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Home Loan

Housing Loan Apr 2020

Last Updated 21st Sep 2020

  • Home Loan is long term credit offered by banks to home buyers to help them purchase their dream house against the collateral of the home purchased.
  • Instant Home Loan are pre-approved home loans in which the loan amount is decided based upon your income levels and repayment capacity.
  • Currently, lowest home loan interest rates are starting @ 6.95%.
  • Housing loan can be availed up to a tenure of 30 years and up to 90% of the property value.
  • Compare the best online instant home loan offers from top banks in India.
  • Estimate your loan eligibility online with MyLoanCare Home Loan Eligibility Calculator.
  • Apply for a home loan online at MyLoanCare and get an attractive cashback upto ₹ 1,000.

Home Loan Overview

A home loan is a credit facility provided by banks and NBFCs that allows the borrowers to buy or construct a home, by keeping the house as a collateral. Most of the banks finance home loans up to the maximum limit of 90% of the property’s value, wherein the funds are provided by undertaking the concerned house as a security and these funds are provided against the security of that very property for which you have sought finance. Along with the banks, the Central and State Governments offer various housing schemes to encourage “Housing to All” by the end of the year 2022.

Top Banks of Home Loans in India

Bank Interest Rates Lowest EMI Per Lakh for Maximum Tenure
SBI Home Loan 6.95%661.95
HDFC Home Loan 6.95%661.95
Bank of Baroda Home Loan 7.00%665.3
Citibank 7.20%719.59
ICICI Bank 6.90%658.6
Axis Bank 7.10%672.03
PNB Housing Finance 8.60%776.01
LIC Housing Finance 6.90%658.6
Indiabulls 9.25%856.38
DBS Bank 7.30%793.41
Aavas Financiers 8.00%733.76
Aadhar Housing Finance 11.00%952.32
Kotak Bank 8.60%874.16
Edelweiss 10.50%944.18
Canara Bank 8.05%737.25
IDFC First Bank 9.50%840.85
IIFL 8.70%783.13
Union Bank of India 8.25%751.27
South Indian Bank 8.05%737.25
Punjab and Sind Bank 8.05%737.25
Lakshmi Vilas Bank 9.70%945.23
Karnataka Bank 8.55%772.46
Indian Bank 7.55%808.65
GIC Housing Finance 10.25%981.64
Dhan Laxmi Bank 7.40%799.49
Sundaram Home Finance 8.60%874.16
Corporation Bank 8.35%758.31
Bajaj Finserv 7.75%820.95
Bank of Maharashtra 8.20%747.75
Tata Capital 9.05%808.22
Andhra Bank 8.15%744.25
LT Housing Finance 9.90%870.19
Standard Chartered Bank 9.40%925.61
UCO Bank 6.90%658.6
PNB 7.15%675.41
Reliance Capital 10.00%877.57
OBC 8.00%771.82
Jammu And Kashmir Bank 7.70%938.41
IDBI Bank 7.40%692.38
Federal Bank 8.35%758.31
DCB Bank 10.24%980.98
Central Bank of India 6.85%655.26
Piramal Housing Finance 9.00%804.62
Bank of India 6.85%655.26
Yes Bank 9.85%898.15
Allahabad Bank 8.25%852.07
United Bank of India 8.00%733.76
Syndicate Bank 8.00%733.76
RBL Bank 10.45%940.61
Karur Vysya Bank 8.20%785.11
Indian Overseas Bank 7.45%695.79
HSBC Bank 8.65%815.36

Housing Loan Benefits

The government has announced various home loan subsidy schemes like PMAY to encourage the availability of home loans. Recently, RBI has linked home loan interest rates to repo rate and hence, it has been constantly reducing the repo rate in the last few monetary policies to ensure availability of easy loans. However, availing a home loan is a major decision, and you should develop a complete understanding of it before opting for one. Some features of home loans that make it a go-to option for fulfilling housing dreams, are listed as follows:

