Availing a home loan can be a tedious process for many, getting a loan approved is another task.
Individuals who are availing home loan for the first time should be aware of a lot of things such as loan amount, best interest rate, different fees, documentation, and procedure etc.
Here we have explained few things home loan borrower should know:
Home loan eligibility
Banks will decide your eligibility based on income, repaying capacity, surplus income, expenses etc.
Some banks consider 55-60 per cent of your monthly disposable or surplus income is available for repayment of loan.
While, other banks calculate the income available for EMI payments based on an individual's gross income.
Home loan amount
The home loan amount will depend on the tenure of the loan and the rate of interest along with variables which determine your monthly expenses which again will depend on your disposable income.
Equated Monthly Installments (EMIs)
Home loan borrowers will repay the loan in Equated Monthly Installments (EMIs) which includes both principal and interest.
Repayment by way of EMI starts from the month following the month in which you take full disbursement.
All legal documents relating to the house, one should also keep ready, including identity and residence Proof, latest salary slip and Form 16A and last 6 months bank statements along with application form and photograph.
Interest rate options
Banks generally offer either Floating Rate Home Loans or Fixed Rate Home Loans options for home loan borrowers.
For a Fixed Rate Loan, the rate of interest is fixed for the entire tenure of the loan. While, the EMI of a floating rate loan changes with changes in market interest rates.
Keep aside some amount for different fees involved while applying for home loan. A home loan often requires payment of various fees, such as processing charges, administrative charges, documentation, late payment, legal fee, technical inspection fee.
Down Payments or Margin
Individuals should set aside margin amount which they have to pay to the builder. Depending on the lenders they can ask around 20/30 percent of the home's purchase price as a down payment from home loan borrowers.
Co-applicant is a person who applies for the home loan along with the primary applicant. Co-applicant will also be equally liable in case of default.
Home Loans have become a great way to save Income Tax in India, particularly in view of the fact that tax exemption on interest rate has been raised in the recent budget.
Home loan complaints
Home loan borrowers can raise a complaint against only scheduled bank. If the bank fails to respond within 30 days, you can lodge a complaint with the Banking Ombudsman.