Home loan guides

Documentation of a home loan will also include various components related to the purchase of a property. This includes original copy of the loan agreement along with the copies of documents showing that there is a clear title to the property plus documents indicating that the transfer of rights in the property has been completed properly. This can include documents like the registration fee receipt, stamp duty receipt of the agreement plus a clear title report from a lawyer about the title to the land is cleared and so on. The availability of all these documents will help a lender to make a decision regarding a particular loan, making the entire loan application easy to clear.

One has to be very careful about the manner in which the rates are fixed on a particular floating rate loan. While there is a benchmark rate present, one needs to take into consideration its nature which can influence the way a rate is fixed. There have been several examples where the bank or financial institution has actually fixed a separate benchmark rate for its housing loans, which moves and behaves differently from the prime lending rate of the bank.

This gives the financial institution flexibility to make several changes in the benchmark rate without having to rest all the loans in their portfolio. When a larger action has to be initiated only then the prime lending rate is touched. This has also led to a situation wherein several borrowers have complained about the different manners in which the rates move under different circumstances. When the rates start falling all around the revision in the rates is slower than the overall fall. However when the rates start rising the rise in the floating loan rates is much faster than the overall rise.

Availing a home loan is not just a viable option for owning a home, but also brings with it attractive tax benefits.

Under section 80C of the Income Tax Act, investments in specified instruments up to Rs 1 lakh annually are deductible from an individual’s taxable income. Also included under this section are principal repayments on a home loan. So in case you take a home loan, any payments you make towards repayment of the principal is deducted from your taxable income up to an amount of Rs 1 lakh.

Not just the principal, but also the interest payments on a home loan have tax benefits. Your interest payments are considered as an expense under the head ‘Income from house property’ and are deductible up to an amount of Rs 1.5 lakh per annum.

Do keep in mind the following points while availing a home loan:

* You will not get a loan for the entire amount required by you to purchase a house. You will have to put up a certain percentage of the amount yourself. This is generally in the range of 10% to 20%. Banks do this to ensure that the outstanding amount of your loan never exceeds the value of your property.

Home loan eligibility criteria

There are a number of factors that are taken into consideration by a bank or housing finance institution while assessing your eligibility to get a home loan. Below are some of the most basic criteria that one is required to meet in order to be eligible for a home loan.

* The applicant must be at least 21 years of age.
* The maximum age to avail home loan is 58 for salaried people, whereas it is 60 for self-employed persons. Again this might vary with different financial institutions.
* The applicant should have a stable source of income.

Many people think that when there is an option of renting a house why to take a large liability and buy a house. The reason for that is the major disadvantage involved in the process of renting a house. Here, a person pays a monthly rent and even after having paid rent for a number of years no ownership comes to him/her.

On the other hand, there might be an equal amount paid as an equated monthly instalment (EMI) on a Housing loans but the difference here is that the person is the owner of the property. The real benefit from the house comes in the form of capital appreciation that is witnessed here. House prices in India have risen quite sharply in the past and it is expected that they will keep rising in areas that have development as well as good facilities.

Home loan is a loan provided by a financial institution to finance the purchase/construction/renovation of a residential property. It is a much sought-after product for Indians today when it comes to owning a house. Earlier there was very little borrowing and people generally tried to avoid creating debt. Now with the situation having undergone a complete transformation, borrowing to create an asset is not only common but in many situations makes good economic sense too. A house is generally considered to be an appreciating asset. This is because the price of the house is expected to rise over a period of time. This makes financing of such a purchase by borrowing a good way to own and create an asset without having all the funds for the purpose. Financial planners will always advise against taking a loan for undertaking expenditure but encourage borrowing for buying a house.