  • Easy availability: All leading banks and NBFCs offer attractive housing loan schemes. In India, the home loan schemes are offered with customer friendly rates and features. This makes home loans a good choice for borrowers.
  • Multi-Purpose: Housing loans are multi-purpose loans available for various purposes such as buying a new residential flat or building, constructing a new house on a plot, home renovation or for extending your current house.
  • Long Tenure: Since the loan amount involved in housing loans is high, the tenure to repay that loan can go up to as high as 30 years. This allows the borrower to choose an affordable EMI and ensure that his monthly budgets are not under any kind of pressure.
  • Prepayment and Foreclosure: Home loans offer the facility of foreclosing or prepayment of a home loan, wherein home loan borrowers can pay more than the EMI or can prepay the loan. This makes home loans a customer-friendly product. However, as per the Reserve Bank of India, banks and NBFCs cannot charge any fee or penalty on prepayment or foreclosure of a home loan.

Some of the notable benefits of taking a housing loan are listed as follows:

  • Save Rent: By opting to buy your house using a housing loan, you will be saving the rent that you pay for a rented accommodation.
  • Tax Benefits on Housing Loan: The housing loan has attractive tax benefits associated with it. A deduction of up to ₹ 1.50 Lakh is available under Section 80C for repayment of the principal amount. Further, a deduction of up to ₹ 2 Lakh is available for the interest amount accrued in a financial year on home loan under Section 24.
    In addition to the above mentioned, as per the regulations under budget of 2019-20, tax benefits can be availed on home loan as per Section 80EEA. Under this section, an additional deduction on interest of the home loan is provided if the housing loan is availed between 1st April 2019 to 31st March 2020, and the stamp duty value of the property is ₹ 45 Lakh or less. However, in the Budget 2020-21, the time limit of the loan was extended from 31st March 2020 to 31st March 2021.
  • Tax Benefits on Second Home: In case you have availed a housing loan to buy a second house, the entire interest amount accrued on that loan for a financial year is available for deduction without any ceiling limit under Section 24B.
  • Affordable: Housing loans are affordable as the interest rate is very low in case of home loans and repayment can be done in easy affordable EMIs.
  • Appreciation of Capital: Over a period of time, the value of property increases. Thus, your investment in your home through the home loan will reap you benefit in terms of having a high-value asset as well.

Home Loan Procedure

A home loan procedure does not simply involve loan application and approval, indeed, it involves various step by step processes. These are listed as follows:

Step 1 : Check Eligibility and Calculate EMI
Before you apply for a housing loan, check your loan amount eligibility and calculate monthly home loan EMI. Home loan eligibility is calculated based on age, monthly income, current obligations, LTV ratio, property type and other factors. EMI can be calculated based on the loan amount, interest rate and tenure. It is advisable to shortlist the banks which offer the maximum loan amount once you check your EMI and eligibility.

Step 2 : Check Legal Documents and Property Approval Status
In case you are buying a builder property, then check for the banks who have approved the shortlisted projects. In case of a resale property, map plans are to be approved. Ensure that the property registration documents are accurate for both the first and the current owner. On ensuring the authenticity of the documents, shortlist the banks who give loan on your selected property.

Step 3 : Decide on Home Loan Interest Rate Type

  • Choose between floating and fixed rates: Most of the banks offer home loans at either floating or fixed interest rates. As per the fixed interest rates on home loans, the interest rate remains constant during the loan tenure. On the other hand, as per the floating home loan rate, the rate changes after periodic intervals in response to MCLR, PLR and external benchmarks like RLLR and TBLR. It is preferable to do a home loan interest rates comparison before you apply for a home loan.
  • Home saver loan option: Banks offer overdraft facilities to allow borrowers to save interest on home loan. A surplus amount can be deposited in the loan overdraft account as and when available with an option to withdraw the amount anytime. The interest rate on overdraft loans is higher than regular home loans.

You can also evaluate a mortgage guarantee home loan as it covers any default risk and allows the lender to give you a loan at a lower rate of interest. You will however need to pay a mortgage guarantee fee to the bank.

Step 4 : Compare Shortlisted Banks
You can compare home loan interest rates of all banks and NBFCs at online marketplace like MyLoanCare.in. Along with rates, you can also check processing fee, prepayment charges and any other associated cost on loan. Compare all the rates and charges to shortlist the banks further and reduce the options to 2-3 banks.

