Home loan is a secured loan for buying or constructing a residential property. Currently, home loan interest rates start from 6.49% p.a. Home Loan is not limited to property constructed by a builder, you can avail home loan to buy residential plots and construction of residential property (Plots purchase and Construction). Most Banks and Housing Finance Companies sanction home loans for 75% to 90% of property value. You can even transfer your home loan from higher rate of interest to the lower rate of interest with overdraft facility.
Home Loan Documents RequiredEvery customer has to satisfy the Know Your Customer (KYC) norms stipulated by RBI. You have to provide the documents relating to your KYC, employment, business, and income
- PAN Card
- Aadhar Card
- Voter ID
- Driving Licence
- Registered Rent agreement
- Aadhar Card
- Driving License
- Lease agreement
- Latest Gas or electricity bill
- Loan application form duly filled in
- Signature Proof
- Copies of all property documents that can establish the chain of ownership for the past 30 years.
- Encumbrance certificate for 30 years
- Property tax paid receipt in case you reside in the property being mortgaged (usually when you apply for Home Loan Balance Transfer).
Income Proof Documents:
- Salary slips for the last 6 months in case you are a salaried employee (In addition, you can provide IT returns for the past 3 years along with Form 16).
- IT returns for the past 3 years in case you are self-employed (Some banks accept 2 years IT returns as well).
- Statement of A/c for the past 1 year where your salary is credited (in case of salaried people).
- Profit and Loss statement and Balance sheet for the last 2 years in case of self-employed persons.
- Sales tax, GST registration certificates, if applicable.
- Partnership deed in case of partnership firms (if the applicant is one of the partners).
- Certificate of Incorporation in case of limited companies(if the applicant is one of the directors).
Documents Required from Non-Resident Indians (NRIs) Applicants
- Employer identity card
- Valid passport and visa (attested copy)
- Address proof with the current overseas address
- Copy of Continuous Discharge Certificate (CDC) for merchant navy employees.
- PIO card issued by Government of India (for PIOs)
- Documents must be attested by FOs/Rep. Offices or Overseas Notary Public or Indian Embassy/Consulate or officials of Branch/Sourcing outfits based in India.
- Home loan application – completed and duly filled
- 3 passport size photographs
- Identity proof (any one): PAN/ Passport/Driving License/Voter ID Card
- Residence proof (any one): Recent copy of Utility Bills/Piped Gas Bill/Passport/Driving License/Aadhar Card.
Income Proof Documents for NRI
- For Salaried
- Valid work permit
- Employment contract with an English translation (if it’s in another language) duly attested by employer/consulate/Indian foreign office/Embassy.
- Last 3 months’ salary certificate or salary slips
- Last 6 months’ bank statements showing salary credit
- Latest salary certificate or salary slip in original
- Last year’s Individual Tax Return (duly acknowledged copy) except for NRIs/PIOs located in Middle East countries & Merchant Navy employees.
- For Self-employed
- Business address proof
- Income proof in case of self-employed professionals/businessmen.
- Last 2 years’ balance sheet and P&L accounts (audited/C.A. certified).
- Last 2 years’ Individual Tax Return except for NRIs/PIOs located in Middle East countries
- Last 6 months’ bank statements of overseas account(s) in the name of individual as well as company/unit.
Lowest interest rate on Home Loan
Currently rate starts at 6.49% p.a. onwards.( Home Loan rates ae controlled by RBI so rate change from time to time). As current housing loan interest rate are at decadal low, you can seal the best housing finance deal ever this year from a lender of your choice.
Home Loan Details
Below are some common home loan details of various housing loan offers offered by different banks and other financial institutions:
|Loan Amount||Rs. 5 Lakh onwards|
|Tenure||5 year – 30 years|
|Interest Rate||6.49% onwards|
|EMI Per 1 Lakh||Rs. 645 – Rs. 1087|
|Processing Fees||Up to 0.10% onwards of the sanctioned loan amount|
|Prepayment Charges||Nil for floating interest rate based home loans|
|Purposes||House purchase, Residential Apartment purchase, Builder Floor Purchase, Residential Plot Purchase and construction thereon, repair/renovation/extension of self-owned house.|
Types of Home Loan Interest Rates Available
A home loan can be availed of as a fixed rate loan or a floating/ variable rate variant. However, currently maximum lenders in India are offering floating home loan schemes only.
