Buyers Guide


What Are The Types Of Home Loans?

Types of Home Loans

  1. Home Equity Loans
  2. Home Extension Loans
  3. Home Improvement Loan
  4. Home Purchase Loans
  5. Land Purchase Loans
  6. Mortgage Loans

When Can I Apply For A Loan?

You can apply for a home loan even before you have selected your property. The loan amount would be sanctioned or approved for you, based on your repayment capability.

What Are The Various Types Of Loans Available?

Loan Types are:

  1. Home Loans
  2. Land Loans
  3. Home Equity Loans
  4. Office Premises Loans

All of these are available on an adjustable rate or a fixed rate.

What Security / Collateral Do I Have To Provide?

Typically the security for the loan is a first mortgage of the property to be financed, by way of deposit of title deeds and/or such other collateral security as may be necessary. The title to the property should be clear, marketable and free from any encumbrances.

How Much Time Will It Take For My Loan To Be Approved?

It takes a week for your loan to be sanctioned after you have submitted all the documents.

How Is The Interest Charged / Calculated?

There are two schemes:

  1. Fixed Rate Home Loans
  2. Adjustable Rate Home Loans

If you opt for an Adjustable Rate Home Loan, the interest rate would vary with the Bank Home Floating Reference Rate. Under the Fixed Rate Home Loans the rate applicable on the date of disbursement remains fixed during the entire duration of the loan.

When Will The Loan Be Disbursed?

Your loan will be disbursed after:

  1. Your identification and selection of the property.
  2. Submission of the legal documents.
  3. Legal and technical clearance of the property
  4. Investment of your contribution towards the property

What Is An Annual Reducing Balance?

An Equated Monthly Installment (EMI) has 2 components, interest and principal. When the interest is calculated on annual rests, the principal reduces only at the end of the year. Therefore, you continue to pay interest on a portion of the principal that you have already actually paid back to the lending company.

Is A Personal Guarantor A Must?

No, there is no personal guarantor required in most cases.

Who Can Be The Co-Applicants For The Loan?

You could include your spouse as a co-applicant for the loan and we shall include his/her income to enhance your loan amount. Further, in case there are any other co-owners they also need to be co-applicants.

What Are The Loan Tenure Options?

You have the option of selecting a term you are comfortable with, ranging upto 20 years, provided the term does not extend beyond your reaching 65 years of age or retirement age, whichever is earlier.

Points To Be Considered Before Choosing Any Home Loan Option

Property Types: You should know more about type of property in lieu of which you seek loan. There are loans offered by banks to resident Indians and NRIs for ready property, under construction property, self construction and home improvement.

Loan Tenure: The loans provided by financial institutions are offered in tenures or period of years. You should check out the tenure for loans available in the market. There are loan tenures available for up to 25years.

Repayment Options: You need to choose between fixed and floating rate home loans. Many banks and financial institutions will provide you with the option of switching from a floating rate home loan to a fixed rate home loan once a year at no extra cost. But you need to check the facts first with loan providing firm.

No Penalty option: There are no penalty options offered by few finance companies. In this mode, you can opt to pre-pay up to 25% of your loan every year. Pre-payment is permitted after a minimum of 6 months following loan disbursal.

Tax Benefits: You should know the right of your tax benefits on home loans. Resident Indians are eligible for certain tax benefits on principal and interest components of a housing loan under the Income Tax Act, 1961.

Always check with a financial home loan expert or financing company to understand home loan processes and to avail the best bargain on your home purchase.

The home buying process can seem complicated, but if you take things step-by-step and you know how to choose the right home loan, you will soon be holding the keys to your own home.

Benefits Of Taking A Home Loan For Section 88 Of The Income Tax Act

You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assesses is also considered under this amount.

Benefits Of Taking A Home Loan For Section 24 Of The Income Tax Act

Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

When Put In Figures, This Is Quite An Amount

Amount comes as follows:
1. Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
2. Assume interest payment during the first financial year is Rs 1.60 lakh
3. Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh – Rs 1.5 lakh being the maximum limit)
4. Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980)
5. Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)

Who Is An NRI?

Any person of Indian origin (Indian Citizen) living abroad for purpose of education, employment, carrying on business etc. for a long duration abroad is a non-resident Indian. Non-residents foreign citizens of Indian Origin are also treated on par with non-resident Indian Citizens (NRI’s) for purpose of certain facilities.
Non Resident Indians are allowed to make real estate investments in India without any cap on quantity or the number of investments.

