Every individual looks forward to having his/her own house. Today, buying a house is no more a luxury. With Rupas Capital Services, availing a home loan is hassle-free and easy. We help you make your dream into an affordable reality. A home loan or housing loan is a secured loan that you can borrow from any bank or lending institution for purchase, construction, extension or renovation of a residential/commercial property. The concerned property acts as a collateral against the loan, i.e. if the borrower fails to repay the loan, the bank or lending institution will retrieve the money by selling the concerned property. Home loan repayments are done through EMI (Equated Monthly Installments) and the amount typically depends on the amount of loan, tenure (number of years the loan is borrowed for) and the rate of interest charged by the bank or lending institution. HDFC started the trend of home loans in 1978. Before 2002, there were no regulations to deal with defaults on home loans. The introduction of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) in 2002 gave banks the power to deal with Home Loan defaults. This Act encouraged the banks to foray into the home loan sector.
Home Loans are of various types and one can choose the home loan as per your need and affordability. Mentioned below are different types of home loans:
Home Purchase Loan
This type of loan is typically borrowed to buy a residential property which includes flats and bungalows. Home Improvement Loan This type of loan is usually borrowed to enhance your home structurally i.e. renovate, repair or refurnish it.
Home Construction Loan
As the name suggests, this type of loan is borrowed to construct a new home on a piece of land.
Home Extension Loan
This type of loan is borrowed when an individual wants to extend or add more space to the house. Banks and lending institutions have their own set of eligibility criterions with which they can assess your repayment capacity as a borrower. Your monthly income is the basic factor which is considered to assess your repayment capability. If your monthly income is higher, you will be eligible for a higher home loan. These are some of the basic criterions for availing home loans:
Monthly income
Your monthly income is the most important consideration for the disbursement of home loan. The amount of home loan usually sums up to 60 times of your income. For example, if your salary is INR 20000 per month, you may be eligible for a home loan of up to INR 12 lacs.
Property Attributes
Banks typically provide 75% of your property value as the home loan amount. For example, if your property is worth 60 lacs, you can get up to 75% of the value as home loan which calculates to 45 lacs in this case.
Credit History
Your credit history plays a very important role in deciding the amount of home loan. CIBIL records your credit history based on all your loan transactions and a credit report is prepared. Based on your credit report, you are awarded with a CIBIL score, which is an important factor in deciding the home loan amount you can avail.
Age
Your age is a crucial determinant for home loan. You must be of a minimum of 18 years to apply for a loan and the maximum age may vary from 58 to 65 years depending on the income source of the individual. Your age is a deciding factor in the tenure (duration) and EMI of the loan. The interest rates in home loans are of two types – Fixed Rate of Interest and Floating Rate of Interest. They are explained as follows: Fixed Rate of Interest As the name suggests, the rate of interest charged on the home loan amount remains constant throughout the loan duration. This means that the EMI amount is fixed and not affected by fluctuations in the market. A fixed rate of interest is beneficial as it helps plan your finances better and in advance. However, it may turn out as a demerit if the market rates are lower than the fixed rate of interest.
Floating Rate of Interest
Here, the rate of interest on the home loan amount is not fixed. This means that the rate of interest keeps changing as per the market conditions and hence can increase or decrease every month. Hence it is called as floating rate of interest. It proves beneficial at times when the market trends are optimal and allow for lower rate of interest. However, with this type of rate of interest, financial planning becomes difficult as you may end up paying more or less than the previous EMI amount.
Documents Required
The documents required to apply for a home loan are:
Home Loan Application Form
You need to complete the home loan application form with your signature and passport size photographs.
Age Proof
You require to submit any one of the following as an Age Proof.
Aadhaar Card
PAN Card
Passport
Birth Certificate
SSC Marksheet
Bank Passbook
Driving License
Residence Proof
Any one of the following can be submitted as a Residence Proof.
Aadhaar Card
PAN Card
Passport
Bank Passbook
Voter’s ID Card
Ration Card
Telephone Bill, Electricity Bill, Water Bill, Gas Bill
Life Insurance Policy
Letter from a recognized Public Authority verifying customer’s address
Income Documents
There are two separate income documents required as per the category of individuals – Salaried Individuals and Self-Employed Individuals.
For Salaried Individuals, the income documents required are:
Form 16
Certified Letter from Employer
Payslip of last 3 months
Bank Statements of last 6 months
Increment or Promotion Letter
Income Tax Returns for past 3 years Any Investment Proofs (like Fixed Deposits, Shares, etc.)
For Self-Employed Individuals, the income documents required are:
Income Tax Returns for last 2 years
Balance Sheet and Profit & Loss Account Statement of the Firm
Business License Details
License of Professional Practice
Registration Certificate of Establishment
Proof of Business Address
Firm’s PAN Card and Address Proof (in case of Partnership Firm)
Property Documents
In addition to the above documents, these are some of the property documents required for home loan.
NOC from Builder
Cost of construction of the house
Registered Sales Deed, Sale Agreement, Allotment Letter
Occupancy Certificate
Property Tax Receipts, Maintenance Bills and Electricity Bills
Approved Copy of Building Plan
Possession Certificate
Bank Account Statements showing payments made to the Builder
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