Purchasing your home can take a long time and you may have to be patient until you find just the right one. However, if you’re planning to take a home loan, it is always better to know beforehand what you may require for a successful application of a home .
Gone are the days of patiently collecting sufficient funds to purchase a home; a home which would remain in the family for decades to come. The times, they have changed and how. Nowadays, banks are prepared to give on the spot approvals on home loans and there are previous tie ups with builders in order to process a speedy loan process. A home can be purchased in a few weeks and there have been cases where people have moved into their dream home within a few days of obtaining their loan.
Home Loans have become one of the most sought after financial instruments and have become the reason of happiness for millions of people in India. Banks and financial institutions ensure a smooth, hassle free process for getting loans and it is estimated that 70-80% of salaried class employees and 15-20% of self employed people avail of finance through banks and financial institutions.
It is important to understand that while taking a loan may seem easy, it also means that you are taking a financial obligation for a long time; in some cases loan tenures extend up to 20-25 years. Read below to understand certain nuances of a home loan and ensure that you take the right steps in the right direction towards purchasing your dream house.
1. Who can avail housing loan?
Following categories of individuals, in the age group of 18 to 55 years are eligible for housing loans:
Salaried individuals confirmed in the service with minimum service of 3 years.
Individuals engaged in business & self-employed persons like, doctors, chartered accountants, architects and others. Such persons should have been in the business for a minimum period of 3 years.
Eligibility relating to upper age limit is relaxed selectively, subject to certain conditions. However, entire loan should be cleared before the borrower attains the age of 70 years
2. What are the purposes for which housing loan is sanctioned?
For purchase of ready built house / flat
For construction of house / flat
For purchase of site and construction of a house thereon
For undertaking expansion of existing unit, upgradation and creation of additional amenities
For undertaking repairs and renovations, subject to ceiling of Rs.15.00 lakhs
For taking over of the HL liability from other Public Sector Banks/Private Banks and NBFCs.
3. Whether Housing Loan is sanctioned for purchase of site only?
No. Housing loan is not sanctioned for purchase of site only.
4. What is the quantum of loan?
The maximum loan is four times gross annual income of the concluded financial year OR four times of average gross annual income of preceding four financial years. A higher quantum is considered selectively
Minimum Net income/Net take home salary after meeting the installment of the proposed Housing loan should be 40%. This can be relaxed selectively to 25%.
5. Whether income of the family is reckoned for arriving at loan quantum?
In the case of salaried individuals/businessmen/self-employed persons, the income of the family may be taken into account, subject to documentary evidence, for the purpose of computing the quantum of eligible amount of loan.
But in case of 2nd Housing loan, income of only spouse can be clubbed for this purpose.
6. Whether income of the spouse can be taken to determine repayment capacity?
Yes, where family income includes the income of the applicant and the spouse, the spouse’s income is reckoned to determine the repayment capacity and compliance of NTH stipulation, provided such spouse joins execution of loan documents.
7. What is the maximum eligible quantum of loan for repairs and renovations?
Maximum eligible quantum of housing loan is Rs.15.00 lakhs for repairs & renovations.
8. Whether agricultural income is considered for arriving at loan quantum?
Yes, Agricultural income is considered if it is supported by land records and income is reported in Income Tax Return, though not taxed.
9. What is the margin required to be borne by the applicant?
|Amount of Loan||New House /||Old House / Flat|
|Flat||Up to 10||Ø 10 Years|
|Up to Rs.20 lakhs||10%||20%||25%|
|Above Rs.20 lakhs and up to||20%||20%||25%|
|Above Rs.75 lakhs||25%||25%||25%|
In case of Repairs & Renewals, expansion of existing unit, upgrading and creation of additional amenities there is a uniform margin of 25%. Also in case of 2nd & subsequent house, margin is 25%.
10. How is the margin computed?
In case of Housing Loans where Project Cost is up to Rs.10.00 Lacs, Stamp duty, Registration Charges and other Documentation charges can be included in the project cost for the purpose of stipulating Margin as well as for LTV ratio.
In all other cases other than above i.e., cases where project cost exceeds Rs. 10.00 Lacs, the margin shall be stipulated only on the basic Project Cost which shall not include expenses towards stamp duty, registration and other documentation charges. The margin is computed on the basic project cost which shall not include expenses incurred towards stamp duty, registration and other documentation charges).
