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Frequently Asked Questions About Home Loans- Answered
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It is basically amount of capital offered by a bank or a financing institution to a potential buyer of home against a rate of interest for a specific period of time. The amount has to be repaid in EMIs. These loans are available for both Indians as well as NRIs in India as per the Foreign Exchange Regulatory Act.
What are the different types of home loan options available in India?
There are myriad types of home loans available in India as per the purpose for which it is required.
Home loan for purchase
Home construction loan
Home improvement loan
Home extension loan
Loan against property
Purchase of land
Home loan for NRIs
What is an EMI? How is it calculated for repayment of loans?
An EMI i.e. Easy Monthly Instalments is an amount which you owe to your lender of home loan at the end of each month. The EMI is paid until the full due amount is paid back. The total amounted EMI includes principal amount as well as the rate of interest.
The EMI is calculated on the basis of loan sanctioned to you, the interest to be paid and the total tenure of the loan. You can calculate your EMIs, approved limit and maximum loan for salaried employee by using online home loan calculators.
How do you determine your loan eligibility in India?
To be eligible for a home loan in India, you must be:
Over 21 years of age
Below 65 years of age at the time of maturity of loan
A salaried employee or self employed
How do I choose the cheapest loan?
Well, choosing the cheapest loan is not difficult as you just need to hold the repayment period as a constant and work out the final amount in home loan calculators.
What is fixed and floating interest rate?
A fixed rate of interest is the interest rate that remains unchanged for entire tenure, in spite of prevailing interest rates in the market. A floating interest rate changes with fluctuations in the market, hence, you pay more when the rates go up and you pay less when the rates go down.
What are the costs associated with loans in India?
While you need to pay a rate of interest for home loans there are additional costs prevalent like processing fee, pre-payment penalty if you are paying ahead of your time frame and documentation/consultation charges as per the lender policies.
What are the general tenure of repayment?
The average tenure of repayments ranges from five to thirty years.
Do I need any collateral?
Many institutions consider the property being purchased along with the lenders capital as security and the same is mortgaged until the total amount is repaid. Many housing finance companies may ask you for extra collaterals like fixed deposits, loan guarantor etc. you may also take a loan against property. It is suggested to use a home loan calculator if you are taking a loan against property without ITR.
How much time is required for approval?
You can expect the approval for your home loan in two weeks, depending on your credit profile and the property you are purchasing. For instance, loan in Lal Dora may sometimes take a little bit longer.
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