In India, home loans are a common way for individuals to finance the purchase of a residential property.
The amount you can borrow for a home loan generally depends on your income, credit score and the value of the property you want to buy. Most lenders offer loans up to 80% of the property value, but this may vary.
home loan interest rates in India May vary depending on the lender, loan amount and loan tenure. Some lenders may also offer floating or fixed interest rates.
The home loan tenure in India is generally up to 30 years, but it can vary depending on the age of the lender and the borrower.
Your bank will assess your repayment capacity while deciding your home loan eligibility.
Repayment capacity is based on your monthly disposable income and other factors such as spouse’s income, assets, liabilities, stability of income etc.
Read also: Smart ways to reduce home loan EMI burden when interest rates rise
How will your bank decide your home loan eligibility?
As per RBI, the main concern of the bank is to ensure that you comfortably repay the loan on time and ensure end use. Higher the monthly disposable income, higher is the loan amount you are eligible for.
Generally a bank assumes that around 55-60% of your monthly disposable/additional income is available to repay the loan.
However, some banks count available income EMI payment Based on a person’s gross income and not his disposable income.
The loan amount also depends on the loan tenure and rate of interest as these variables determine your monthly outgo/outflow which in turn depends on your disposable income.
Banks generally fix an upper age limit for home loan applicants.
What are the different interest rate options offered by banks?
Banks usually offer any one of the following loan options: Floating and Fixed Rate Home Loans.
For fixed rate home loans, the rate of interest is fixed either for the entire loan tenure or for a certain part of the loan tenure. In case of pure fixed loan, the EMI of the bank remains fixed.
However, if you have fixed EMI, then any reduction in interest rates in the market will not benefit you.
The EMI of a floating rate loan changes with changes in market interest rates. If the market rate rises, so does your repayment. When rates fall, so does your balance.
What are the documents generally asked for loan approval?
Apart from all the legal documents related to the home being bought, like builder buyer agreement, payment receipts, builder bank NOC etc., the bank will also ask you to submit identity and residence proof, latest salary slips and Form 16 and last 6 months bank deposits . statement, as applicable.
Read also: What is pre-EMI interest in home loan?
The loan application form will give a checklist of documents to be attached with the application.
What are the minimum standards banks have to follow while selling you a home loan?
As per RBI guidelines, at the time of sourcing the loan, banks are required to provide you with information about the applicable interest rate, fees/charges and any other matter which affects your interest and this is usually But the product is presented in the brochure. Banks. Complete transparency is essential.
On request, the Bank will provide certified copies of all loan documents executed by you at your cost along with a copy each of all enclosures quoted in the loan document.
It is advised to discuss about any relaxation in the terms and conditions provided by the bank and get more details.
For example, some banks insist on depositing life insurance policies of the borrower/guarantor equal to the specified loan amount in favor of the bank. There is usually a cap on the amount for this condition which can also be waived by the appropriate authority.
Don’t be in a hurry to seal the deal quickly. Read the fine print of the bank’s scheme carefully and ask for clarifications.
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