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.

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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.