Home Loan FAQ
What is home loan?
Its a loan taken to purchase a home (may be an under construction property), or to purchase a piece of land, or to renovate/ extend an existing home.
How long could my home loan tenure be?
Home loan tenure can be up to 30 years. Longer the tenure, lower your EMI will be. However if you stretch your loan tenure, you will end up paying more in interest amount and your loan will be costly.
How much loan amount can I avail?
Usually the banks provide 80% to 85% of your property value as loan and rest you will have to provide as down payment. Moreover, the banks decide the amount of loan by taking into account your income, age, number of dependents, your spouse’s income (if any), your credit history and your repayment capacity.
How much should my monthly EMI be?
It depends on your monthly income and expenses. Usually, the banks advise you to restrict your EMI to 35% to 45% of your monthly income so that you can pay this debt without feeling a pinch in your wallet.
How can I enhance my home loan eligibility?
By clubbing your income with your spouse or with your earning parents / children, you can stretch the loan available to you. Different banks have different rules and restrictions regarding with whom and how you can do this. Loan available to you depends on the value of your property also, as the banks give only 80 to 85% of the value of the property. Further, if monthly EMI is the limiting factor in expanding your loan then you can stretch your loan tenure to bring down the EMI.
What is the eligibility criteria for home loan?
Mostly it is your repayment capacity which is depending upon other factors such as your age, your monthly income and expenditure, your credit history, value of the property etc.
What is refinancing?
Refinancing means taking loan from a bank to pay off the loan taken from another bank. You may opt for this if you are not happy with the service of your existing bank or if there is a chance of getting lower rate of interest from another bank. Banks and HFCs may reduce (or completely waive off) the prepayment penalty if you pay the loan from your own source of funds and may charge a penalty if you pay it by taking a loan from another lender depending on the current loan scheme (i.e, floating or fixed interest loans).
Do I need an insurance for my home?
Yes, you need to insure your house from various vulnerabilities such as fire and any natural hazards as per the requirements of the bank. The bank will be the beneficiary of the insurance during your home loan tenure.
What are the tax benefits on home loan?
The borrower will get tax benefits on principal as well as interest component. You can claim deductions on Rs. 1,50,000 (or actually paid whichever is less) paid towards interest and Rs. 1,00,000 (or actually paid whichever is less) paid towards principal amount in a fiscal year.