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Note:
We're here to help. You will find listed below, a list of the most common
questions of real estate services. If you cannot find the answer to
your questions in our Frequently Asked Questions (FAQ) area, then fell
free to contact us at anytime and our support specialists will assist
you.
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Frequently
Asked Questions ( FAQ ) |
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HOME LOAN |
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- Who can apply
for a home loan?
- When can a home
loan be applied for?
- How does the
lender calculate eligibility?
- How do I repay
the loan?
- What is pre-EMI
interest?
- Is there a fixed
interest rate for the duration of the loan?
- What is a fixed
rate loan?
- What is a floating
rate loan?
- It is better
to opt for a fixed or a floating interest rate?
- Is there a difference
between monthly rest & annual rest?
- What are the
other areas of expenditure before I get a home loan?
- Is a guarantor
required?
- Can I repay the
loan before the set date of repayment?
- How do I select
my HFC?
- Can a loan be
switched over if I have obtained it at a high rate of interest, but
another HFC is offering a better interest rate?
- What is the maximum
amount of housing loan available?
- What is the amount
I can borrow and what are the criteria?
- What is the period
in which I will have to repay the loan?
- How is the interest
calculated on my loan?
- How do I apply
for a loan?
- Who can be co-applicants
for the housing loan?
- What security
do I have to provide?
- Does the Agreement
for Sale have to be registered?
- Does the property
have to be insured?
- How long does
it take to get my application processed and my loan sanctioned?
- When do I have
to make my share of the contribution to the purchase price of the
property?
- What do I have
to do when my housing loan is sanctioned?
- In how many installments
can the loan be disbursed?
- Do I get tax
benefits on the loan?
- Can I get a loan
for extension / upgradation / renovation of my house?
- Can I sell the
property on which I have taken the loan?
- Can I rent the
property on which I have taken the loan?
- What is an amortization
schedule?
- Can I get IT
certificates in the name of both the Applicant and co-Applicant separately?
- When is the IT
certificate issued?
- How can I get
the tax benefit during the year?
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Who
can apply for a home loan?
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Ans
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Any
Indian Resident, Non-resident Indian or Person of Indian Origin can
apply for a home loan if they are 21 years of age at the origin of the
loan and 65 years or below at loan maturity. Housing Finance Companies
(HFCs) usually give home loans for properties located in India to people
who are employed or self-employed, with a regular source of income.
Eligibility for Home Loan
1.You must be at least 21 years of age when the loan is sanctioned.
2. The loan must terminate before or when you turn 65 years of age or
before retirement, whichever is earlier.
3. You must be employed or self-employed with a regular source of income
Eligibility for Office Premise Loan
1. You must be at least 21 years of age when the loan is sanctioned.
2. The loan must terminate before or when you turn 65 years of age.
3. You must be self-employed with a regular source of income.
4. The loan can be for the purchase / construction / extension of a
non-residential property.
5. A loan for renovation or improvement will be given only at the time
of acquisition of property.
6. Professionally qualified and self-employed individuals can apply.
7. A minimum of 3 year's work experience is a must.
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When
can a home loan be applied for?
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Ans
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An
individual can apply for a home loan even before the property has been
selected. The loan amount is sanctioned based on the ability to repay.
This helps in planning a budget while purchasing the house.
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How
does the lender calculate eligibility?
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Ans
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A
number of factors are taken into account when assessing your repayment
capacity. Your income, age, number of dependants, qualifications, assets
and liabilities, stability/ continuity of your employment / business
are some of them.
However,
there are ways by which you can enhance your eligibility.
1. If your spouse is earning, put him/her as a co-applicant. The additional
income shall be included to enhance your loan amount. Incidentally,
if there are any co-owners they must necessarily be co-applicants.
2. Did you know that your fiancée's income can also be considered for
sanctioning the loan on your combined income? The disbursement of the
loan, however, will be done only after you submit proof of your marriage.
3. Providing additional security like bonds, fixed deposits and LIC
policies may also help to enhance eligibility.
While there is no need for a guarantor, it could be that having one
might enhance your credibility with us. If so, our loan officer would
provide you with the necessary details.
The final amount to be sanctioned will depend on your repayment capacity.
