A home loan, also known as a housing loan, is a loan used to purchase a house or an apartment. Banks often lend between 80 and 85 per cent of the property’s market value as a home loan. The home loan comes with a variety of terms and different types of interest rates, including fixed and variable. Further, a home loan can be used to buy a new property or an existing property being resold in the real estate market.
Benefits of a Home Loan
To encourage more individuals to own their home, the Indian government offers a tax break on both the principal and interest paid on a home loan. In a financial year, an individual can claim a deduction of up to Rs.1.5 lakh under Section 80C of the Income Tax Act of India 1971.
No advance fees:
There are no prepayment penalties for variable-rate house loans, unlike other loans where lenders impose prepayment penalties on payments made toward the loan. As a result, anytime you have extra cash, you may use it to make a partial payment on your mortgage and reduce your debt. In the event of a variable rate house, however, there will be prepayment penalties.
Leads in capital Growth:
The cost of real estate properties in India has continuously increased over the last few decades. Many analysts believe that the capital appreciation of real estate assets has outpaced the interest you pay on your mortgage.
Ensures property’s safety:
Purchasing a house is a once-in-a-lifetime investment, and you’ll want to be sure the property you choose is free of legal concerns. This is where obtaining a house loan may be quite beneficial. When you apply for a home loan, the lender will do a thorough investigation of the builder’s reputation as well as the property itself.
Types of Home Loan
There are two fundamental types of house loan interest rates. You should carefully consider all of your alternatives before settling on one.
- Fixed-rate Housing Loans: The interest rate on your loan is fixed for the life of the loan, and you pay a fixed EMI for the entire duration of the loan.
- Floating-rate Housing Loans: During the term of your loan, the interest rate you pay changes based on external market circumstances. If you are certain that interest rates will fall throughout the term of your loan, you should pick this option.
- You’ll need an excellent credit history to get the best home loan interest rates. You can also use a home loan EMI calculator to determine the best interest rate for you.
Home Loan Application Process: A Step-by-Step Guide
The following are the steps to completing the house loan process by going over your desired bank’s online service:
Fill out the loan application and attach the required documents:
The application form is the first step in the process of getting a home loan. A few basic details about the applicant, such as the applicant’s biographical information, residential address, and monthly or annual income, are required while filling out the application
- Pay the processing fee: After completing the official application and document submission process, the applicant must pay the bank the processing cost. This is the money collected to keep the applicant’s loan account in good standing. It entails transmitting certain secret documents, such as IT certificates, post-dated cheques, etc., each year.
- Documents’ valuation: After the applicant has finished the application and paperwork procedure, he or she must wait for the bank or financial institution to review the documents. It generally takes 1-2 days or even less if the documentation is complete and proper.
- Process of Approval/Sanctioning: The bank will not accept any forged documents or fraudulent conduct. It is a criminal crime that can lead to more serious consequences. The bank authority analyses the application form and papers after they have submitted the processing fee has been paid.
- Signing of the loan agreement and disbursal of funds: The bank provides a certified offer letter as soon as the loan is sanctioned or authorised.
The following documents required while applying for a home loan
- Evidence of income and proof of identification (or ID)
- Proof of address
- Documents that provide information about your job and job stability
- Proof of education (school/diploma/degree certificates)
- Statements of account
- Property-related documents
The house loan makes it more affordable for an ordinary middle-class paid individual to own a home. Keep in mind the things highlighted in this article and avail of a housing loan today to become a homeowner.