Q. Who can apply for a housing loan?
A. Anyone, including Non Resident Indians, with a steady source of income.
Q. How much can one borrow?
A. Loans are generally disbursed up to a maximum of 90% of the cost of the apartment. In most cases, housing loan is sanctioned depending upon your repayment capacity and income. Your spouse's income can be included, if you want to increase the amount of your loan.
Q. What is an EMI?
A. Equated Monthly Installment (EMI) is the amount comprising a portion of the interest and the principal loan amount which is payable by a borrower to the lender every month.
Q. What is a fixed rate housing loan?
A. A fixed rate housing loan is a loan where the rate of interest is constant through the entire term of the loan. It is not favorable.
Q. What is a floating interest rate housing loan?
A. A floating interest rate housing loan is a loan where the interest rate payable is linked to market conditions such as the lender bank's retail Prime Lending Rate (PLR). A floating interest rate fluctuates as the bank rate varies. Floating interest rates are generally lower than fixed interest rates.
Q. Do institutions accept joint loan applications?
A. Yes.
Q. What are the documents required to apply for a housing loan? 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/tax returns for the previous 3 years.
- For partnership/private limited companies: The Articles of Association, partnership deed and details about the firm.
- For NRIs: Latest salary certificate specifying name (as it appears in the passport), date of joining, passport number, designation, salary and perquisites, photocopy of labor card / identity card, photocopy of valid resident visa stamped on the passport, photocopy of monthly statement of local bank account and other property related documents.
Q. Which sources, other than housing finance companies offer loans?
A. Banks and insurance companies. You can avail loan against your Provident Fund Account, Fixed Deposits, Post office Savings; against shares and debentures of listed companies and government bonds and securities.
Q. How is the rate of interest calculated in India?
A. Interest rates vary from time to time and from institution to institution. The current trend ranges from about 9% to 11% pa. The interest calculated either on a daily or monthly reducing or yearly reducing balances.
Q. What are the repayment period options?
A. Repayment period options range generally from 5 to 20 years.
Q. What are the charges for availing a housing loan?
- Processing Fees: payable to the lender on applying for a loan and is either a fixed amount not linked to the loan or may also be a percentage of the loan amount.
- Commitment Fees: in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned then some institutions levy a commitment fee.
- Prepayment Penalty: Nil for Home Loans and Home Improvement Loans with floating rate of interest.
- 2% plus applicable taxes on principal outstanding *on full repayment for Home Loans with fixed rate of interest.
- 2% plus applicable taxes on principal outstanding *on full repayment for Top Up loan if the applicant or co-applicant is Non Individual.
- 4% plus applicable taxes on principal outstanding *where loan** is given to Non Individual borrowers or with fixed rate of interest to Individual borrowers.
- *Current principal outstanding and all amounts tendered by the borrower towards prepayment of the Facility during the last one year from the date of final prepayment.
- **Home Equity Loan/Home Equity Enhancement Loan, Office Premises Loan and Lease Rental Discounting Loan.
- Stamp duty and registration fee on a deed of mortgage.
- Miscellaneous costs: such as administrative costs, legal documentation charges, technical consultant charges.
Q. What security is required for a housing loan?
A. The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.
Q. Do lending companies require guarantors?
A. Yes. Many lending companies require 1 guarantor.
Q. What is the time required for approval of a loan application?
A. About 15 - 20 days.
Q. What is the time required for disbursement of loans?
A. Usually loans are disbursed within 5-7 working days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale/lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrower's own contribution has been paid by him to the Vendor/ Builder/Developer.