However, what you ultimately are entitled to will have to conform within
the limits fixed for each loan.
Also, when the company looks at the total cost, registration charges,
transfer charges and stamp duty costs are included.
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How
do I repay the Loan?
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Ans
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You
can repay the loan in Equated Monthly Installments (EMIs) comprising
principal and interest. Repayment by EMIs commences from the month following
the month in which you take full disbursement. Till then, you only need
to pay the interest on the amount disbursed.
How
is the loan repaid?
All loan repayments are done via equated monthly instalments (EMI).
What
is an EMI?
An EMI refers to an equated monthly instalment. It is a fixed amount
which you pay every month towards your loan. It comprises of both, principal
repayment and interest payment.
When
does the repayment start?
EMI payments start from the month following the month in which the full
disbursement has been made.
How
is the EMI paid?
The EMI is to be paid every month through post-dated cheques (PDCs),
Electronic Clerance or direct deductions from your salary. If you are
opting for PDCs, then you will have to provide 36 upfront. The PDCs
are to be dated on the 1st of every month. However, if you receive your
salary a few days later, no problem. There are some flexibilities of
dating the cheques, which depands on that financial institution's rules
& regulations.
What
if a PDC bounces?
In the case of a bounced cheque or delayed payment, charges and outstanding
dues will be charged as per the prevailing company policy. You can replace
old PDCs with new ones within 5 - 7 working days.
What
is pre-EMI interest?
In the case of part disbursement of the loan, monthly interest is payable
only on the disbursed amount. This interest is called pre-EMI interest
(PEMI) and is payable monthly till the final disbursement is made, after
which the EMIs would commence.
When
do I pay PEMIs?
The first PEMI is payable by cheque by the end of the month in which
the disbursement is madeand each subsequent PEMI at the end of every
month till the commencement of EMI.
When
does the repayment start?
EMI payments start from the month following the month in which the full
disbursement has been made.
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What
is pre-EMI interest?
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Ans
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Before
final disbursement, you may have to pay interest on the portion of the
loan disbursed. This is called pre-EMI interest. Pre-EMI interest is
payable every month from the date of each disbursement up to the date
of EMI commencement.
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Is
there a fixed interest rate for the duration of the loan?
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Ans
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Most
HFCs offer the fixed rate as well as the variable rate options to customers.
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What
is a fixed rate loan?
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Ans
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A
rate of interest that is constant throughout the duration of the loan
is known as a fixed rate loan.
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What
is a floating rate loan?
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Ans
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A
floating rate is when the interest rate on the loan changes according
to the rates in the market during the period of the loan.
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It
is better to opt for a fixed or a floating interest rate?
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Ans
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If
interest rates are falling, a floating rate loan is a better option.
But when interest rates are rising, opt for a fixed rate loan, because
you will then know in advance what your EMIs will be.
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Is
there a difference between monthly rest & annual rest?
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Ans
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On
the basis of the principal at the start of every month, the interest
is calculated in monthly rest. For annual rest, this is done at the
beginning of every year.
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What
are the other areas of expenditure before I get a home loan?
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Ans
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Processing
and administrative fees, pre-payment charges and delayed payment charges,
legal fees, technical fees, stamp duty and registration of mortgage
deed are all likely areas of expenditure.
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Is
a guarantor required?
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Ans
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A
guarantor is insisted on by the HFC so as to ensure that the loan is
paid back in full and in time. The guarantor is responsible for the
repayment of the loan if the borrower is unable to do so.
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Can
I repay the loan before the set date of repayment?
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Ans
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You
could do this, but some HFCs require a pre-payment fee to be paid. Check
with your HFC.
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How
do I select my HFC?
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Ans
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Various
considerations would help you zero down on the HFC most suitable for
your loan requirements. Analyse the following points before taking your
decision:
- Loan amount:
The minimum and maximum loan amounts vary between HFCs. Find out if
the amount you require falls within this limit.
- Duration: There
is no lower and upper limit to the tenure of the loan. Find out if
the time limit you want it for can be accommodated. This varies between
HFCs. Normally HFCs offer loans ranging form 5-20 years, with some
going up to 30 years. For NRIs the maximum tenure could be 10 years
in some cases. Depending on your requirements, this would have a bearing
on the loan you opt for.