What Payment Modes Can An NRI Use For Paying For The Property?

There is no restriction or condition on payment on buying a property. The normal banking channels are applicable.
1. FCNR (Foreign Currency Non-Resident accounts) in India
2. Remittance from abroad through normal banking channels.
3. NRO accounts in India. (Deposits in dollars opened by residents or non-residents)
4. NRE (Non Resident External Rupee accounts)

What Are The Regulations For Purchase Of Property?

FEMA stipulates that before making a purchase, special form called the IPI 7 needs to be filed with the central office of the RBI along with the title deed or any other certified copy of the document proving that the NRI has executed an agreement to purchase the property within the country within 90 days of the purchase of property along with bank certificate stating consideration paid for the purchase.

Do Foreign Citizens Of Indian Origin Require Permission Of Reserve Bank Of India To Purchase Immovable Property In India For Their Residential Use?

Reserve Bank has granted general permission to foreign citizens of Indian Origin, whether resident in India or Abroad, to purchase immovable property in India for their bonafide residential purpose. Therefore, they are not required to obtain separate permission of Reserve Bank.

Can NRI's Obtain Loans For Acquisition Of A House/Flat For Residential Purpose From Financial Institutions Providing Housing Finance?

Reserve Bank has granted general permission to certain financial institutions, like HDFC, LIC Housing Finance Ltd., to grant housing loans to non-resident Indian nationals for acquisition of houses/flats subject to certain conditions.

Tips For Buyers

The Following Approvals Need To Be Taken From Different Departments (Whether The Builder Received Approvals From Various Departments

  • From Municipality / municipal corporation
  • From Airport authorities
  • From Electricity Boards
  • From Area development authorities
  • From Pollution control boards
  • From Forest & Agriculture

One Needs To Check On The Following

  • Water and electricity connections
  • Whether any industrial pollution issues
  • Approach roads
  • Drainage, sewerage and garbage arrangements
  • Public transport facilities, hospitals, educational institutions, shopping facilities etc.

On The Ownership Front One Needs To Check The Following Things

  • Previous Ownership/Title documents for last 13 years
  • Previous encumbrance documents for last 13 years
  • Tax paid receipt

Other Tips

  • Have a clear idea
  • Don’t love different kinds of buildings but understand exactly your requirements
  • Research from good agent
  • Enquire with more than 3 agents

Deeds In The Real Business

  • Though there are many deeds available in real business to explain the title.

The Following Four Deeds Are Popular

  • Bargain and sole deed: With this document the buyer may not get protection from encumbrances but the deed is useful for other important purposes
  • General Warranty deed: This is the very important deed which protects buyer. Many rights, covenants and warranties explained by the seller to buyer.
  • Special Warranty deed: This deed doesn’t provide security to buyer but in this deed the seller grants few warranties.
  • Quitclaim deed: This is the deed provides least warranties among above all deeds. The purpose and usage is very limited.

From the above you can understand there is lot of scope for real estate because of fast growth. It would be better time to own real property. Slowly the demand and prices will go high and high above. We believe that the above points may help real property buyers. The above tips are only suggestions. Above all we advise buyers to use their wisdom and take decisions based on place, time, seller and locality.

Ten steps to buying a home

Step 1: Figure out how much you can afford. What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. The calculators can help, but it is best to visit a lender to find out for sure. A housing counselor can help you figure out how to manage and pay off your debt, and start saving for that down payment.

Step 2: Know your rights.

Step 3: Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates, and negotiate to get a better deal. Consider getting pre-approved for a loan.

Step 4: Learn about home buying programs.

Step 5: Shop for a home. Choose a real estate agent, Wish list – what features do you want, Home-shopping checklist – take this list with you when comparing homes.

Step 6: Make an offer. Discuss the process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale.

Step 7: Get a home inspection. Make your offer contingent on a home inspection. An inspection will tell you about the condition of the home, and can help you avoid buying a home that needs major repairs.

Step 8: Shop for homeowners insurance Lenders require that you have homeowners insurance. Be sure to shop around.

Step 9: Sign papers. You’re finally ready to go to “settlement” or “closing.” Be sure to read everything before you sign.

Step 10: The House is yours now. Have Puja or hawan.