HOME LOAN, DEFINITION, BENEFITS, ELIGIBILITY AND HOME LOAN CALCULATOR- MOVE TO YOUR OWN DREAM HOME TODAY

Buying a home is a significant milestone for many individuals and families in India. With rising property prices, most people opt for home loans to finance their dream homes. A home loan is a financial product offered by banks and financial institutions that enables individuals to purchase, construct, or renovate residential properties. The property itself serves as collateral for the loan, which means that if the borrower fails to repay, the lender can take possession of the property. home loan calculator depends on several factors which are described in this article.

Types of Home Loans:

1. Home Purchase Loan: – This is the most common type of home loan, specifically designed for purchasing an existing or new property.
2. Home Construction Loan: – These loans are tailored for those looking to build their homes from scratch. Funds are disbursed in stages, aligned with the construction progress.
3. Home Improvement Loan: – Ideal for homeowners seeking to renovate or improve their existing properties, this type of loan provides the necessary funds for repairs or upgrades.
4. Land Purchase Loan: – These loans are offered for purchasing land intended for future construction. The construction must be completed within 3 years of the purchase of residential land otherwise lender will charge commercial rate of interest.
5. Balance Transfer Loan/takeover home loan: – This option allows borrowers to transfer their existing home loan to another lender, typically to take advantage of lower interest rates.
6. Home saver Loan/home loan advantage loan/saving account linked home loan:- The Home Loan sanctioned will be linked with Saving Bank Account. The rate of interest applicable on this SB account will be Zero. Under the scheme, the borrower shall have the option to deposit all his savings in the linked SB account to avail maximum benefit of interest in the Home Loan account. Any credit available in the linked SB a/c at the end of the day will be counted for credit in linked Home Loan account. Consequently, the borrower will get the benefit of interest amount reduction in the Home Loan account to the extent of daily outstanding credit balance in the Savings Bank account.
7. CRE Home Loan:- As per RBI guidelines if an individual owns 2 or more houses, singly or jointly, then the exposure for the 3 house onwards/purchse of plot is to be treated as CRE (Commercial Real Estate) Home Loan. lender are charging 0.25% over applicable rate on normal home loans.

Eligibility Criteria:

While eligibility may vary by lender, common factors include:

1. Age:- Most lenders require borrowers to be at least 21 years old, with the loan tenure typically extending until the borrower is 60 to 70 years old.
2. Income:- A stable and sufficient income is crucial for loan approval. Lenders usually consider your income-to-debt ratio.
3. Credit Score:- A good credit score (generally above 750) enhances your chances of securing a loan with favorable terms.
4. Employment Stability:- Lenders prefer applicants with a steady job history, typically requiring a minimum of two years of work experience.
5. Property Valuation:- The property being purchased will be assessed for its market value, impacting the loan amount sanctioned.

Interest Rates:

Home loan interest rates can significantly affect the overall cost of borrowing. The rate of interest depends on the CIBIL score of an individual. The CIBIL score depends on the history of past repayment of any loan of any individual. Generate your CIBIL Report by visiting the official website of CIBIL. The higher will be the CIBIL score the lower will be the rate of interest. In India, lenders offer two main types of interest rates:

1. Fixed Rate: The interest rate remains constant throughout the loan tenure, making it easier to budget.
2. Floating Rate: The interest rate fluctuates based on market conditions, which can result in lower payments if rates drop. It depends on the RBI repo rate i.e. quarterly changed by the RBI.

Customers should compare rates from multiple lenders to find the most favorable terms.

Tax Benefits:

Home loans offer significant tax benefits under Section 80C and Section 24(b) of the Income Tax Act.

1. Principal Repayment: Up to ₹1.5 lakh can be claimed under Section 80C.
2. Interest Payment: Up to ₹2 lakh can be claimed under Section 24(b) for self-occupied properties.

These benefits can substantially reduce the tax liability of borrowers.

Loan Tenure:

Home loans in India typically range from 5 to 30 years. While a longer tenure means lower monthly installments, it also results in higher interest payments over the life of the loan. Balancing tenure and EMI (Equated Monthly Installment) is crucial for financial planning.

Prepayment and Foreclosure:

Most lenders allow borrowers to prepay their loans or foreclose them after a certain period. Prepayment can help reduce the overall interest burden. However, it’s essential to check for any prepayment penalties that may apply. The government-owned banks have no prepayment and foreclosure charges, while the private bank and NBFC have prepayment and foreclosure charges which varies from bank to bank.

Documentation Required:

To apply for a home loan, customers typically need to provide the following documents:

1. Identity Proof:- Aadhar card, passport, or voter ID.
2. Address Proof:- Utility bills, rental agreements, etc.
3. Income Proof:-  
   • for salaried:- Latest 3 months’ Salary slips, last 2 years form16 & last 6 months salary account bank statements,  
   • for business person:- last two-year income tax returns with computation, balance sheet, and Profit loss statement, along with other business proof like GST Certificate, GST returns /Udyam certificate. Last 6 months’ current account statement/savings account that has business-related transactions.
4. Property Documents:- Sale deed, approved building plan, and encumbrance certificate.
5. In case of balance transfer/takeover from one bank to another bank- the following additional documents are required
   • Sanction letter of current lender
   • Loan account statement from current lender
   • List of property document(LOD)- The property documents which has been deposited by the customer to the present lender.

Choosing the Right Lender:

When selecting a lender, consider the following:

1. Reputation: Research the lender’s reputation and customer service.
2. Interest Rates: Compare rates and terms from different institutions.
3. Processing Fees: Be aware of any additional costs involved in the loan processing.
4. Prepayment and foreclosure charges: inquire about these charges of lender before deciding  for the home loan
5. Customer Reviews: Look for feedback from other borrowers to gauge the lender’s reliability.

Home Loan Calculator: