A Complete Guide for First Time Home Loan Applicants
Buying a home which you can proudly call as your own is a life-time experience. It requires a lot of planning by the family members about the exact necessities and research about prospective home and its developer etc. Once these are done, you finally require finance to buy your dream home.
While planning about the necessities and identifying a right home may take some time, you should do another homework simultaneously, i.e. to find out a Housing Finance company which can provide you a home loan easily with affordable EMIs. But before that, let us see the various aspects of a home loan:
What is Home Loan?
Home Loan is a secured loan offered by housing finance companies or bank against the security of your house. Home Loan is offered to individuals who wish to purchase or construct a house. The property is mortgaged to the lender (housing finance company or bank) as a security till the repayment of the loan. The lender will hold the title or deed of the property till the loan has been paid back along with the agreed interest. If the customer fails to pay back the loan, the lending institution can retrieve the lent money by selling the property.
What are the Different Types of Home Loans
Through a home loan you can purchase or construct a new house/flat. However, if you already have a house, you can take a home extension loan to add some more space / room in the house or a home Improvement loan in case you wish to renovate your house. You can also take a loan to purchase a land to build a house.
A Loan against Property is also offered for individuals seeking loan against an already existing property. A balance transfer of home loan is also possible basically to transfer your existing high cost loan to avail a loan with a lower interest rate.
Must Read: How Much Minimum Down Payment is Required for Home Loan?
What is the Maximum Amount that Can be Borrowed
The amount of loan that can be borrowed typically depends on the repaying capacity of the customer, his credit score, his income level (to ascertain how much EMI he / she can pay) and type of home loan (like, new purchase, renovation, extension or loan against property). Generally the maximum loan offered is up to 90% of the cost of the property depending upon the loan amount required & if rest of the conditions are fulfilled.
What are the Types of Interest Rates
The interest rates for Home Loans are of two types – fixed rate or floating rate. Some housing finance companies may offer partly fixed and/ or partly floating rate, depending on the needs of the borrower.
Fixed rate home loan -The fixed rate loan comes at a pre-specified interest rate for a certain period, after which it is repayable at a floating rate
Floating Rate Home Loan– In the case of a floating rate loan, the rate can vary throughout the loan tenure as it is tied to a reference interest rate which changes based on economic compulsions.
What are the Tax Benefits on Home Loan
There are attractive Income Tax benefits on a home loan and can broadly classified into three parts –
- Rs. 200,000 deduction on interest paid for self-occupied property can be claimed under Section 24 of the Income Tax Act 1961
- Rs 150,000 deduction on principal repayment can be claimed for a property which is self-occupied under Section 80C of the Income Tax Act 1961.
- Another Rs. 50,000 tax benefit can be claimed as “interest on home loan” provided the home loan has been availed from FY 2016-17 onwards, the value of the house is less than Rs 50 Lakhs, the home loan amount is less than Rs 35 Lakhs and on the date of sanction of the loan the taxpayer should not own any property.
What are the Documents Required
Following documents required for home loan in case you are a salaried individual or self-employed professional–
| Salaried Employees | Self Employed/Professionals |
|---|---|
| Duly filled Application Form with Photograph | Duly filled Application Form with Photograph |
| Age Proof (PAN Card, Passport, Any other Certificate from Statutory Authority) | Age Proof (PAN Card, Passport, Any other Certificate from Statutory Authority) |
| Residence Proof (Passport, Driving License, Telephone Bill, Ration Card, Election Card, Any other Certificate from Statutory Authority) | Residence Proof (Passport, Driving License, Telephone Bill, Ration Card, Election Card, Any other Certificate from Statutory Authority) |
| Education Qualifications – Latest Degree | Education Qualifications – Latest Degree (for professionals) |
| Latest Salary-slips for 3 months | Certificate & Proof of business existence along with Business Profile |
| Form 16 for last 2 years | Last 3 years Income Tax returns (self and business) with Profit & Loss Account & Balance Sheets duly certified/audited by a Chartered Accountant |
| Last 6 months Bank Statements(salary account) | Last 12 months Bank Account Statements (self & business) |
| Processing Fee Cheque in favour of ‘PNB Housing Finance Ltd.’ | Processing Fee Cheque in favour of ‘PNB Housing Finance Ltd.’ |
| Photocopy of Title Documents of the Property, Approved Plan | Photocopy of Title Documents of the Property, Approved Plan etc. |
All documents need self-attestation.
Must Read: What Are the Tax Benefits on Home Loans? How to Avail Them?
How to calculate the loan eligibility
Your loan eligibility will depend upon your age, income level, repayment capacity (EMI to income ratio), your repayment history of other loans and above all the credit score. You may try this home loan calculator to check your home loan eligibility criteria.
A home is one of the most important assets that you will purchase in your lifetime; these tips will help you owning a home hasle free.
PNB Housing Finance offers its clients a dynamic range of housing loans for various tenures in fixed and floating rate. We are also happy to let you know that we process your loans within 7 days as we understand that the sooner you own your dream home, the better.
