#FinancialBytes: Want a home-loan? Here's all you need to know
Home Loans are one of the most popular financial products in India. All major banks and financial institutions offer home loans to provide funding for buying or constructing houses and residential properties. Home loans are witnessing a steady increase as a majority of people nowadays prefer to have their own house instead of renting one. Here's all you need to know about home loans.
What exactly is a home loan?
A home loan is a secured loan that helps those who do not have enough money to buy their own house. Both salaried and non-salaried individuals can avail home loans; this may vary from bank to bank. For home loans, the borrower's house works as collateral. Home loans can be taken for buying or constructing a house, renovation, or extension to an existing house.
Home loan eligibility and the factors that affect the same
Before applying for a home loan, one must find out whether they meet the eligibility criteria for the same. Though the eligibility criteria may differ from bank to bank, the loan approval and eligibility mainly depend on whether the applicant is salaried or not, the applicant's income, credit history, and credit score. It will also depend on the borrower's repaying capacity.
What is the maximum amount of loan one can take?
Most banks and other financial institutions require the applicants to pay around 10-20% of the total property value as the down payment. The rest of the amount (80-90%) is financed by the bank. The total loan amount includes registration, transfer, and stamp duty charges.
About the interest rates on home loans
Coming to the interest rates on home loans, they are of two types: fixed and floating. While fixed interest rates remain the same throughout the loan tenure, the floating interest rates change along with the market rates. The interest rates also vary from borrower to borrower based on a number of factors like loan-to-value (LTV) ratio, applicant's risk score, income, credit score, etc.
Home loan repayment tenure, pre-closure charges, and other fees
Most banks offer maximum home loan repayment tenure of 30 years. However, borrowers can also pre-close the home loan before the original tenure. In such cases, customers may be required to pay pre-closure charges. Apart from this, home loans involve several other charges like processing fee (up to 1% of loan amount), documentation fee, technical evaluation fee that may vary from bank to bank.