- Fixed interest rate – As the name suggests, fixed interest rate of home loan results in fixed EMIs through the tenure. You can plan the budget for the entire tenure of the loan and thus there is no fear of escalating EMIs ever. However, this peace of mind comes at a higher cost than the floating rate interest. There is also a charge on foreclosure or prepayment of a fixed home loan.
- Floating/ variable Home Loan – In this, interest rate changes as per fluctuations in benchmark lending rates. With change in any of the external benchmarks such as Treasury Bill yields or repo rates, your bank will also change your home interest rates and thus your EMI will adjust accordingly. However variable rate of interest is lower than fixed interest and there are no foreclosure or prepayment charges.
Some banks also offer combination schemes wherein the loan switches to a floating rate after initial few years. Based on your current repayment capacity and market situation choose the loan regi
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Planning to invest in your dream home? Choose from the best home loan offers for easy financing. Whether you want to buy a home or construct it from scratch, you can get access to funds that can make it a reality.
There are various home loan products that you can choose from based on your requirements:
|Type of Loan||Details|
|Purchase of apartment||You can get a home loan for a residential apartment complex that is under construction or already ready to move in.|
|Purchase of bungalow/independent house/Builder Floor||Get a home loan to purchase a ready-to-move-in or under construction bungalow or independent house.|
|Purchase of land/plot||You can buy a vacant plot for construction. Some banks insist that you must begin constructing your property within one year of purchasing the land.|
|Home renovation||These loans are for the improvement or renovation of an existing house or apartment.|
|Construction of house||You can avail of a loan for the construction of property if you have permission from the municipal corporation and an approved building plan.|
|Balance transfer||Transfer an existing home loan to another bank or NBFC that gives you better home loan eligibility criteria and interest rates.|
- Capital appreciation
- Sense of accomplishment
- Tax benefits on interest and principal components
- Zero prepayment charges
- Home loan top up and balance transfer facility
- Long repayment tenure of up to 30 years
- High loan amount of up to 5 Crores (can be more in some cases)
- Makes it easy to purchase a new or resale house/apartment/plot, house construction, or even renovation of an existing house.
- Repayment holiday facility
- Loan available as term loan and overdraft
- Fixed, floating, and hybrid rates of interest available
Some common types of home loans available in India are:
- Home loan for purchase of a flat in an apartment complex: Banks finance their customers to buy flats in residential complexes. Here you have the concept of an Undivided Share (UDS) in the land.
- Home loan for purchase of an individual house: This is similar to the type of Home Loan described above however there is no concept of ownership of UDS. The entire land belongs to the borrower. Naturally, such houses have a better resale value.
- Home loan for purchase of land/plot: Banks finance their customers for the purchase of vacant plot or land for subsequent construction of house. Usually, banks stipulate that the construction of the house should begin within one year of purchase of land for the loan to be treated as a home loan.
- Home loan for construction of a house on own land/land: You can avail a loan for constructing your house on your land. Banks have their methods of determining the cost of construction. Naturally, you need to obtain the requisite permission from the local municipal authorities for constructing your house on the land. You need to have an approved plan as well.
- Home loan for home improvement/extension: You can approach a bank for financing home improvement or for extending the house. In the latter case, you need to have the requisite approvals and plans in place.
- Home loan balance transfer: This facility allows you to switch over your Home Loan from one bank to the other. If you have a high-interest Home Loan, availing this facility can be useful. You could transfer your outstanding loan amount to another lender at low interest rate, thus saving on interest cost.
You should be ready to pay the processing fees for your housing loan. Processing Fees depending upon bank to bank. On the other hand, some banks and financial institutions consolidate their charges and include them in the processing fees. Let us look at some common charges you will most likely incur when you apply for home loan.
- Upfront fee for processing: Many banks charge an upfront fee for processing your application. This is usually in the range of Rs. 3,000 onwards. This is a non-refundable fee, even in case the bank rejects your loan application. In case they sanction your loan, they adjust this fee in their regular processing fees.
