KnowledgeCenter

Why should I buy, instead of rent?

A home is an investment. When you rent, you write your monthly cheque and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your income taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you'll enjoy having something that's all yours - a home where your own personal style will tell the world who you are.

How do I know if I can get a loan?

It is a mixture of the Value of the property and the income of the buyer. Usually you can get loans upto 75 to 85% of the Property value provided you have substantial income records. The Financiers or Bankers usually calculate the eligibility based on the net income of a person. 50% of an individual's net income is considered as the key to calculate the EMI which in turn is the loan eligibility. They do have options of clubbing incomes from co-borrowers (usually only a direct blood relative is considered as co-borrower). Use our simple EMI calculators to see how much you could pay for a particular loan. The prevailing interest rates and further procedures can be taken from our Home Loan consultants at any time.


How do I find a lender?

It's very simple. Our projects are pre approved by several banks and NBFC's. You can have a choice of financier which suits your needs and essentials. Our Home Loan consultants can be contacted at any time for choosing the same.

So what will my Loan cover?

Most loans have 4 parts:

Principal: the repayment of the amount you actually borrowed;

Interest: payment to the lender for the money you've borrowed;

Homeowner's insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders; and

Property taxes: the annual city taxes assessed on your property, which starts once you gain entry into the house.

Most loans are for 20 years, although 15 year loans are available, too. During the life of the loan, you'll pay far more in interest than you will in principal - sometimes two or three times more! Because of the way loans are structured, in the first years you'll be paying mostly interest in your monthly payments. In the final years, you'll be paying mostly principal.

What do I need to take with me when I apply for a loan?

Here is a simple list of documents for applying for a loan. The documents pertaining to property will be handled by our Home Loan Consultants.

Documents required for Sanction - Salaried Individuals :

1. Identity proof

Any one of the following,

2. Age proof and Signature proof

Any one of the following,

3. Address proof

Any one of the following,

4. Income proof

Any one of the following,

5. Banking history

Any one of the following,

6. 2 passport size photographs signed on top.

7. Loan Statements of Existing Loans till date if any.

8. Processing fee cheque from Salary account.

Documents required for Sanction ? Self Employed/Businessmen

Do NRIs and PIOs need permission from RBI before purchasing a property?

All Indian citizens (NRI and PIO) can purchase property in India irrespective of their residency status and without prior permission from RBI.

What is Power of Attorney (POA)??

If you are settled outside India or any other place other than local city and come once if a couple of years, then for all practical purposes, you should give a specific power of attorney to some one here in Local City of Registration, so that in your absence, things like registration, possession, execution of agreement for sale, agreement of leave and license etc, can be taken care of with ease. You could give a very specific POA to some one e.g. only for buying, or leasing, etc. you could fine tune the rights you would like to give out and clear that up.

Home Loans for Non Resident Indians..?

It's simple. Our projects are pre approved by several banks and NBFC?s. You can have a choice of financier which suits your needs and essentials. Our Home Loan consultants can be contacted at any time. The documents are usually different with the specified banker.

What is Pre EMI?

You've chosen a property that's yet under construction. So the lender makes the disbursement in parts based on the progress of the construction of your property. However till the housing loan is fully disbursed you have to pay simple interest at the rate you have agreed upon with the lender. This is known as the Pre EMI. And from the month following in which the full disbursement is made you will start paying your EMI.

What is a fixed rate home loan? When should one opt for a fixed rate home loan?

A fixed rate home loan is one where the interest rate on home loans charged by the lender is constant over the tenure of the loan. It is advisable to go in for a fixed rate only if you feel that the rate of interest prevailing in the market have touched rock bottom and the rates can only move upwards.

What is a floating rate home loan? When should one opt for a floating rate home loan?

A floating rate home loan is one where the home loan interest rate charged by the lender keeps changing with respect to the rates in the market over the tenure of the loan. Typically, the rate charged is on the basis of their cost of funds and the prevailing market rates. These rates change periodically. Accordingly the tenure increases or decreases or alternatively the EMI increases or decreases based on whether the rates move upwards or downwards. Every home loan lender decides whether to change the rate of interest or change the tenure at the time of sanction. It is advisable to go in for the floating rate if you feel that the interest rates have reached its peak and can only go downwards.