- Interest rate:
This varies between HFCs. Fix a duration that you want the loan for
and find out the EMI from them. Compare and identify the lowest EMI.
- Pre-payment:
Check if the HFC charges for repaying the loan before its due date.
- Flexibility:
Find out whether you can change your interest scheme from fixed to
variable if so desired or if there are restrictions.
- Guarantor: Some
HFCs require this, while others don't.
- Documents required:
These may vary between HFCs although there are a few standard documents
like proof of income, proof of age and residence and a salary slip.
- Co-owner: If
there is to be a co-owner or co-applicant for the loan, the HFC has
to accept the relationship between the two.
- Other fees: Each
HFC has different fees for administration and processing among others.
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Can
a loan be switched over if I have obtained it at a high rate of interest,
but another HFC is offering a better interest rate?
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Ans
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You
could do this. After discussing the reasons with the current HFC, they
may even reconsider the interest rate.
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What
is the maximum amount of housing loan available?
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Ans
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The
maximum amount is 85% of the cost of the property, including the cost
of land, subject to a maximum amount of Rs 1 crore.
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What
is the amount I can borrow and what are the criteria?
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Ans
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Generally,
the amount is up to 2.5 times your gross annual income. But your equated
monthly installments usually should not exceed 35 per cent of your gross
monthly income. Besides this, HFCs will assess your eligibility based
on your ability to repay.
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What
is the period in which I will have to repay the loan?
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Ans
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The
repayment tenure:
1. Home Equity Loans - Maximum loan tenure of 15 years.
2. Office premise loan - Maximum loan tenure of 15 years.
3. Home loan - Maximum loan tenure of 30 years - Few HFCs offers usually
at a higher interest rate.
Usually
in a period of between 5 to 15 years, but definitely before you retire.
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How
is the interest calculated on my loan?
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Ans
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Most
HFCs follow the yearly reducing balance method, which accounts for your
principal repayments only at the end of their financial year. Thus you
pay interest on the principal that you have already returned to the
HFC during the year. The effective interest rate is thus higher than
the quoted interest rate by around 0.7 per cent. Banks and some HFCs,
in contrast, follow the daily or monthly reducing balance method, which
results in a lower interest burden.
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How
do I apply for a loan?
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Ans
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- Approach an HFC
with the latest salary slip and TDS Form 16 of the last two financial
years for yourself and your co-applicant. The loan officer will informally
tell you the amount of loan you are eligible for and the terms, in
areas in which they finance homes.
- Collect a loan
application form and confirm the needed documents.
- Visit more than
one company since you are likely to get better terms / larger loan
amount if you shop for the best deal.
- At your chosen
HFC, submit the duly filled loan application along with the required
documents and an application fee (around 1 per cent). They will then
interview you on the same. After conducting an appraisal of your application,
the HFC will give an in-principle sanction of your loan.
- You now have
to submit your property documents, which should show a clear title.
The HFC will check these and levy an administrative fee (around 1
per cent). It will then disburse the loan, either fully or in installments,
directly to the builder / seller of the property.
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Who
can be co-applicants for the housing loan?
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Ans
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Usually
a spouse can be a co-applicant. Other immediate family members are also
acceptable to some companies, depending on merits. If both partners
are working, it is better to have your spouse as a co-applicant since
this will entitle you to a much larger loan.
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What
security do I have to provide?
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Ans
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A
first mortgage of the property to be financed. The title should be clear
marketable. Some HFCs may also require collateral security like the
assignment of life insurance policies, pledge of shares, NSCs, units
or mutual funds, bank deposits or other investments.
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Does
the Agreement for Sale have to be registered?
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Ans
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Yes.
In many Indian states, the agreement between the builder and purchaser
has to be registered. This can be done at the office of the sub-registrar
appointed by the State government.
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Does
the property have to be insured?
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Ans
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The
property should be insured against fire and other hazards and the HFC
will have to be the beneficiary of the policy.
