What is a
Home Loan?

A home loan is a secured loan taken from a financial institution to buy a new or a resale home, construct a home or renovate or extend an existing home. A loan which is taken against a property, which is already owned by the person is called loan against property (or LAP)

In both these types of loans, i.e Home loan or LAP, the property under question is used as collateral. The money is borrowed at a specific interest rate and repaid within a particular duration in smaller instalments known as EMIs (Equated monthly instalments)..

Flexible Rate and Fixed Interest Rate
Home Loans

A Fixed ROI loan is a loan where the rate of interest on the loan charged by the bank is fixed throughout the tenure of the loan, while in a Flexible rate loan, the ROI changes with the change in Base rate of the bank. Banks offer a choice to the customer to opt for a flexible home loan rate of interest or a fixed rate of interest. If a customer believes that rates are going to constantly rise in the future, then he may decide to opt for a fixed ROI.

However, if he/she thinks that current ROI is high and in future the rates are going to decrease, then they may opt for a flexible ROI. However, fixed rate loans are uncommon these days, because the rates are fluctuating very wildly, and it is difficult to predict with certainty whether the rates are going to constantly rise or constantly fall in the future. Hence Flexi rates are commonly adopted.

Types of Home Loans

Home Loans

This is the most common type of home loan. This loan is meant for buying a new apartment, row house, or bungalow, from a developer or a development authority, or from an existing owner. The property under question can be a ready to move in property, or a property under construction.

Home Construction Loan

You can avail a home construction loan if you already own a plot and require funds for the construction of the house on that land. In this case, banks normally make payments directly to the agency/builder who is constructing the house, against bills.

House Renovation Loan

If you already own a house and want to renovate it, you can apply for a house renovation loan. You can avail a house renovation loan for painting, tiling, roof repairs, etc. The loan amount is disbursed to the contractor/builder who is renovating the house, on the basis of bills raised for the work done.

Home Extension Loan

As your family grows, you may need a bigger house to accommodate all the members comfortably. A home extension loan could be helpful in such a situation. You can use this loan to fund the cost of adding a new room/floor to your home, extending the kitchen, building a new bathroom, etc.

Balance Transfer Loan (BT)

Housing Finance Companies (HFCs) and banks offer this this type of loan that allows you to transfer your existing home loan from one lender to another. A Balance Transfer is usually done to get loans at a lower interest rate, flexible repayment terms and sometimes for additional loan, which is called top-up loan.

Benefits of Home Loan?

Tax benefits

A Home Loan allows you to claim income tax deductions on the interest and principal amount due. Under the Income Tax Act, 1961, as per Section 80C, you can claim up to INR 1.5 lakh on principal repayments, and up to INR 2 lakh on interest repayments under Section 24B.

Due Diligence

When you apply for a Home Loan, banks check the property from a legal standpoint and ensure that the documents are valid and the title is clear. This step can prevent you from being scammed and passing this due diligence test can validate your ownership of property.

Long repayment tenure

Unlike any other loans, home loans come with longer repayment tenure, sometimes even as high as 25-30 years. Spreading the loan amount and corresponding interest over a longer tenure reduces the monthly EMIs thereby enabling capacity to take a higher amount.

No prepayment penalty

When you take a floating-rate home loan, you can make prepayments towards the loan whenever you have a lump sum at hand without having to pay any prepayment penalty. This will help you close the home loan much before the set loan tenure.

Balance transfer facility

You can transfer the home loan from one lender to another for several reasons, such as the better interest rate, additional amount, better repayment terms, customer service experience, etc.

Interest Rate

When compared to the various kinds of loans available, the interest rate on a Home Loan is the lowest. When compared to the various kinds of loans available, the interest rate on a Home Loan is the lowest.

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Eligibility criteria for Home Loan

LTV or loan to value

Loan to Value or LTV ratio is the ratio of loan amount against the value of asset purchased. A higher LTV means that the loan amount in comparison to the equity component in the loan is higher. Normally, banks offer upto 75-80% of the value of property as loan. Some home loan lenders also offer lower interest rates to applicants opting for lower LTV ratios.