Can I convert my loan from fixed rate loan to floating rate loan & vice versa?

Yes, you can convert floating rate home loan into a fixed rate one with no extra charges. However, to convert a fixed rate product to a variable rate product, most banks will charge a small fee. The swap can be done any number of times and at any point of time.

Can the Fixed Rate of Interest change during the loan repayment?

The Fixed Rate of Interest ideally remains fixed over the tenure of the loan. This rate does not change after the final disbursement has been made. It is ideally suited for situations where you expect the rates of interest to go up in the future and this fluctuation in the rates does not affect you adversely. In cases where the disbursement is spread out over a period of time and the rates might have changed in the interim. The rate of interest would remain fixed at the final weighted average rate at which the loan was disbursed.Nowadays, many lenders are reserving the option of changing the rate on a fixed rate home loan after 3 or 5 years. So please read the fine print before you sign up for a fixed rate home loan.

What happens to processing/administrative fees if I don't avail of the disbursement?

Most lenders do not refund the fees that you pay to them if you cancel the loan after taking the offer letter from them. However, there are few Govt. owned banks which do offer full or partial refund. Almost all the lenders refund the money in case the loan is not sanctioned.

What are the charges other than interest that are levied by home loan lenders?

Almost all lenders charge certain administrative or processing fees apart from interest for providing a home loan in India. You must compare all these charges as well before signing on to a home loan contract.

Legal fees - payable to the lender or to the legal consultants of the lender

Technical or Valuation charges - payable to the lender or to his technical consultant.

Stamp duty on creation of mortgage - some banks charge this fee whilst other banks normally just have a clause that requires this to be paid in the event the state government actually charges this amount. The escape route for non-payment of this duty are progressively being eliminated and the fact that the consumer carries the liability to pay this duty in the future if demanded by the state government along with interest and penalties in the future. So, this should not really be used by a consumer to eliminate a lender just because he is paying this stamp duty to the government.

Prepayment Charges - This is the biggest charge that most consumers miss taking into account. A loan can be prepaid either in part or in full at any given point of time. You can also prepay a loan even when it is only partly disbursed. However, most banks have an upper limit on the number of times a person can prepay his loan in a year as well as on the minimum amount you can prepay each time. Until recently, banks charged a penalty for part or full prepayment. Increased competition has forced most banks to allow repayment without any charges if it is funded from own sources. In case the borrower, is transferring the loan to another lender he will need to pay the full charges.

What are the tax benefits that I can avail of for repaying a home loan?

You will be eligible to claim both the interest and principal components of your repayment during the year. Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or the actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)

Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum level of Rs 100,000 across all 80C investments.You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.

Can I take advantage of tax benefits from a home loan as well as claim House Rent Allowance (HRA)?

If you took a home loan and are still living in a rented place, you will be entitled to: Tax benefit on principal repayment under Section 80C

Tax benefit on interest payment under Section 24

HRA benefit

Of course, you can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete, the HRA benefit ss. If you took a home loan, got possession of the house, have rented it out and stay in a rented accommodation, you will be entitled to all the three benefits mentioned above. However, in this case, the rent you receive would be considered as your taxable income.

Can I sell the property, even when the home loan is outstanding?

Yes, you can sell the property with the consent of the lender. This consent letter usually mentions the amount at which the home loan can be considered fully paid off. This amount is inclusive of prepayment charges as applicable and calculated at a future date to give you enough time to find a buyer. Based on this letter, you can negotiate with potential buyers.

If the buyer, wants to take a loan to purchase the property the process is much simpler if he approaches the same lender. Then the lender does not need to release the title papers to another lender before getting the payment.

If the buyer wants to make an outright payment- he can make the payment out to the bank directly based on the consent letter. And the balance amount is paid out to you. The property papers will be released only after the bank has recovered the entire amount including prepayment charges.

Can I increase or decrease the amount of the loan even after it has been sanctioned?

Yes, the change in amount can be done at any point before disbursement. Any increase in loan amount will however be subject to the eligibility conditions. The bank might also charge you excess fees on requesting an increase in the loan amount. The bank is not obliged to return excess fees paid in case you are requesting for a reduction in the loan amount.