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A home loan is an amount of money that an individual borrows from a bank or money lending company at a certain rate of interest to be paid with the EMI every month. The property is taken as a security by the money lending company for the Home Loan.
A house loan or home loan simply means a sum of money borrowed from a financial institution or bank to purchase a house. Home loans consist of an adjustable or fixed interest rate and payment terms.If you have never received a loan to purchase something, you are certainly in the minority! Loans can be a great thing, but they can also get you into trouble. One of the keys to being financially successful is understanding when loans are a good solution for your situation. Loans are never a good idea if you can't afford to pay them back in the required time frame. Let's explore what a loan is and find out some of the common ways to borrow money.

Why home loan is important?

Most banks also require that the borrower take out an insurance policy to protect the home loan. ... As long as the borrower is eligible for it, such a loan is usually made available. After all, banks depend a lot on the interest generated by home loans, and are willing to extend home loans in most cases.
There are various home loan options offered by national or private banks and non-banking financial companies in India You need to understand each of the options available to know which one is best for you based upon your need:

Benefits of taking a home loan

Benefits of a home loan. Tax benefits: – To encourage more and more people buy their own house, government of India provides tax deduction on the principal as well as interest paid on home loan. ... While a deduction of up to Rs.2 lakh is allowed on the interest portion under Section 24B of Income Tax of India Act.Tax Benefits of Home Loans. The home loan borrower enjoys Tax Benefits on both Interest payment & the Principal payment. ... Under Section 80(c) of Income Tax Act 1961, Principal amount for the repayment of loan along with other savings & investments is eligible for deduction up to a maximum limit of Rs. 1,50,000.

Advantages of Home Loan

A home loan makes home loan ownership affordable.

A mortgage is a cost-effective way of borrowing.

The rate of interest of a home loan is lower than any other loan.

It is easy to get as it is approved on behalf of collateral or asset.

You will get tax benefits on the principal and interest part of the loan, up to Rs.2 lakhs.

Disadvantages of a home loan

You need to keep someone as guarantor.

You have to continue the loan for a long period of time.

If you become defaulter for more than 3 months, lenders may auction your collateral to get the money back.

Types of Home Loans

  • Land Purchase Loan
  • Home Purchase Loan
  • Home Construction Loan
  • Home-Extension or House-Expansion Loan
  • Home Improvement Loan
  • NRI-Home loan
  • Home-Conversion Loan
  • Balance Transfer Home Loan
  • Bridged Loans
  • Stamp Duty Loans

Types of Availbale Banks

  • ICICI Bank
  • Indian Bank
  • State Bank Of India
  • Canara Bank
  • TATA Capital
  • HDFC Bank

Land Purchase Loan

Land-purchase loans are given by banks or non-banking financial companies (NBFCs) to buy a plot and land on which the loan applicant is looking construct a house. Generally banks lend up to 80%-85% of the price of the plot and land

Home Purchase Loan

A home purchase loan amount utilized to buy a residential property. Financial institutions usually provide up to 80-85% of the market value of the house as loan amount the interest rate on these loans is either fixed, Floating or hybrid.

Home Construction Loan

Financial institutions issue home loans to applicants who want to construct a house on a plot owned or co-owned by Them. The loan application and approval process for home-construction loans are different in certain aspects then from the commonly available housing loans this includes The plot or land should have been bought within a year The borrower has to make a rough estimate of the cost that will be incurred for the construction of the house If the cost of plot is not included in the loan amount only the estimation for construction of house is taken into consideration .

Home Extension or House-Expansion Loan

This loan is taken by individuals who want to expand or extent their existing house few banks differentiate this loan based on the purpose of expansion of the current house most banks include this type of loan as part of their home improvement loans

NRI Home Loan

NRI-home loans are specialized home loans that assist non-resident Indians who are interested in buying residential property of India Though the structure of this home loan variant is similar to the regular home loans the paper work is a bit more exhaustive.

Home

Conversion Loan

Existing home-loan borrowers who wish to move into another property to avail a home Conversion loan to buy a new house .

Balance Transfer Home Loan

This option can be availed when an individual wants to transfer his home loan from one bank to another bank owing to reasons like lower interest rates or better services offered by the other bank. This is done to repay the remaining loan at a revised, lower interest rates offered by the other lender.

Bridged Loans

Bridged Loans are short term loans that are designed for existing homeowners who are planning to purchase a new property. It aids borrowers to fund the purchase of new house until a buyer is identified for the existing property. This type of loan usually requires the mortgage of new house with the bank and is extended for less than two years. Several banks HDFC Bank offer bridged loans. .

Stamp Duty Loans

Not a widely known segment of home loans, stamp duty loans are offered to cover the Stamp duty charges during the purchase of a property. With home loans becoming the norm of the day when it comes to purchasing a home, it Also becomes equally important to identify your requirement and apply for the right Type of home loan. Not only will it reduce the paperwork and simplify the loan Approval Process, it will also allow you to enjoy a loan at reduced interest rates. Also, make sure You use an home loan EMI calculator to know your amortization schedule and plan the Finances better. .

Documents needed to apply for Home Loans

Checklist of Documents required for Home Loan
1.Completed Loan Application

2.Proof of Identification

  • Driving license
  • Ration card
  • Passport
  • PAN card
  • Voter’s ID card
  • Employee ID
  • Bank passbook
3.Proof of Age

  • PAN card
  • Birth certificate
  • 10th class marksheet
  • Bank passbook
  • Passport
  • Driving license
  • Bank passbook

4.Address Proof

  • Bank passbook or Bank account statement
  • Voter’s ID
  • Ration card
  • Passport
  • Utility bill (telephone, electricity, water, gas) – less than 2 months old
  • LIC policy/ receipt
  • Letter from a recognized public authority verifying the customer’s residence address
5. Income Documents

Salaried individuals (any one of the following):

  • Form 16
  • Certified letter from Employer
  • Pay slip (Last 2 months)
  • Increment or Promotion letter
  • IT returns (for 3 years)

Apart from the proof of income of the salaried individual, he would also have to furnish any investment proofs (like fixed deposits, shares, etc) and his passport-size photographs.

Self Employed or businessman (any one of the following):

  • Last 3 years Income tax returns of the applicant along with computation of income duly attested by a Chartered Accountant
  • Last 2 years Balance Sheet and Profit & Loss account of the firm- duly attested by a Chartered Accountant

Apart from these, a self-employed individual also has to submit:

  • A brief introduction of his profession/business
  • Passport size photographs
  • Photocopy of Registration Certificate of establishment under Shops and Establishments Act/Factories Act
  • Photocopy of Registration Certificate for deduction of Profession Tax
  • Proof of investments
  • Certificate of Practice
  • Receipts of advance tax payments (if any )
6.Property Documents:

  • Sale deed, agreement of sale with the builder (original copy)
  • Land and building tax paid receipts, location sketch of the property certified by the revenue authorities, possession certificate
  • Letter of allotment given by the Housing Board/Society/Private builder
  • Original receipts of the advance payments that are made towards the purchase of flat
  • An approved copy of the building plan (key plan/floor plan in case of purchase of flats)
  • Original of the land tax paid receipt and possession certificate as issued by the revenue authority
  • Original No objection certificate (NOC) from the housing society or builder
  • Detailed estimate of the cost of construction of house
  • Letter from the builder/society/housing board, stating their account number and name of their bankers for the remittance of installments

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