Bank guidelines for home loans in India

Everyone needs their own place to live in! But not everyone can buy a house upfront with any help from their parents or the banks! That’s where home loans in India come in. They help you by that dream house and become a proud home owner. Now some may argue that renting is better that buying. Well the thing to consider here is that with a home loan your EMI could be equivalent to the rent that you pay every month. At the end of which you can own property as opposed to finding another place. So for those who don’t plan to move cities it is better to opt for a home load then pay rent.  

Let’s find out more about home loans in India.  

There are many different types of homes in India. Some that help you buy home, some that help you maintain it and some that help you expand it. You have home purchase loans that help you buy a house outright, Home improvement loans that help with renovations as do home extension loans that are meant to add that extra floor! You also have home construction loans and as well as home conversion loans. Home conversion loans are for people who are moving homes, in this case the existing loan is transferred to the new home after calculating the extra cost of the new house and no repayment of the previous loan is required. You also have bridge loans that are like a make shift arrangement between selling the old place and buying the new one. You must remember that home loans in India come with a few added costs like processing fees, registration of mortgage deed, a pre-closure penalty and/or commitment charges in case the loan is not availed of within the given period of time. The duration of home loans can be anywhere between 5 years to 15 years. The amount of the loans depends on many factors namely age of the applicant, no of dependants, expenses, credit rating, incomes etc.

Now comes the most important aspects of home loans in India the EMI and interest. The Equated Monthly installment is calculated on the basis of three factors the rate of interest, loan amount and tenure. The biggest catch is the rate of interest which can be anywhere from 9.25 % to 12% depending on the type of interest levied by the bank. You either have fixed rate which means no matter what the market situation your interest rate doesn’t change. Floating interest rates move up and down with the market which means you may or may not need up paying more than more than required. Some institutions calculate the interest rate on the basis of annual reducing where the principal amount reduces at the end of the year. In the monthly reducing system the principal, for which you pay interest, reduces every month as you pay your EMI and you also have daily reducing system where the principal amount reduces from the day the EMI is paid. It’s up to the discretion of the banks but banks will lend you almost 85% of the total amount required. Some banks may lend you more depending upon your income. With home loans in India you are eligible for tax benefits according to the Income Tax Act.