HOME LOAN

"Build new dreams in your new home"

What is Home Loan?

A home/housing loan, also known as a mortgage, is an amount of money borrowed by an individual, usually from banks and companies that lend money. The borrower has to pay back the loan amount with interest in Easy Monthly Instalments or EMI’s over a period of time that can vary between 10-30 years depending on the nature of the loan.

Benefits of Home Loan

  • Tax benefits

To encourage more and more people buy their own house, government of India provides tax deduction on the principal as well as interest paid on home loan. An individual is eligible to claim a deduction of up to Rs 1.5 lakh under Section 80C of Income Tax of India 1971 Act in a financial year.  While a deduction of up to Rs 2 lakh is allowed on the interest portion under Section 24B of Income Tax of India Act.   The deductions under income tax are only available after the construction of the house is complete. You can’t claim the income tax deductions while the property is under construction. Read: to know more about home loan deductions.

  • Tax benefits on second house

In case of second house, you are eligible to claim deduction for the entire amount of housing loan interest paid under Section  24B of Income Tax Act.

  • No prepayment charges

Unlike other loans where lenders charge prepayment penalties on payment made towards home loan , there are no prepayment penalties on floating rate home loans . So, whenever you have surplus money, you can utilize it for making part payment towards your home loan and lower your burden. However, there will be prepayment charges in case of floating rate home loan.

  • Balance Transfer Facility

In case of home loan you have the facility to transfer your home loan to different lender if he is giving you loan at a lower interest rate. Check out our Balance Transfer Calculator to know how beneficial it will be for you to transfer your loan amount.

  • Makes it easy to buy dream home

For many people buying house with own money is not possible, home loan as it can be repaid in easy monthly instalments makes it easier to buy a house.

  • High repayment Tenure

Among all types of loan, home loan has the longest repayment tenure which goes up to 30 years, so one can reduce the burden of equated monthly instalments by extending the tenure

  • Enjoy capital appreciation

You will also benefit from the rise in prices of the property over time.

  • Saves you from paying rent

As rent in metro cities is quite high, they put strain on your monthly budget. It is better to pay the EMIs and own a house.

 

Types of Home Loan

Lenders offer home loans, not only for buying a house but also for a variety of other purposes. Some of the popular types of home loans available in the financial market are described below.

  • Loans for Purchase of Land

Several banks offer loans for land purchase. Purchasing a land is a flexible option, the buyer can save funds and construct a house whenever his finances allow or just have the land as an investment. Up to 85% of the cost of the land is given as loan by lenders like ICICI Bank and Axis Bank.

  • Loans for Home Purchase

The most popular type of home loan is the loan for purchase of a new or a pre-owned home. This loan is also commonly available and is offered by many banks in different variants. The interest rate is either floating or fixed and generally ranges anywhere between 9.85% and 11.25%. Also, 85% of the total amount is offered as a loan by many banks.

  • Loans for Construction of a House

This loan is specially designed for people who want to construct a place according to their wishes rather than buying a pre-constructed house. The approval process for this type of loan is different for it takes into account the cost of plot also. The most important clause when applying for a home construction loan is that the plot must have been purchased within a year for the plot cost also to be included in the loan amount. The loan amount is decided based on a rough estimate of the construction cost. The amount may be disbursed at one go or in multiple instalments. Popular home construction loans include the schemes offered by Bank of Baroda, UCO Bank and Canara Bank.

  • House Expansion or Extension Loans

Want another balcony or an additional bedroom? No worries, some banks also offer loans for house expansion including alteration of current structure and construction of new rooms. HDFC Home Extension loan and house renovation loan offered by Bank of Baroda are popular in this category.

  • Home Conversion Loans

People who have already availed a home loan and have purchased a house with it but want to move to a new house can opt for home conversion loans. By transferring the current loan to new house, borrowers can fund the purchase of the new home and also need not repay the previous home loan. Though it offers convenience, this segment of home loan is also very expensive.

  • Loans for Home Improvement

Renovation and repair works like external and internal repair, painting, construction of overhead water tank and electrical renovation certainly will make your house look better. But if you lack the finances for repair and renovation, banks like Union Bank of India, ICICI Bank and Vijaya Bank offer specialized home improvement loans.

  • Balance Transfer Home Loans

This option can be availed when an individual wants to transfer his home loan from one bank to another bank owing to reasons like lower interest rates or better services offered by the other bank. This is done to repay the remaining loan at a revised, lower interest rates offered by the other lender.

  • NRI Home Loans

Specially designed to support non-resident Indians in buying a residential property in India, the formalities and application procedure for this type of loan is different from the others. Generally, most of the private and public sector banks offer NRI loans as a product of their housing loan portfolio.

  • Bridged Loans

Bridged Loans are short term loans that are designed for existing homeowners who are planning to purchase a new property. It aids borrowers to fund the new house until a buyer is identified for the existing property. This type of loan usually requires the mortgage of new house with the bank and is extended for less than two years. Several banks like Vijaya bank and HDFC Bank offer bridged loans.