11. When is the margin required to be brought in?
Margin should be contributed before disbursement of the loan. However, pro-rata and stage-wise contribution of margin is selectively permitted.
12. Whether and to what extent reimbursement of amount spent on housing project is permitted?
Up to 25% of loan amount is permitted to be reimbursed only in exceptional cases, subject to production of vouchers / receipts / related documents and claim being made within 3 months from date of incurring expenditure.
13. Where housing loan is sanctioned for purchase of site and construction of house thereon, what is the maximum period within witch construction of the house should start?
Construction of the house should commence within a maximum period of 12 months from the date of disbursement.
14. What is the penalty for not commencing construction of the house within the stipulated period?
Higher rate of interest is charged (Base Rate + 6%) from date of disbursement till date of commencement of construction.
15. Whether pre-payment penalty is charged:
No. Prepayment penalty in respect of housing loans carrying floating rates of interest.
16. What is the rate of interest on housing loans:
Up to Rs.1.00 Crore—-Base Rate i.e. 10.00%(floating) Presently.
Above Rs. 1.00 Crore—–Base Rate +0.10%
Currently 10.10% (floating).
17. Whether additional interest is charged on loan for purchase of second dwelling unit?
No additional interest is charged in case of loan for second dwelling unit.
18. Whether housing loan is provided for purchase of third and subsequent dwelling units?
Yes; these loans are sanctioned under Housing Loans “Non-Priority-Commercial Real Estate”. Such loans are charged 1.00% interest over and above regular housing loans.
19. Can I submit online application for housing loan?
Yes. Through your bank’s website
20. What are the repayment terms?
Entire loan together with interest (including repayment holiday if any),shall be repaid in a maximum period of 30 years from the date of disbursement or the borrower attaining the age of 70 years whichever is earlier.
In the case of purchase of ready built house/flat, the repayment should commence one month after the date of disbursement. In the case of construction of a house/flat, repayment should start one month after the completion of the house/flat. However, the maximum repayment holiday cannot exceed 18 months from the date of first disbursement.
21. Can I avail the benefit of step-up installments?
Yes, on case to case basis based on the generation of income. For details, please contact the nearest branch/Retail Assets Hub
22. What are the processing charges for housing loans?
Processing charges in the form of upfront fee shall be collected as a one time measure at the time of submitting the application. The processing charges payable is 0.5% of the loan amount subject to a minimum of Rs.1500/- and maximum of Rs.10,000/- (subject to change from time to time).Such processing charges will be refunded if the loan is not sanctioned by the Bank.
23. What are the other charges to be borne by the borrower?
All out-of-pocket expenses like, outsourcing charges, periodical inspection charges, inspection charges, CERSAI Charges, CIBIL Charges, insurance premia etc need to be borne by the borrower.
24. What security has to be provided?
The house property shall be mortgaged to the Bank. If mortgage is not possible for any valid reasons, suitable collateral security in the form of NSC/KVP, bonds, Bank deposit can be provided.
25. Whether there is an option for our existing housing loan borrowers (in respect of housing loans carrying floating rates of interest) for switching over from higher rates of interest to the recently reduced card rates.
Yes, It is permitted on payment of switch over fee of 1% of the outstanding liability and after satisfying certain other conditions. You may contact your lending branch for more details on this.
26. In case of loan for flat under construction, if putting through of mortgage is immediately not possible, then what is the procedure?
Then in case of only those projects which are approved by our Bank, loan is considered provided TRIPARTITE AGREEMENT i.e. agreement between Builder, Borrower and Bank is executed & a suitable guarantee of a person acceptable to Bank is furnished.
27. Is there any time period within which EMT (deposit of registered sale deed) has to be completed from the date of grant of housing loan, permitted for purchase of site and construction thereof (composite loan) / ready built house.
A maximum period of six months is stipulated for completion of EMT (deposit of registered sale deed) from the date of grant of housing loan permitted for purchase of site and construction thereof (composite loan) / ready built house. Penalty at 2% p.a. on the sanctioned amount after the expiry of six months till completion of EMT (deposit of registered sale deed)/Delayed submission of registered sale deed is stipulated except in case the plot is allotted by the Government/Housing Board and similar autonomous bodies.
This is not applicable for flats under construction.
At NorthernSky we provide assistance for all the above steps and we also have a tie up with most major banks who acknowledge our credibility and quality.