Home is a place where people get relax after coming back from whole day’s hard work, it is that place where people give time to their family. It is a life time decision for a person to acquire a home with lots of planning and needed good amount of fund which is called “Dream Home”. To acquire a Home people need huge amount so they are looking for HOME LOAN from various finance houses or banks. Now a day’s home loan is not though job.
Home loan is the sum of money a bank or financial institution lends you to help you buy your dream home. By taking a home loan from a bank or a housing finance company you pledge your home as the lender’s security for repayment of your loan. The bank or financial institution will hold the title or deed to the property till the loan has been paid back with the interest due for it.
Home loans are generally taken for long tenures as the loan amount is usually a huge sum. A home loan can be taken anywhere between 5 and 30 years. The amount of loan one is eligible for is dependent on the individual’s credit profile.
Home improvement, extension loan Home improvement or home-extension loans are also available for the purpose of repairing/extending the existing house.
Tax Implications
- You can claim both Exemption for House Rent Allowance and deduction for interest on home loans
- New Direct Tax Code
- Tax deduction benefits on loan repayments on more than one property
- Loan Amount Eligibility
Eligibility For availing Home Loan
Indians with a regular source of income, which includes salaried individuals, self-employed professionals, self-employed business people, NRI individuals and existing property owners who can pledge it as security for the loan, are all eligible for a home loan. The individual applying for the loan should be above 21 years of age, when the loan period begins and should be less than 65 years when the loan period closes.
The amount of loan you can avail depends on factors like salary details, qualifications, employer/business, years of experience, growth prospects, alternate employment prospects and sources of other income, if any. Generally, about 40% of your monthly gross income can be availed as your loan amount. For self-employed applicants, profit is the benchmark that determines loan value. The longer the time frame for repaying the loan the lower the EMI and this also means you can opt for a larger loan amount. The loan amount you are eligible for is also dependent on other factors like the company you are employed with, the location of your residence and your credit history.
Documentations for availing home loan
For Salaried persons
- Salary slip for last 53 months
- Form no.16 for last year
- Job Appointment &Confirmation Letter
- Salary Account Statement
- PAN Card Copy
- Address Proof
For Self Employed
- Last 3 years ITR along with Balance sheet & taxes paid receipts.
- Last 1 year bank Statements of business &personal account
- PAN CARD Copy
- Address Proof
- Shop Act, Business Registration/partnership deed (whichever is applicable)
- Property Paper i.e. Kharedi Khat
- The title documents of your seller, which prove the seller's title including the chain of title documents if he is not the first owner
All you have to do is to provide supporting documents so that the home loan process can start moving forward.
Procedure for Project Financing for home Loan
Loan Application
Filling up the application form is the first step. The look of an application form may differ from bank to bank, but most of the information they need is similar.
Personal Discussion
After you have completed the application process, wait for a day or two so that home finance institution evaluates your papers. Some banks can insist to meet you to gather more details about you that may not be mentioned in the application form and to reassure them of your repayment capacity.
Field Investigation by Bank
The bank will checks all your information including your existing residential address, your place of employment, employer credentials, residence and work telephone numbers. Representatives are sent to your workplace or residence to verify the details.
Credit Appraisal and Loan Sanction
If the bank is not convinced about your credentials, your application may get rejected. If it is satisfied, it sanctions your loan.
The bank evaluates your repayment capacity based on your information and based on that they work out your maximum loan eligibility, and the final loan amount is communicated to you. The bank then issues a sanction letter.
Offer letter
Once the loan is sanctioned, the banks sends you an offer letter mentioning the following details:
- Loan amount
- Rate of Interest
- Whether fixed or variable rate of interest linked to a reference rate
- Tenure of the loan
- Mode of repayment
- If the loan is under some special scheme, then the details of the scheme
- General terms and conditions of the loan
- Special conditions, if any
The legal angle: Property and Papers
After you have selected your property you need to hand over the entire set of original documents of the property to the bank, so that it can keep them as security for the loan amount given to you.
Documents include:
The title documents of your seller, which prove the seller's title including the chain of title documents if he is not the first owner.
Registration: Sealing the deal
After all the evaluation and checking you need to do the stamping and registration of the property.
Signing the Home Loan Agreement
All the customers need to sign the home loan agreement with the bank. And they also need to submit post-dated cheques. All the original documents of the property have to be handed over to the bank.
Disbursement: The big payout
after you have paid your personal contribution payment towards the property bank will release there cheque to you. You will now actually receive the cheque in your hand.
