loan
Housing Loan
Home Loan – Meaning, Types, Eligibility, and Features
Buying a house is one of the biggest dreams come true for most people and an extravagant affair altogether. Imparting life to such a dream requires a lot of effort from the buyers’ end and the best one can do to accommodate the home in their budget is through a home loan.
A home loan can be opted to buy a new house/flat or a plot of land where you construct the house, and even for renovation, extension, and repairs to an existing house.
Types of Home Loans in India
Home Loan
This is the most common type of home loan availed to purchase a house. There are many housing finance companies, public banks, and private banks that offer housing loans where you borrow money to purchase the house of your choice and repay the loan in monthly instalments.
You can get up to 80%-90% of the house’s market price in the form of financing. The lender will hold the house until you completely repay the loan.
Home Construction Loan
This is the right home loan type if you already have a plot of land and you need financing to construct a house in that land.
Home Extension Loan
Say you already own a house and you would like to extend the house with another room or another floor to accommodate the growing family. Home extension loan provides financing for this purpose.
Home Loan Balance Transfer
The current home loan interest rate may be overwhelming, or you may not be happy with your current lender’s service; you can transfer the home loan’s outstanding balance to a different lender who offers a lower interest rate and better service. Upon transfer, you can even check out the possibilities of a top- up loan on your existing one.
Composite Home Loan
This type of home loan provides financing for purchasing the plot of land where you would like to construct a house and for the construction, both within a single loan
Home Loan Interest Rates
The average home loan interest rates are from 6.5% to 12.00% in India as of March 2021. The rates usually vary from lender to lender, RBI-prescribed repo rate, inflation, economic activities, and many other factors.
Some banks also give a special privilege to women, bank staff, and senior citizens by providing a 0.05% concession on the home loan interest rate.
Further, a home loan interest rate can either be fixed or floating in nature. A fixed-rate home loan remains the same for a period specified by the bank. This type of home loan is immune to market fluctuations.
In the case of floating-rate home loans, the interest rate applicable varies based on the market fluctuations. It may or may not be beneficial for the borrower.
Eligibility
Banks have a list of eligibility criteria for home loans. The first thing banks look at is one’s credit history to understand their repayment habits. Typically, a credit score of 750 and above is preferred. Some other important factors taken into account are as follows:
- Age
- Employment Type
- Minimum Annual Salary
- Collateral Security
- Margin Requirements
- Assets, liabilities, stability, and continuity of occupation
- Residency status (Resident Indian/Non-Resident Indian)
Documents Required
The following documents are required, along with your duly-filled loan application.
| Agriculturists | Salaried Customers | Businessmen/Non-Salaried Professionals |
|---|---|---|
| Application form with photograph | Application form with photograph | Application form with photograph |
| Identity and Residence proof | Identity and Residence proof | Identity and Residence proof |
| Last 6 months bank statements | Last 6 months bank statements | Last 6 months bank statements |
| Processing fee cheque | Processing fee cheque | Processing fee cheque |
| Copies of Title Documents of Agricultural Land depicting Landholding | Latest Salary Slip | Educational Qualifications Certificate and Proof of Business |
| Copies of Title Documents of Agricultural Land depicting crops being cultivated | Form 16 | Business Profile and Previous 3 years Income Tax returns (self and business) |
| Statement of previous 2 years of loans availed | Previous 3 years Profit/Loss and Balance Sheet |
Process of Applying
Availing a home loan has gotten easier than before, thanks to the various mediums that exist now with the advent of technology. One can either go to the bank branch directly, inquire about the home loan options, or go for an online application.
Upon applying, the bank collects the required documents from you. It initiates the processing of your application, including checking of CIBIL score, the value of the asset, eligibility calculation based on your income and liabilities, and more.
After evaluating and verifying all the documents, the banks decide to approve or reject the loan.