- Processing fee: This amount ranges starts from 0.10% onwards depending on your employment status. Salaried employees incur a smaller fee whereas self-employed professionals and business persons have to pay more. Some banks do have a uniform rate. Note that you have to pay GST @ 18% on this processing fee.
- Valuation charges: Many banks charge for the valuation of the property. They have independent evaluators on their panel. These banks have a fixed structure of payment. Some banks insist that the customer pays to the bank whereas some of them include this amount in their processing fee structure.
- Legal scrutiny charges: Legal scrutiny of the property is mandatory. The financing bank has to ensure that you get a clear title to the property so that the mortgage holds well in law. Therefore, they have a panel of legal experts who carry out the search for a period of 30 years. You need to supply the property documents to these advocates to allow them to do the needful. Some banks ask the customer to pay the advocates separately whereas many banks include these charges in their processing fees.
- Mortgage registration charges: The prime security for the home loan is an equitable Most of the states in India require you to register the equitable mortgage in the bank’s favour. Under such circumstances, you incur stamp duty and registration charges. The equitable mortgage does not attract stamp duty in some states like Rajasthan. However, in states like Tamil Nadu, there is a stamp duty of 1% of the loan amount subject to a maximum of 25,000. In addition, you have to pay 5,100 as registration charges. Be aware of these additional expenses when you avail Home Loan.
- Insurance: Taking out insurance for the property is not mandatory. At the same time, many banks and financing companies bunch a lot of their products like loan insurance, Mediclaim family floater policies, accident insurance, and critical illness cover, etc along with the loan. They provide the financing for the premium as well. Of course, you have to repay the same in your EMI. In a way, it is good to have these insurance policies because life is uncertain. In case something happens to the breadwinner and the principal borrower, the insurance can take care of the liability. However, other than the property insurance, all the other policies are optional. You can refuse to take them.
Various factors go into the determination of your Home Loan eligibility. The basic rules for salaried people and self-employed people are the same. Some banks stipulate a higher take-home pay percentage for self-employed persons.
- Your current income: Salaried employees can submit salary slips for the last three months and furnish a bank statement for the past six months where their salary is credited. Self-employed professionals should submit the statement of accounts for one year where they receive the credits for the services rendered by them.
- Continuity of employment/business: Salaried employees can rely on their income tax returns, Form 16, Form 26AS, etc to display their continuity of employment. They can also show a statement of the Provident Fund account to establish the links. Self-employed businessmen and professionals can furnish the income tax returns along with other financial statements like balance sheet and profit and loss statements. They can also furnish copies of invoices raised by their clients.
- Current obligations: It is possible that an applicant might have pre-existing personal loans, vehicle loans, and other loans for which they might be paying instalments. You have to account for these instalments as well while calculating Home Loan eligibility.
- Credit history: The repayment track record of the applicant is of utmost importance. Every bank or financial institution is a member of CIBIL or another credit bureau. These bureaus keep track of the loan activities of every borrower. Based on this information, they generate your credit history profile and quantify the same by generating your credit score. This is a number ranging between 300 and 900. The higher your score, the better are your chances of getting a loan. Naturally, it goes without saying that defaults, frequent requests for loans or missing payments can pull down your credit score. A score of 600 and above is considered fair for determining HL eligibility.
- Value of the property: The value of the property you purchase is important. The financing bank needs to determine the cost of the project it is going to finance. Banks usually finance up to 75% – 90% of the value of the property (also known as LTV or Loan to Value Ratio) with the balance being your contribution or margin as they call it.
- Legal position: The prime security for any home loan is a mortgage of the land and building they have financed. You have to create the mortgage and register the same with the respective registering authorities. In order to do so, you must be legally empowered to create the mortgage. Hence, banks and financial institutions insist on a legal scrutiny report from their panel of advocates who carry out a search for the previous 30 years to establish the ownership chain.
- Age of the borrower: The minimum age of the borrower at the time of home loan application should be 21. The age at the time of maturity should generally be 65 years. Some banks stretch this limit to 70 years.