Home is a very important part of our existence and survival along with food and clothing.
Owing a home of your own is a basic requirement of an individual.
To buy your own home involves an investment once in a lifetime.
The lump sum amount can be carried out with the help of Home Loan.
Home Loan is a secured loan, i.e, it is approved against any collateral as mortgage.
Importance Of Home Loan
Following are the importance of taking a home loan:-
- LONG-TERM SAVING- Home Loan helps in saving the money in the long-run.
- TAX RELIEF- Purchasing a home through Home Loan helps in tax benefits under the Income Tax Act.
- ZERO DOWN PAYMENT LOANS- Sometimes individual’s need to buy a house but is unable to arrange for the down-payment. Banks provide Home Loans with zero down-payment to help them.
- GOOD SAVING INSTRUMENT- According to studies, in the long-term the return in investing in a home on an average is around 20%-24%, while the cost of borrowing funds in the market on an average is more or less 7%-9%.
- OPTIMIZING RETURN- It helps in diversified investment portfolio with optimized return.
- GOOD CREDIT HISTORY- Timely payment of Home Loan EMI helps in having a good credit history. This will help in acquiring a good CIBIL score whiich further will be useful in taking future loans and credit card applications.
- SAVE FOR ANY EMERGENCY- Investing the lump sum savings in one go, is not a wise decision. The money can be used in case of any emergencies or any other investment plan.
Eligibility Criteria for Home Loan
| ELIGIBILITY CRITERIA | SALARIED | SELF-EMPLOYED |
| Age(range) | Around 24-61 | Around 24-66 |
| Employment | Full time job of atleast 2-3years of experience | Atleast 45-47 years of experience with a decent turnover |
| Income | Starting from around 1,30,00 p.a | Starting from around 1,60,000 p.a |
| Co-applicant | Family members | Family members |
| Preference | Having bank a/c | Having bank a/c in the bank eherte loan is |
| CIBIL score | 750 or above | 750 or above |
| Documentation | Bank Statement, Latest utility bill, Passport, ID proof, Existing registered house lease, Employment Appointment Letter | Bank Statement, Latest utility bill, Passport, ID proof, Employer’ Letter for existing email address |
Some more Eligibility criteria to consider- Assets and Liability (if any), Number of Dependent members of the applicant.
Types Of Home Loans
- Home Purchase Loan
- Home Improvement Loan
- Home Construction Loan
- Home Extension Loan
- Home Conversion Loan
- Land Purchase Loan
- Bridge Loan
- Balance Transfer Loan
- Stamp Duty Loan
- NRI Home Loan
Documents Required
There are a list of documents which are necessary for a Home Loan.
Common set of Documents
- Identity proof
- Residence Address proof
- Income proof
- Appointment letter and job continuity proof
- Bank documents- 6 months bank statement, 3 months salary slip, 2 years Form 16
- Investment proof
- Property documents
- Cancel Cheque
Documents specific for Salaried/Self-Employed/Senior Citizen
| Salaried | Self-Employed | Senior Citizen |
| Loan form- Fill loan application form with affix passport size photo. | Loan form-Fill loan application form with affix passport size photo. | Loan form-Fill loan application form with affix passport size photo. |
| Address proof- Passport, Registered Agreement of Rent,Any kind of bill upto 3 months(electricity or gas), Leave and License. | Address proof- Any kind of utility bill(gas or electricity bill), License. | Address proof- Registered Agreement of Rent,Any kind of bill upto 3 months(electricity or gas), Leave and License. |
| Identity proof- AADHAR card, PAN card, Driving License, Passport. | Identity proof- AADHAR card, PAN card, Driving License, Passport. | Identity proof- AADHAR card, PAN card, Driving License, Passport. |
| Income proof-2 years FORM 16, 3 months salary slip, Income Tax Report. | Income proof- Balance Sheet, Profit & Loss A/C, Report Of Audit, Latest 3 years Income Tax return. | Income proof- Bank Statement or Pension record. |
| Bank Statement- for 6 months. | Bank Statement- for last 1 year. | Bank Statement- for last 1 year. |
| Office address and ownership proof- Maintainence bill, any kind of Utility Bill, Documents of Property | Age proof- (Maximum Age should be 50 years)AADHAR card, PAN card, Passport. | |
| Business Existence proof- License of the company registration, SARAL copy for last 3 years. |
Components determining Interest Rates on Home Loan
- CIBIL Score- Should have good CIBIL score.
- Interest Rate- 2 types:- Fixed and Floating.
- Time Period- Short term loans with low interest rates but high EMI and vice-versa.
- Property Location- Urban and Rural area determines the interest rate.
- Amount of Down Payment- Lesser the down payment, greater the rate of interest rate and vice-versa.
- Determining the Loan amount- Loan amount is net result of down payment deducted from price of the house.
Submission Of Application Form
After you fill up the loan application form, submit it with the required documents.
Approval of Loan
If the documents and the eligibility are fulfilled, then bank will approve the house loan and will notify the customer within 1 month of submission of the application form and the documents.
Process Of Disbursement
- In case of properties with ready possession or resale, the loan is disbursed in one go.
- In case of properties which is not fully constructed, the loan is disbursed partly known as Part-Disbursement.
