A home loan is a secured loan wherein a bank or a financial institution lends you money to help you purchase your dream home. It is generally given for a longer duration compared to other loan types because the amount borrowed is usually higher and requires a longer repayment plan.
Types of home loans
- There is a home loan for every requirement, take a look:
- Home Purchase Loans: Avail these when buying a new home
- Land Purchase Loans: Choose them when you buy property for either investment or construction purposes
- Home Construction Loans: Opt for a home construction loan, if you plan to build a house over an already owned land.
- Home Improvement Loans: Avail these when you are about to start a home repair or renovation project
- Home Conversion Loans: Transfer your existing home loan into a new loan amount by availing a home conversion loan when you wish to buy a new house but already have a home loan over an existing property
- Home Extension Loans: Opt for this loan type when you plan to extend your existing home
- Bridge Loans: Opt for a bridge loan when you plan to buy a new house while looking for the right buyer to sell off your already existing home
Characteristics of a home loan
- It is a secured loan, that is, the lender considers your house/property as a security collateral. If you fail to pay back the loan, then the lender will become entitled to retrieve the money lent by selling your house/property.
- The loan amount can vary, with the minimum amount being Rs. 50,000.
- The repayment time period for a home loan is fixed and ranges from 5 years to 30 years.
- The Equated Monthly Installment (EMI) of a home loan is computed by adding the principal amount and interest.
- Home loan includes such charges as registration charge, processing fee, penalty on prepayment, commitment charge and miscellaneous charges (documentation/consultation).
Home Loan – Eligibility Criteria
Eligibility criteria might vary from one lending institution to the other, but there are some common requirements:
- Any salaried, self-employed or business person with Indian nationality can apply for a home loan
- You must be aged 21 years or above
- You should have a regular source of income for timely repayment of the loan
- Your professional stability and savings history will help in quick loan approval
- Ensure that you do not have bad credit history for at least the three months prior to applying for a home loan.
- If you are a salaried professionals, about 40% of your monthly gross income can be availed as loan amount.
- For self-employed individuals, profit earned by you majorly determines the loan value you are eligible for.
Home Loan – Documents Required
- Duly signed and filled application form
- Passport-size photograph
- Statements of investments, if any
- Copy of plan approved for the proposed construction/extension
- Cost estimation or valuation report from the bank’s (or finance company’s) panel CA
- Allotment letter of housing board/NOC of the society/builder etc.
- Bank statement and salary slips
In addition to these, you will have to also submit the following documents:
- Identity and signature proof – Passport, Pan card, Driving License, Voter ID card, Aadhar card, employee identity card in case of government employees.
- Address Proof – Bank statement, Rent Agreement, Voter ID card, Ration card, Passport, Driving License, telephone/electricity/water/credit card bill or Property tax.
- Age Proof – Voter ID card, Secondary school leaving certificate (class 10), birth certificate, Passport, Aadhar Card, pension payment order or receipt of LIC policy.