We all dream of owning a house bearing our name plate. In cosmopolitan cities like Bangalore, Mumbai, Delhi it costs a lot if you stay in a rented house. So, people prefer to buy their own houses and pay equated monthly income (EMI) on home loans they take to buy a property.
Generally, the first mortgage of the property that is the title deed has to be provided to the bank as security against the loan. Banks or housing finance companies ensure that the property is free from any concern that could adversely affect the property.
Mostly, the banks or housing finance companies asks the borrowers for down payments which becomes the borrower's contribution in the creation of the asset. If you are able to put a lump sum amount as down payments then it will reduce the loan amount that you are required to take from the banks or housing finance companies.
Suppose, you are buying a house that costs you Rs. 40 lakh and if you make a down payment of Rs. 15 lakh then you have to take a home loan of Rs 25. lakh from the bank. However, you need to be financially sound to make such a hefty down payment.
Some banks or housing finance companies ask for collateral security also. It could be your life insurance policies, the surrender value of which is set at a percentage to the home loan. Other security collateral can be pledge of shares or securities as well as investments investments like National Saving Certificates (NSC) or Kisan Vikas Patra (KVP).
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As you have to submit the title deeds and other valuable documents to the banks or housing finance companies as security, it is better if you keep photocopies of the documents before submitting them. You can use the photocopies for reference in future. It is important to remember that each bank would have its own norms in terms of what securities are needed. Some banks could be more stringent, while other banks could be more liberal.
Also, the norms could change from time to time. So, what securities were applicable about a year back, may not be applicable today. It is best to enquire with the bank and see if there is any additional documentation that would be necessary for them. The security requirement could also be posted by the bank online, to make the entire process easy for applicants.