Home Loans

Home loans are available to resident Indians and NRIs for the purchase or construction of house or flats, repairs and renovation of house.
The Procedure and Practices for Home Loans
Target Group: Normally, the target group is the salaried class, professionals, self-employed and business?men. Banks fix the age criteria for availing the loan.
Purpose: The purpose of the loan is for the purchase or construction of house or flats, repairs and renovation of house, and in some banks, for purchase of house sites also.
Quantum of loan: The quantum of eligible loan is fixed based on the gross monthly income/net monthly income. For this, banks ask for a salary certificate for the salaried class or the Income tax return for others. Bank also ask for the statement of bank account for a prescribed period.
Age: Banks fix the lower and upper age for availing the loan taking in to consideration the remaining period of service, in the case of salaried class and the income earning capacity during the period of loan for others.
Repayment: Most of the banks are giving long repayment period, say 20-25 years. The repayment will be based on equated monthly instalments (EMI). In case of loan for purchase of a ready built house, it should be ensured that the remaining life of the building should be longer than the repayment period allowed, plus a cushion period, says ten years. Normally banks allow a holiday period for repayment. The holiday period for construction will be more than it is, for the purchase of ready built house.
Security: Generally, the property purchased or constructed out of the bank loan is taken by way of mortgage. Sometimes, when the income of the spouse is taken for arriving at the quantum of loan, his/ her guarantee is also taken as personal security.
Margin: Banks stipulate that a certain percentage of the project cost, say fifteen per cent, is to be borne by the borrower from his own sources. When the loan is for repairs/renovation, banks stipulate a higher margin.
Rate of Interest: When compared to the rate of interest for other loans, the rate of interest for home loan is cheaper. Most of the banks offer a rate of interest below the ‘Bench Mark Prime Lending Rate’ (BPLR). Banks also offer a floating rate and a fixed rate option to the borrower.
Documents Required
At the time of applying for the loan, the banks ask for some necessary documents namely;
(a) Agreement of Sale/Sale deed
(b) No Encumbrance certificate NIL EC (for 13 years)
(c) Parent document for 30 years
(d) Approved building plan
(e) Patta (NOC from Housing Board, etc., wherever applicable)
(f) Valuation report from the Bank’s approved engineer
(g) Bank statement for last 12 months

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