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Home loan or Housing loan is the loan provided by the Banks to the borrowers to buy a house/flat either new or old. Home loan is also sanctioned by the Banks to build a house or renovate the house.

The Home loan is one of the most sought-after loans in India as it allows every, one who can repay a minimum EMI, to buy a house of their own and enjoy the property with the family.

Eligibility :

Generally, individual(s) with steady source of income including persons engaged in agriculture and allied activities, who are 18 years of age are eligible for housing loan.

Purpose :

The housing loan can be availed for any of these purposes;

  • To purchase /construct a new house/flat
  • To purchase an existing (old) house/flat or
  • To extend an existing house
  • Repair/renovate an existing house/flat
  • Reimbursement of investment made in housing from own resources
  • Purchase furnishings / consumer durables as part of the project cost.
  • One or more loans may be granted to an individual if he has the capacity to repay

Maximum Amount :

Maximum loan amount is calculated on the basis of two broad factors namely the price/value of the flat or house and secondly on the repaying capability of the borrower. The repaying capacity of the borrower is arrived at by finding out the ratio of EMI/NMI.
EMI= Equated Monthly Instalment
NMI= Net Monthly Income

Security :

In cases of Hosing the house or flat which is financed itself renders to be a good security for the Banks and hence many a times Banks do not insist for any further security.
Sometimes Banks can ask for additional Guarantors looking at the high value ticket loans.

Frequently Asked Questions :

Can Home loans be sanctioned to individuals above the age of 70 years?
Usually, the maximum age limit for a Home Loan borrower is fixed at 70 years i.e. the age by which the loan should be fully repaid, subject to availability of sufficient, regular and continuous source of income for servicing the loan repayment. Sometimes banks with discretion do sanction loans to individuals above the age of 70 years, provided son / daughter / spouse, who is a legal heir and below the age of 50 years, with sufficient income for servicing the loan repayment, joins as co-borrower / guarantor.
Can a prospective buyer apply for a housing loan even before selecting the property?
Yes, the banks do allow a buyer apply to for housing loan by a prospective buyer even before identifying a specific property. In such a case in-principle approval on can be granted to the buyer and this depends on Bank to Bank. This in-principle approval is valid for a limited period from the date of issue. The actual sanction depends upon their furnishing of identification, income and property related documents and fulfillment of the eligibility criteria.
Can more than one loan be granted to an individual?
Yes, more loans may be granted by Banks to an individual borrower provided he fulfills the income criteria as also EMI/NMI ratio after netting off the repayment obligations of existing loans and subject to satisfactory conduct of existing loan(s).

Persons already owning one house are also eligible in the same or a different town for use by self or for letting out. The loan eligibility, in general, depends on the repaying capacity of the borrower. So, as long as EMI/NMI (Equated Monthly Instalment/Net Monthly Income) Ratio is good the borrower can get loans.
Can loans be granted where place of employment is different from location of the property?
Yes, Banks do sanction loan int this kind of cases an all the Banks which allow this have their own process and method of verifying the property and its and valuation.
What are the aspects relating to loans for purchase of old house / flat?
Loans for old house and flat are being provided by Banks but for these loans they need additional documents and apart from the usual application and documents. The banks can ask for;
  • Valuation Certificate from a Government approved valuer.
  • Certificate from the Government approved architect / structural engineer certifying the condition of the house/flat.
Whose incomes can be clubbed together to increase the Total Eligible Loan Amount?
Income from the following sources can be considered to enhance total eligible loan amount:
Income of spouse/Income of son/ unmarried daughter

