Home loan is a loan product where the lender provides funding for purchase or construction of a house/ residential property. The housing loan may be availed either for buying a new house or resale of residential house. One can also avail a housing loan product, for the purpose of buying a plot of land and carrying out construction on the same, which is called composite loan.
Home loans in India are provided by the lenders up to maximum of 75% to 90% depending on the loan amount. In case of home loan for resale flats, most lenders get the property valued independently and they will provide the housing loan based on their value rather than the cost mentioned in the purchase agreement. Frequently, the valuation as determined by the banker’s valuer for the purpose of home loan is significantly lower than the actual cost and hence the requirement of the borrowers for down payment for the loan goes up. Also note that banks do not consider other charges like Stamp Duty, Registration Charges, etc. while considering the home loan amount eligibility.
Home loans are repaid through monthly installments (EMI) spread over up to 20 years. Some of the banks provide housing loans even for a tenure extending up to 25 – 30 years. The maximum tenure of any loan and home loan specifically is also restricted by the borrower’s age at the end of the tenure so as to ensure that the loan gets fully paid by or before the retirement age. Home loan India can primarily be classified into two categories on the basis of interest rates i.e. fixed rate and floating rate of interest. There are very few lenders in India who offer pure fixed rates where the rate of interest remains constant for the entire tenure of the home loan, while most lenders have a reset clause of 3-5 years. In floating home loan type, the rate of interest on such loans is subject to change whenever there are changes in the repo rates announced by RBI or any changes in base rate of the bank. Borrower should opt for fixed interest rates only if she/he is certain that the rate of interest is the lowest in the interest cycle.
The home loans in India are provided by banks and housing companies. The popular ones being SBI, HDFC, ICICI, AXIS etc. In turn RBI and National Housing Bank regulate these respectively, which issues guidelines governing home loans in India from time to time. In recent times, some lenders have come up with innovative home loan products like dual rate of interest where the interest rate on such loans remains fixed for initial 1-5 years and thereafter it automatically moves to a normal floating rate of interest. Here one should be aware that loan taken under dual rate, which starts as a fixed type of interest in the initial stages are treated as fixed rate home loan for the purpose of levy of penalty for prepayment of loans. In case where you prepay your housing loan the lender cannot levy any penalty for prepayment of such loan where the loan is taken under floating rate of interest as per the guidelines issued by RBI and National Housing Bank (NHB).Apply Loan