Frequently Asked Questions:
Get answers of all your queries related to Home Loans at Creditnation.
Which types of home loans are accessible?
Banks gives home loans for multiple reasons and for different means.
Home Construction Loan: This loan is given for the construction of a new home.
Home Extension Loan: Home extension loans are convenient for extending your home.
Home Purchase Loan: This loan is for purchasing a home.
Home Improvement Loan: This loan is provided for doing repair works and renovations.
Land Purchase Loan: This loan is given for purchase of land.
Bridge Loan: The Bridge Loan is meant for those who wanted to sell their home and wished to purchase a new home. Thus, bridge loan helps in financing their new home unless the old home is sold.
Home Conversion Loan: This loan is applicable for them who have already financed the present home but they want to switch to another home for which more funds are needed. With a Home conversion loan, you can easily transfer the existing loan to the new home plus the additional amount which is required.
Can I add a co-applicant while making an application for a home loan?
Many financial institutions are eager to recognize the joint incomes while considering the amount of loan. However, some institutions are there who do not require the co-applicant to be co-owner of the property.
Would I be able to take a tax benefit based on interest and principal payments of home loan?
Yes, as per Income Tax Act, 1961 certain tax benefits are privileged to resident Indians on both interest and principal components of a loan. As per current laws, you are eligible to a rebate for interest repayment up to Rs. 1, 50,000/- per annum. Plus, under section 80 C you can also get more tax benefits on repayment of principal amount up to Rs. 1,00,000/- per annum.
How do housing finance companies and banks count on amount of loan?
Many banks and housing finance companies provides loan up to 85% of the total cost of home. The loan applicant has to provide the other 15% which is called equity. The loan amount which will be given to the applicant is based on the age, income, number of dependents, monthly outgoing and repayment capacity.
Bank or housing finance companies counts on repayment capacity of an applicant while providing the home loan. Repayment capacity is on the basis of your monthly disposable income and other aspects like assets, liabilities, spouse’s income etc.
Mostly a bank considers that around 55-60% of the monthly disposable income is recognized for the loan repayment. The loan amount will be dependable on the time period of the loan and the rate of interest also as these factors decides your monthly outflow which absolutely depends on your disposable income.
How long does it take to get a home loan?
At least, it takes 3-15 days to get a loan sanctioned including a proof that applicant will pay the other 15% of the home loan.
Does the tenure affect the loan cost?
If the tenure of the loan is longer than the monthly EMI outflow will be less. Short tenure will lead to more EMI burden, but it could be paid faster.
Does any type of security required while applying for home loan?
Mostly, the property which is to be purchased itself becomes the security and is mortgaged till the loan is repaid with the finance institution. However, some may ask for security including life insurance policies, FD receipts etc.
What are the different interest rate options offered by banks?
Banks provides the following loan options:
Floating rate home loan: The EMI of a floating rate loan fluctuates with changes in market interest rates. If market rates increase, your repayment increases. When rates fall, your dues also fall.
Fixed Rate home Loan: The rate of interest is fixed either for the entire tenure of the loan or a certain part of the tenure of the loan. In case of a pure fixed loan, the EMI due to the bank remains constant. However, if you have fixed EMI, any reduction in interest rates in the market, will not benefit you.
What do Daily Reducing, Monthly Reducing and Yearly Reducing interest rates refer to?
This refers, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system.
This refers, the principal, for which you pay interest, reduces every month as you pay your EMI.
This refers, the principal, for which you pay interest, reduces at the end of the year.
This means the EMI for the monthly reducing system is effectively less than the annual reducing system.