Housing Finance

HYDonline - Housing Finance

There are a variety of home loans available in India, some offered by various financial institutions like Banks and Housing Finance Companies. They are:-

1) Home Purchase or apartment purchase Loans: This is the basic home loan for the purchase of a new home.

2) Existing Home Improvement Loans: These loans are given for implementing repair works and renovations in a home that has already been purchased by you.

3) Home Construction Loans: This loan is available for the construction of a new home.

4) Home Extension Loans: Is given for expanding or extending an existing home. For example addition of an extra room, etc.

5) Home Conversion Loans: Is available for those who have financed the present home with a Home Loan and wish to purchase and move to another home for which some extra funds are required. Through a Home Conversion Loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need for pre-payment of the
previous loan.

6) Land Purchase Loans: This loan is available for purchase of land for both home construction or investment purposes.

7) Loans to NRIs: This loan is tailored for the requirements of NRIs wishing to build or buy a home in India.

Eligibility For a Home Loan

To qualify for a home loan most lending institutions in India require you to be:

An Indian resident
Above 21 years of age at the commencement of the loan
Below 65 when the loan matures
Either salaried or self employed
Nationalized banks offer loans to NRIs also.

The standard norms for acquiring a home loan

Securities required: In most cases the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts, share or savings certificates.

Guarantors: Some institutions ask for 1 or 2 guarantors, others require no guarantors at all. Applying for loan: Loans may be applied for before or after selection of property. The loan amounts are sanctioned in principle to let buyers know what amounts they can avail of. This helps them decide their budgets and purchasing power. Actual disbursements are made after satisfactory verification of all necessary documents and completion of specific procedures.

Documents required at the time of application

Latest salary slip (proof of income for salaried individuals)
Photographs
Proof of age
Identity papers
Proof of residence
Bank statements for the previous six months
For self employed, certified copies of balance sheet, profit and loss statement and tax challans for the previous 3 years
For partnership/private limited companies, the Articles of Association, partnership deed and details about the firm loan limit

Usually most companies give upto a maximum of 85% of the cost of the house. The other 15% sometimes called 'seed money' will have to be provided by a loan applicant. Out of the 85% the amount the applicant is eligible for, is decided by the age, income, no. of
dependents, monthly outgo and repayment capacity. This varies from case to case.

Rate of Interest:

Interest rates are different from institution to institution and generally range from about 12.5% to around 16%. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance.

Monthly reducing:

In this system the principal on which you pay interest reduces every month as you pay your EMI.

Annual reducing

In this system the principal is reduced at the end of the year, thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. Which means the EMI for the monthly reducing system is effectively lesser than the second system of calculating interest.

Loan amounts vary from institution to institution and usually range from Rs.1 lakh to 1 crore. Repayment period options range generally from 5 to 15 years.