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Home loan: Things to know before taking home loan from banks









All you need to know before taking home loan from banks


A person in need of residential house can request for home from banks.


For what purposes bank provide home loan?

The Home loan has been given for following purposes:

  1. Purchase of a new or old residential unit 

  2. Construction and extension of a residential unit 

  3. Purchase of Plot and construction of residential unit i.e. a composite project 

  4. Repair/renovation of an existing residential unit 

  5.  Purchase of solar power panel 

  6. Takeover of Home Loan from other bank/FI


Who are eligible for home loan?

Resident Indian citizen and non-resident Indians (NRIs) [Persons of Indian Origin (PIOs) and Overseas Citizenship of India (OCI) are to be treated as NRI]. 


Banks in India generally permitted to join as applicants/co-applicants to following family members: 

Father 

Mother 

Son 

Spouse 

Siblings, i.e. brother-brother, brother-sister, sister-sister subject to the property must be in the joint names of the siblings. 

Inclusion of HUF as an applicant to the loan, where the income of the HUF is to be considered or the HUF is owner/co-owner of the property. all major coparceners have to stand as guarantors to the loan in their individual capacity. 


Persons of Indian Origin (PIOs) and Overseas Citizenship of India (OCI) are to be treated as Non Resident Indians (NRIs). 

*If you are purchasing from first property you can also available home loan under Pradhan mantri awas yojna.

What is Age criteria of applicants for home loan?

 Minimum age of borrower should be above 18 years. 

Maximum permissible age at end of repayment for both salaried and non-salaried class of borrowers is 70 years. Some banks are considering age upto 75 years. This is subject to assessment at the time of sanction the adequacy of income to meet repayment obligation till the age of 70 years. 

What  is minimum and maximum Age of Residential Unit?

Repayment tenure should be five years less than the residual life of the building 


What is Margin Norms in home loans?

Following margin norms are used by banks in india


For purchase or construction of a residential unit Loan Amount 

Margin 

(Minimum) 

Loan to Value (LTV) Ratio 

(Maximum) 

Up to ` 75 lakh 

20% 

80% 

Above ` 75 lakh & up to ` 200 lakh 

25% 

75% 

Above ` 200 lakh 

35% 

65% 


*Now most of the banks are giving home loan upto rs 30.00 lakhs with 10% margin.

Repayment period of home loan? 

The banks are providing maximum repayment tenure for 30 years. 

The maximum repayment tenure for repairs/renovation of an existing residential unit is 10 years.


What is Moratorium Period in home loan?

The maximum moratorium period for a under construction unit is 36 months. In case of purchase of completed residential unit, no moratorium is permitted. 

After completion of moratorium period, the borrower has to start repayment of loan, irrespective of status of construction/repairs/renovations/extensions. 

Servicing interest during the moratorium period is optional. Borrowers to exercise the option at the time of first disbursement itself. 


Option 1: Interest is serviced during moratorium period 


Option 2: Interest during moratorium period is capitalized 


What is Rate of Interest in home loan? 

At present our Bank is offering Pricing based on Trans union CIBIL score in home loans as detailed under. Generally Floating rate of interest is applicable in home loans. The rate of interest changes every year. 


How income considered in home loan? 

Income of any of the permitted applicants/co-applicants can be considered for arriving at eligible loan amount, provided it is a regular source of income.

 

Bank do not considered Income from capital gains, speculation income, one-time bulk receipts etc cannot be considered for arriving at eligible loan amount as they are not of regular nature. 


For salaried individuals: 

 Income to be taken as per the latest salary slip / latest ITR for arriving at eligible loan amount/repayment capacity. 


Any other regular source of income such as rent, agricultural income etc. can be considered provided the same is reflected in ITR. In case such income is from the current financial year, then the same to be duly supported by documents and bank credits. 


Bank may also consider regular income sources e.g. pension, income from alternate employment post retirement etc. in case of loans given to individuals post retirement. 


For self-employed individuals: 

Average of gross annual income as per income tax return (ITR) or audited Computation of Income document of immediately preceding three years to be considered for arriving at eligible loan amount/repayment capacity. 

 

Supporting documents like the P&L, Balance Sheet, and Computation of Income etc. also to be obtained for assessment. 



What is Net take home pay or sustenance in home loan?

 

 While calculating the eligible loan amount/repayment capacity, an amount is to be set aside for the purpose of regular sustenance of the borrower and his/her family. 

