High prices of real estate make it a challenge for many people to buy their dream home, but a home loan makes it easy by funding up to 80% of the cost of real estate. A home loan is a loan that is extended to an individual to purchase a dream home. Here, the property is mortgaged with the bank or financial institution till the repayment of the loan is done. The lender will hold the title deed of the home till the loan amount is repaid in full with the due interest rate on time. One thing to note here is that a home loan in India can not only be taken for buying a property but also for the renovation or construction of the house.
So, in case you are planning to take a home loan for your new house but are confused regarding a list of things, then this post is for you. Here, we have got you covered with the top 10 FAQs on home loans in India to keep you informed about the same.
1. What is a home loan?
A home loan in India is a loan disbursed by a financial institution or bank, i.e. lender to an individual specifically for purchasing a residential real estate. Here, the lender holds the real estate title until the loan is fully paid back along with interest at a specified rate. In other words, a home loan is a secured loan that is obtained to purchase a property by offering it as collateral.
Home loan offers high-value funding at economical interest rates and for long tenures. They're repaid through EMIs, and after the repayment, the property's title is transferred back to the borrower.
2. What are the eligibility criteria for a home loan in India?
Any person, whether salaried individual or professional or self-employed with a regular source of income, can easily apply for home loans in India. Also, one must be at least 21 years of age when the loan period starts and should not exceed the age of 65 years when the loan period ends or at the time of superannuation. You must note that this eligibility criteria might vary from one bank to the other.
3. What is the tenure of a home loan?
When it comes to home loans in India, many people are confused regarding their tenure. Well, home loans are long term borrowing instruments with a minimum tenure of 5 years and maximum tenure of 30 years. The tenure period offered to you for your personal loan depends upon the loan amount sanctioned to you by the moneylender, along with other considerable factors.
4. What do banks or financial institutions in India consider when granting a home loan?
Once the repayment capacity of the borrower determines the eligibility to apply for a home loan, lenders or financial institutions consider a list of factors that involve:
Age of the borrower
Income level of the borrower
Qualification, i.e. stability and occupation continuity
Resident status (maximum home loan limit for an Indian resident differs from that of a non-resident)
Credit history and score as per past repayment track record
Number of dependents in order to measure the repayment capacity
Status of existing loans
Spouse's income
5. What is the maximum number of joint borrowers for a home loan?
The maximum number of joint borrowers in case of home loans in India is 6. However, one thing to note is that only family members like parents, spouses and siblings can be co-borrowers for a home loan in India. Also, having a co-borrower who has a strong credit score and good credit history is preferable in comparison to the one with a low or bad credit score.
6. What is a fixed and floating rate home loan in India?
Fixed-Rate Home Loan is offered at a predetermined rate of interest during the loan period. This remains unchanged during the entire loan tenure irrespective of market conditions. This can be an enormous benefit when market volatility starts affecting the rate of interest.
In contrast, if the interest rate on a home loan differs periodically over the loan tenure, then it's known as a floating rate home loan. In this case, lenders have their own base rate, which determines the rate of interest charged on home loans.
7. Can you switch from a floating rate home loan to a fixed-rate home loan?
Yes, you can easily switch from a floating rate home loan to a fixed-rate home loan in India. But only a few lenders offer you the opportunity to switch from a floating rate to a fixed rate home loan and the other way around.
However, there are a few changes involved in implementing this conversion. It is advisable to get in touch with your lender in order to get complete details regarding the requirements and procedure.
8. How to repay the home loan in India?
There are a handful of ways to pay off your home loan in India, such as issuing post-dated cheques for the loan tenure, getting the amount deducted from your salary automatically, or issuing the standard instructions to the moneylender for ECS, i.e. Electronic Clearing System wherein the EMI is deducted automatically from your bank account every month.
9. What documents are required for taking a home loan from a bank or financial institution?
The list of documents that need to be submitted while taking a home loan may vary from one lender to the other. Some of the necessary documents to be submitted involve:
Duly completed home loan application form
Passport size photographs
Identity proof, i.e. PAN Card, passport, Voter ID etc
Bank statement for at least the past 6 months and salary certificates
Residence proof
Allotment letter of housing board/NOC of the society
Cost estimation or valuation report from banks
Copy of plan approved for the proposed construction or extension
10. Can you apply for a home loan in case of a low credit score?
Yes, you can apply for a home loan in case of a low credit score. But yes, you will find it pretty challenging to get a home loan approved. However, you can improve your chances of availing it by getting a co-borrower. The co-borrower needs to be a family member like parents or spouse. Ideally, you must opt for a co-borrower who has a regular source of income and good credit history to bolster your chances of a successful home loan application.
Also read: 16 Reasons for Home Loan Rejection