fixed rate of interest?
Ans.: Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.
Q6. What is a floating rate?
Ans.: This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up
Q7. What are the other costs that usually accompany a home loan?
Ans.: Home loans are usually accompanied by the following extra costs:
Q8. How do HFCs decide on the loan amount?
Ans.: Usually, most companies give up to a maximum of 85% of the cost of the house. The 15%, sometimes called ‘seed money’, will have to be provided by the loan applicant. The amount, for which the applicant is eligible, is determined by the age, income, no. of dependents, monthly outgoing and repayment capacity. This varies from case to case.
Q9. Are securities required for home loans?
Ans.: In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates.
Q10. What is the time required for loan disbursement?
Ans.: On an average, loans are disbursed within 3-15 days after satisfactory and complete documentation and completion of all relevant procedures, including proof that 15% of the cost has been paid upfront to the seller of the property.
Q11. What are the tax benefits of home loans?
Ans.: Both principal as well as interest of home loans attract tax benefits. With effect from 1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965:
Article ID: 8
Date added: 2018-06-16 15:18:39
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