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Financial eligibility

Banks or financial institutions check the financial capability of the person taking the loan, to assess whether he/she shall be able to pay all the EMIs timely. This depends on many factors such as salary/income, age, location, credit score (cibil), work experience and other financial obligations of an individual by calculating FOIR and LTV.

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Dealplexus offers you

Maximum loan amount

You may be looking to get maximum loan amount irrespective of the rate of interest

Lowest Interest rate

You may choose to take home loan from a Bank which offers the lowest interest rate

Minimum processing fee

At times you may want to choose a Bank which charges minimum or Nil processing fees

Quick disbursement

You may be looking to get a quick disbursal of loan due to some urgency

Long repayment tenure

Some want to maximise the loan amount or want to pay smaller EMIs per month. In that case, the first choice is the bank or NBFC which is offering the highest loan tenure.

Online process

Some Banks and NBFCs have also introduced online loan application process, which has minimised the paperwork and time for processing, which may become your reason for choosing a financing partner.

Documents Required for Home Loan

Typically the following documents are required to be submitted to the lending institution while applying for a home loan:

  • Proof of identity: This should be an official document which contains your name and photograph. Could be either your driving license, passport, voter’s ID, PAN card, Employee ID (if the company is registered), etc.
  • Proof of residence: A document that verifies your residence address could be either your phone / internet bill, rental agreement, bank account statement, gas bill, electricity bill etc
  • Bank statements of last 6 months
  • Salary Slips of last 3 months (for salaried individual) and financial statements (i.e Profit and Loss a/c and Balance Sheet (for business applicants)
  • Income proof: This can be your ITR/Form 16 of last 3 years
  • Property Documents

For more detail on documents required or the process, you may connect with our support team at : support@dealplexus.com

Frequently Asked Questions

What is the standard home loan interest rate?

Different banks and NBFCs offer different rates. Slight changes are also made to the ROI based on various factors like customer profile, Loan amount, tenure etc. Currently the rates vary in the range of 8.5% to 9%.

Which Bank will quickly approve my home loan request?

The normal time taken for processing a home loan request varies from 7 to 10 days, based on the completeness of documents provided. The processes of HDFC and Bajaj Housing are very sttreamlined and can quickly disburse the loans

Can we get Home Loan at 100% of value of property ?

No, banks will only provide upto 80% of the value of property as Home loan.

How much home loan amount i am eligible for?

Your Home loan eligibility is largely based on your income and repayment capacity. The amount can also be reduced or increased by increasing or reducing tenure respectively. A higher tenure means lower EMI payable per lakh per month, which will increase your eligibility amount

What is the maximum term for which I can avail a Home loan or a balance transfer loan ?

The maximum tenure of a Home loan is 30 years or till the age of retirement, whichever is earlier.

Are the interest rates on a balance transfer loan higher than a home loan ?

No, interest rates are the same for a home loan or a balance transfer loan.

Do I get tax benefit on a balance transfer loan ?

Yes, you get the same tax benefits in a balance transfer loan as in a home loan, on repayment of principal, as well as on interest paid

Can I avail a top up loan in addition to a balance transfer?

yes, you can avail a top up loan in addition to a balance transfer, provided you meet the eligibility criteria for the total loan amount

Is it possible to close my home loan before tenure? How can I close my home Loan before tenure?

A It is possible to repay your home loan before tenure. Some banks put no restriction on the number of times you make part prepayments of the loan. A full repayment can be done at any time you may desire. If it is a flexible Rate home loan, then you will not be required to pay any prepayment penalty as well.

Can self employed person also get Home Loan?

Yes. Banks need to see that you have a regular stream of income, through which you shall be able to repay your loan in EMIs. It does not matter whether you are a salaried person or self employed.

What are the documents required for a Home loan or a Balance transfer loan ?

The documents required for a balance transfer loan are the same as in a Home Loan, except for a list of documents and a Foreclosure letter from the bank from where the loan is getting transferred.

Can anyone help me with Document process of Home Loan?

A Yes, Dealplexus team shall be able to help you with the documentation process in filing application for a home loan with a bank of your choice. You may raise your query for Home Loan after login, in the Home Loan section.

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