Some of the most Frequently asked questions about Home Loan.
Q1.: When and how can an application be made for home loans?
An application for home loans can be made any time after you have decided to acquire/construct a property, even if the property has not been selected or the construction has not commenced. An application form along with the necessary documents has to be submitted to the respective finance company after which they would review the application and decide on its status.
Q2.: How much time does it take to get an application processed and the loan getting sanctioned?
The processing of a home loan application, if the documents are in order takes around fifteen days and it takes another week for the company to check out the property papers and make the disbursement.
Q3.: What Is The Loan Amount Which Can Be Sanctioned?
HFCs sanction loan amounts is based on eligibility depending upon your repayment capacity (which takes into account your age, qualifications, assets, liabilities, stability of occupation, savings history) and according to your income. The maximum loan that can be sanctioned varies withhousing finance companies and the generally, the maximum loan amount is 80 to 85% of the cost of your home.
Q4.: What is a fixed interest rate?
A Fixed interest rate for Home loans is one where the rate charged by the HFC on the loan amount is constant over the tenure of the loan. A fixed interest rate protects the borrower from a rise in home loan rates. While on the flip side, he may not benefit if the market rates were to fall. Therefore, it is advisable to go in for a fixed rate if you feel that the rate of interests in the market have touched rock bottom and the rates can only move upwards.
Q5.: What is a floating interest rate?
A Floating interest rate for home loans is a loan where the interest rate which is payable is linked to the market rate e.g. the bank lending rate. The interest rate payable by you will also rise and fall as per bank lending rates which may fluctuate.
Q6.: Does the property on which home loan is taken have to be insured?
You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, as required by the HFC during the period of the loan and will have to produce evidence each year and/or whenever required by the HFC. The HFC will be the beneficiary of the insurance policy and will be an additional cost that will add to the final cost of purchase of the property.
Q7.: How does one get a tax benefit on the loan?
There is eligibility for certain tax benefits on principal and interest components of a housing loan under the Income Tax Act, 1961. Moreover, you can get added tax benefits under Sec 88 on repayment of principal amount. Moreover, you can get added tax benefits under Sec 80 C on repayment of principal amount up to Rs. 1, 00,000 p.a. that can further reduce your tax liability by about Rs. 30,000 p.a.
Q8.: Can a NRI avail of a housing loan?
Yes, NRIs can avail of a housing loan to buy a property in India. However, the terms and conditions for a NRI loan offered by the banks and HFCs are different than Housing finance granted to Residents of India
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