It is to be arrived at as under: 


Amount for sustenance = Sustenance Percentage * Income Net of Taxes 

Where, Income Net of Taxes = (Gross Income – Taxes Paid) 

Sustenance Percentage is to be arrived as per the following table depending on the 


Gross Income level of all the applicants put together: 

            Annual Gross Income 

        Sustenance Percentage 

            Up to ` 3 lakh 

        45% 

          > ` 3 lakh to ` 8 lakh 

        40% 

          > ` 8 lakh to ` 12 lakh 

        35% 

          > ` 12 lakh to ` 18 lakh 

        30% 

            Above ` 18 lakh 

        25% 

What are the charges of banks in home loan?

Bank takes following charges in home loans:

a. Approx  Processing charges are 0.50% of loan amount plus applicable Tax 




B. At present No prepayment penalty to be levied if the loan is adjusted by the borrower from his own verifiable sources

C. Stamp duty as per State stamp act

D. Legal and valuation charges of the property

E. Insurance premium of property




What is Security in home loan?

The loan is to be secured through simple or equitable mortgage of the immovable residential property for which the loan is being granted. 


What is legal and Valuation in home loan?

Bank obtained Valuation report from there registered valuer before approval of the loan.


The title deeds/ sale agreement of the property being financed to be examined by the banks registered lawyer. The sellers title to the property must be clear and marketable. 


Is Insurance of property required in home loan?

The property should be insured by the borrower for the 110% value of the property (excluding the cost of land) with usual bank clause. 

Is Guarantee mandatory in home loan?

All the owners of the property proposed to be financed by the bank have to join as applicant(s). 

All the individuals whose income is being considered for repayment of the proposed loan have to join as applicant(s). 

 In case of inclusion of HUF as an applicant, all major coparceners have to stand as guarantors to the loan in their individual capacity. 

No further guarantee is required in case of resident Indian. 

 In case of NRI, guarantee of one/two local resident Indian, acceptable to the bank, and having means equivalent to the loan amount, to be obtained. 


What are the Documents asked by banks for giving home loan home loan?

Bank provide following documents from borrower applying home loan.

Application form duly filled by the customer 

Credit information form duly filled by the customer 

KYC documents for each applicant/co-applicant/guarantor (if any) 

Identity proof (PAN card / Voters ID / Passport / Aadhaar etc.) 


Residence proof (Driving license/ Passport/ Aadhaar etc.) 

Office / Business address proof 

Latest passport size two photographs 

PAN card 

Aadhaar card 

ITR or Income proof (as per Para 11) 

Additional documents for NRIs 

Employment contract or offer letter (if the employer contract is in any language other than English, the same has to be translated into English and attested by the employer / Indian Embassy) 

Latest work permit 

Visa stamped on the passport 

Identity card issued by current employer 

If NRI applicants execute the power of attorney (POA) document abroad, then the same has to be attested by respective Indian Embassy 

Bank statement of last 12 months (to assess satisfactory operations in the account) 

Caste certificate (wherever required for statistical purposes only)  All original documents should be verified and an endorsement there-to should be recorded on the photo copies by the branch officials. 

Property documents (as per report from our empanelled lawyer) 

Property ownership documents: Title deed / Original Sale Deed/ Sale Agreement/ Share Certificate(s) issued by the society (duly registered) and other link documents conveying the ownership 

Advance payment receipts/own contribution receipts 

Copy of approved plan and map

Municipality tax paid receipt

Agreement for sale

NOC from Builder / Developer / Society 

Statutory and regulatory approval of construction of proposed residential unit as per state laws 

In case of construction/ extension/ repairs/ renovations, estimate cost of construction/ extension/ repairs/ renovations 


Disbursement 

The disbursements will be made on a proportionate basis i.e. the bank will not disburse the home loan more than the proportion of the margin amount paid by the customer. 


Disbursements must be made directly in the name of the builder / supplier / Development Authority etc. by issuing a PO/DD or through NEFT/RTGS. 

In case of construction of individual residential houses, disbursement of expenditure actually incurred/proposed to be incurred, may also be released directly to the borrower against bills/quotations. 


We have tried our best to collect all useful and necessary information for availing home loan.


You can also visit respective banks websites to know know any changes in their scheme.


For any clarification feel free to ask in comment box.



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