There could be condition posed by the Bank that the property is held jointly with spouse/son/unmarried daughter who joins as a co-borrower or the property is held in single name of borrower and the spouse/son/unmarried daughter stands as guarantor
What type of mortgage securities are obtained by Banks in case Home Loan?
There are two types of mortgage securities that a Bank can go ahead with when a housing loan has been sanctioned, namely;
  • Equitable Mortgage (by deposit of Title Deeds) which is obtained normally considering the legal expenses involved in registered mortgage.
  • Registered Mortgage where the Title Deeds of the property in question do not exist or where the sanctioning authority considers it necessary to do so.
What is the meaning of Bank approved project or approval of builders?
Some of the reputed Builders who has track record of the activity and business for a certain defined period as needed by an individual Bank approach the Bank get themselves and their projects approved and hence it becomes easier for the buyers to approach the that Bank and apply for the housing loan. This way the approval process becomes fast and loans get disbursed easily and fast.
Why a lawyer’s report is needed for Home loan and why do Banks insist for this?
A Lawyer’s report is a single consolidated search report certifying builder’s/owner’s clear, absolute and marketable title to the property. It is important as this helps the Bank to arrive at a decision whether the Property in question is free from any encumbrance or not.
Why a valuation report is needed in case of housing loan?
If the house or flat is not bought directly from the builder or if it is an old house then Banks do ask for the Valuation report to arrive at the correct and market value of the property basis which the maximum loan amount can be decided.
How loan disbursement is done by the Banks?
Banks disburse the loan amount in the manner that it takes care of the need of the Borrower to pay the money to buy the house. If it a ready to move house or a flat then then the Bank can disburse the whole loan amount. If it is a flat or house under construction then the Bank will disburse the loan amount as per the construction schedule provided by the builder.
What is moratorium Period?
Moratorium period is the time limit which provided by the Bank when the borrower does not have to pay any EMI. Usually Banks provide a moratorium period of few months from the date of disbursement of the loan.
Do I have to pay the interest for the moratorium period?
Yes, as a borrower you have to pay the interest. You do not pay the EMI during the moratorium period bu the interest is applied during that period which gets added to overall interest that you have to pay and gets equally distributed over the EMIs.
What is floating and fixed rate of interest?
When a borrower takes a long-term loan like home loan then the Banks give them the option to choose between Fixed or Floating rate of interest (ROI). When it is fixed rate of interest the ROI remains fixed for the tenure of the loan. If the borrower chooses floating then the ROI will keep changing whenever the Banks base rate changes due to RBI guidelines and policies. In case of floating ROI the EMI amount will not be constant but will keep on varying whenever the Bank rates change.
Can EMI be reset downwards during the tenure of the loan?
Banks do allow reset of EMI at the Borrower’s request but the limit (amount) of reset the times it can be allowed depends on the internal policies of the Banks. In general banks do allow reset of the EMI when requested due to genuine reasons.
Can EMI be reset upwards?
Banks loose income when the move the EMI upwards (increase the amount) as the tenure of the loan will get reduced and hence the total interest income from the loan will be reduced. So, usually Banks do not entertain upward reset of EMI but they can allow on case to case basis.
What are the pre-closure charges for housing loans?
Preclosing a loan account is loss of interest revenue for the Banks hence they charge a pre-closure penalty ranging from 2-5% depending upon the balance amount outstanding.
Is penal interest levied on irregular loans?
Yes, to instill financial discipline among borrowers, often penal interest is charged at certain percentage on the entire loan outstanding for the period of default when an EMI is not paid for any reason, including a bounced cheque or when an overdraft a/c becomes irregular.
What are the general conditions for takeover of housing loans from one Bank other Banks / Financial Institutions?
Banks do takeover housing loans after proper due diligence and taking all possible precautions of any default or misuse.
What is processing fee for a loan?
Whenever a Bank receives an application for a loan it has to have someone to go through all of the documents and papers submitted, do a credit appraisal of the application and finally arrive at a conclusion on the loan eligibility of the borrower. All this takes quite a bit of time and effort and hence Banks take a processing fee for doing all this.
What papers/documents are required to apply for a housing loan?
Usually the following documents are required by a Banks with little variation here and there depending on the individual banks;
  • Completed loan application
  • Passport size photos
  • Proof of identity: Voter ID card/Passport/driving license/PAN card/ Aadhar Card
  • Proof of residence: Voter ID card/passport/electricity/telephone bill/Bank Statement
  • Proof of business address, in case of non-salaried borrowers
  • Statement of bank account for the last six months
  • Signature identification from present bankers
  • Personal Assets and Liabilities statement on Bank’s standard format
  • Detail of securities (if provided)
  • Guarantor’s details: ID proof/Address proof/Asset liability
  • Income documents: Salary/IT returns
  • Property documents:
    1. Sale Deed, Agreement of Sale, Original share certificate(s) issued by the society.
    2. Land and Building tax paid receipts, possession certificate, location sketch of property certified by revenue authorities
    3. Letter of allotment from Housing Board/Society/Private Builder
    4. Original receipts of advance payments towards purchase of flat
    5. Original of land tax paid receipt and possession certificate issued by the revenue authorities.
    6. Copy of permission from Appropriate Authority and approved building plan (and also key plan/floor plan in case of purchase of flats)
    7. Detailed estimate of cost of construction of house
    8. Lawyer's report/Valuation report
    9. Where Check-off is available: Irrevocable Letter of Authority from employee
Do customers who service their housing loan a/cs regularly are rewarded:
Banks do like to reward these kinds of customers who are servicing their EMIs regularly and they do so by providing some kind of discounts on the services and offerings provided by the Banks.