  • Stamp Duty Loans

Not a widely known segment of home loans, stamp duty loans are offered to cover the stamp duty charges during the purchase of a property.

With home loans becoming the norm of the day when it comes to purchasing a home, it also becomes equally important to identify your requirement and apply for the right type of home loan. Not only will it reduce the paperwork and simplify the loan approval process, it will also allow you to enjoy a loan at reduced interest rates.

 

Documents Required for Home Loan

For Self Employees

  • Identity Proof :
  • PAN Card (mandatory) and any one of the below documents
  • Voter Card
  • Aadhar Card
  • Valid Passport
  • Driving License
  • Photo Credit Card
  • Photo Identity card issued by Govt. body
  • Letter from recognized public authority or public servant verifying the identity of the customer with photograph (not more than 30 days old)

 

Address Proof: Any one of the below documents:

  • Voter Card
  • Aadhar Card
  • Valid Passport
  • Letter from a recognized public authority or public servant verifying the identity and residence of the customer
  • Latest Utility bill
  • Rent agreement on stamp Paper
  • Bank Statements reflecting address of borrowers of any commercial nationalized bank
  • Credit Card Statement not older than 3 months
  • Life Insurance Policy
  • Residence address Certificate /letter by employer on company letterhead
  • Copy of Sale Deed of the property (residence), if owned
  • Municipal or property tax receipt
  • Post office saving bank account statement
  • Pension or family pension payment orders (PPOs) issued to retired employees by Govt. departments or Public Sector Undertakings, if they contain the address
  • Letter of allotment of accommodation from employer issued by State or Central Govt. departments, statutory or regulatory bodies, and public sector undertakings, scheduled commercial banks, financial institutions, and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation
  • Documents issued by Govt. departments of foreign jurisdiction and letter issued by Foreign Embassy or Mission in India

 

Address Proof for Business Entities: Any one of the below documents:

  • Shops & Establishment Certificate
  • Trade License Certificate
  • SSI Registration Certificate
  • PAN Card/Sales Tax/ VAT Registration Certificate
  • Partnership Deed (for firms) / Memorandum of Association (MOA) for companies
  • Export-Import Code Certificate/Factory Registration Certificate
  • Professional qualification Certificate and Degree Certificate for Professionals
  • SEBI Registration Certificate
  • Registration No issued by ROC

 

Proof of income: All the documents given below:

  • Income Tax Returns along with computation for last 2 financials years
  • Balance Sheet and Profit & Loss account along with all annexures (duly CA certified and audited if applicable)
  • Last six months current account statement of the business entity and saving account statement of individual

 

Other documents: All the documents given below:

  • Documents related to running loans along with 6 months repayment bank statements
  • Latest List of share holding pattern (duly CA/CS certified)
  • MOA (for private Limited companies)
  • Partnership deed (for partnership firms)
  • Property Documents

 

All the documents given below:

  • Copy of complete chain documents of the property (as applicable)
  • Copy of Agreement to Sell (if executed)
  • Copy of the Allotment Letter / Buyer Agreement(if applicable)
  • Copy of Receipt/(s) of payment/(s) made to the developer (if applicable)

 

For Salaried

  • Identity Proof
  • PAN Card (mandatory) and any one of the below documents
  • Voter Card
  • Aadhar Card
  • Valid Passport
  • Driving License
  • Photo Credit Card
  • Photo Identity card issued by Govt. body
  • Letter from recognized public authority or public servant verifying the identity of the customer with photograph (not more than 30 days old)

 

Address Proof: Any one of the below documents:

  • Voter Card
  • Aadhar Card
  • Valid Passport
  • Letter from a recognized public authority or public servant verifying the identity and residence of the customer
  • Latest Utility bill
  • Rent agreement on stamp Paper
  • Bank Statements reflecting address of borrowers of any commercial nationalized bank
  • Credit Card Statement not older than 3 months
  • Life Insurance Policy
  • Residence address Certificate /letter by employer on company letterhead
  • Copy of Sale Deed of the property (residence), if owned
  • Municipal or property tax receipt
  • Post office saving bank account statement
  • Pension or family pension payment orders (PPOs) issued to retired employees by Govt. departments or Public Sector Undertakings, if they contain the address
  • Letter of allotment of accommodation from employer issued by State or Central Govt. departments, statutory or regulatory bodies, and public sector undertakings, scheduled commercial banks, financial institutions, and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation
  • Documents issued by Govt. departments of foreign jurisdiction and letter issued by Foreign Embassy or Mission in India

 

Proof of income: All the documents given below:

  • Last 2 months salary slip
  • Last 6 months bank statement of salaried account
  • Latest Form 16 / ITR
  • Other documents: Documents related to running loans along with 6 months repayment bank statements

 

Property Documents: All the documents given below :

  • Copy of complete chain documents of the property (as applicable)
  • Copy of Agreement to Sell (if executed)
  • Copy of the Allotment Letter / Buyer Agreement(if applicable)
  • Copy of Receipt/(s) of payment/(s) made to the developer (if applicable)