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How
long does it take to get my application processed and my loan sanctioned? |
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Ans
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It
will take around 15 days for the processing of your application if your
documents are in order. Make an application only if you are eligible
for the loan since the HFC will not return the application-processing
fee. It will take another week for the company to check out your property
papers and make the disbursement.
Documents
Required:
1. Passport size photograph.
2. Age verification: PAN card, Voters ID, Passport, License.
3. Bank statement for the last six months.
4. Income Documents e.g. Latest Form 16, Certified IT returns for latest
3 years.
5. Admin Fee cheque.
6. Loan Enclosure letter.
These
are the documents required for sanctioning a loan. You may be asked
to submit further legal documents if required by the Bank or its approved
lawyers.
Do
retain photocopies of all documents being submitted by you.
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When
do I have to make my share of the contribution to the purchase price
of the property?
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Ans
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You
will have to make your payments towards the property price up-front
before the HFC disburses any installment of the loan.
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What
do I have to do when my housing loan is sanctioned?
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Ans
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You
must submit the property papers and pay an administrative fee (approximately
1 percent). When the HFC clears these papers, you must take the first
disbursement of the loan within a stipulated period (usually three months)
and avail of the entire loan within about a year's time.
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In
how many installments can the loan be disbursed?
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Ans
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The
loan can be either disbursed in full for outright-purchase / ready properties
or in a few installments for under construction properties. The disbursement
will be made taking into account the requirement of funds and the progress
of construction.
Your
loan will be disbursed after you identify and select the property or
home that you are purchasing and on your submission of the requisite
legal documents.
While
you may be under the impression that the list of documents asked for
is rather extensive, please note that it is for your own good. Each
and every single document asked for will be verified and checked to
ensure your safety.
This
may take some time but we want to ensure a clear title and will complete
all the legal and technical verifications to ensure that you have full
rights to your home.
The
230 A Clearance of the seller and / or 37I clearance from the appropriate
income tax authorities (if applicable) is also needed.
On
satisfactory completion of the above, on registration of the conveyance
deed and on the investment of your own contribution, the loan amount
(as warranted by the stage of construction) will be disbursed by Bank.
The
disbursement will be in favour of the builder/seller.
List of standard documents for disbursement:
1. Loan Agreements
2. Disbursement Requests
3. Post-dated cheques
4. Personal guarantor's documents, as the case may be.
Some
documents are specific to each case.
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Do
I get tax benefits on the loan?
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Ans
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Yes.
You are eligible for certain exemptions on both the principal and interest
components of the loan as per the Income Tax Act, 1961. The principal
repayment of the loan up to Rs 10,000 is eligible for a rebate @ 20
per cent U/s 88 of the IT Act. The income tax exemption limit for interest
paid on housing loans is Rs 75,000 per annum on self-occupied houses.
Therefore an interest payment of up to Rs 6,250 per month can be deducted
from taxable income in arriving at the total income tax payment of an
individual.
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Can
I get a loan for extension / upgradation / renovation of my house?
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Ans
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Yes,
these loans are available from some HFCs. However the loan terms may
be different from the usual housing loans.
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Can
I sell the property on which I have taken the loan?
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Ans
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Yes.
But the loan will have to be repaid before the sale is effected. Some
HFCs allow the transfer of loan to the buyer of the property, depending
on his eligibility for loan.
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Can
I rent the property on which I have taken the loan?
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Ans
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Yes,
this is allowed by HFCs.
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What
is an amortization schedule?
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Ans
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An
amortization schedule is a table giving the reduction of your loan amount
by monthly installments. The amortization schedule gives the breakup
of every EMI towards repayment interest and outstanding principal of
your loan.
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Can
I get IT certificates in the name of both the Applicant and co-Applicant
separately?
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Ans
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As
per the IT rules only one certificate can be issued for a home loan
and hence one certificate will be issued in the name of both applicant
and co applicant.
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When
is the IT certificate issued?
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Ans
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Yes,
this is allowed by HFCs.
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Can
I rent the property on which I have taken the loan?
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Ans
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The
IT certificate will be issued at the end of a financial year. You can
expect to receive your copy of the IT certificate in the month of April
or May.
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How
can I get the tax benefit during the year?
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Ans
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You
can request for a provisional IT certificate that can be issued any
time during the course of the year.
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