Step 5 : Select the bank based on other service related parameters
Finally, as you decide to take the loan, consider other services and related transparency parameters of the chosen banks. Some of these factors are turnaround time, quick loan delivery, doorstep services, transparency in the loan process. In addition to that, understand the trends and changes in MCLR, PLR and external benchmark rates over time. Lastly, read reviews of existing customers of banks on their services, interest rates and transparency to take your decision to borrow from a bank.

Different Types of Home Loan

It is often believed that a home loan is only available for buying a new property or for construction. There are various types of home loan available catering to a variety of requirements. These are as follows:

  • Home Purchase: The most common home loan type is the loan which is availed to buy a residential property, it can be a house or a flat. The maximum financing available for it is up to 90% of the property's value.
  • Home Improvement Loan: If you already own a house but don't have enough funds to renovate it, then Home Improvement Loan is best suited for you. It includes works like repair, painting the walls, rewiring, waterproofing, etc.
  • Home Extension Loan: You can also avail a loan for expanding or extending your current house. Some lenders have curated a separate loan product for this purpose, while some of them include this purpose as part of their home improvement loan product.
  • Home Construction Loan: Housing loan is also available for those who want to construct their own house. Although there are certain aspects which you need to keep in mind in this case, they are:
    • The land or the plot on which the house is to be constructed should have been bought within a year.
    • If you do not include the cost of the plot in loan amount, then only the cost of construction would be estimated.
    • A rough estimate of the cost has to be made for the cost that will be incurred in construction.
  • Loan for Land Purchase: Banks and NBFCs also provide loans for buying a plot on which an individual is looking to construct their own house. Usually, the maximum financing for plot loans is done up to 70-80% of the value of the land.
  • Home Loan for NRI: Home loan is also available for the non-resident Indians who want to buy their own house in India. The structure of this loan is similar to a regular housing loan. However, the documentation part is comparatively lengthy.
  • Joint Home Loan: This type of loan is taken with a co-applicant to increase the eligibility of the loan. You can add an earning member of your family like parents, spouse or children as a co-applicant. Banks allow a maximum of six co-applicants for a joint home loan.
  • Affordable Housing Loan: PMAY scheme was launched by the Modi Government in 2015 to provide affordable housing to the urban poor by 2022. Under this scheme, applicants are eligible for interest subsidy if they take a loan to buy or construct a house.
  • Top-Up Loan: After a certain period of time, you can also opt for a top-up loan on your home loan. A top-up is an additional loan amount that is borrowed in between the home loan tenure for varied purposes like, home renovation, meeting an emergency, etc.
  • Balance Transfer: In case of a housing loan you can also transfer your balance from your current lender to another lender if the rate you are paying on your loan is significantly higher than the market rate. So you don’t need to worry about being stuck with a high cost home loan.

Home Loan EMI Calculator

Home Loan EMI Calculator is an online tool that helps one to calculate the Home Loan EMI based on factors such as loan amount, housing loan interest rate and tenure. With the help of an EMI calculator, you can check the amount of EMI and total Interest you need to pay on your Home Loan. To calculate EMI, you simply need to enter the details like required loan amount, interest rate and loan tenure, and you can know about Home Loan EMI without any error and free of cost.

CIBIL Score for Home Loan

Most of the banks or NBFCs consider a score above 700 as a good score. When you apply for a home loan, the bank first checks your credit history and repayment capacity. If you have a low credit score, the home loan lender might reject your housing loan application. However, if you have a good credit score, the chances of approval of the application are very high.

Home Loan Fees & Charges

Other Charges: Banks may also charge other charges like Legal charges, technical charges etc. on a home loan. A home loan does not simply involve the payment of home loan EMIs and interest rate, indeed, it involves various other charges as well. These are listed as follows:

  • Application fee: The application fee is charged by the home loan lender for undertaking the verification procedure during the initial home loan process.
  • Processing Fees: Processing fee on home loan is a one-time fee charged by the home loan lender based on the borrower’s profile and income. This may vary across the lender, and may even be NIL in some cases.
  • Foreclosure/prepayment fee: Home loan foreclosure and prepayment fee is charged upon the home loan borrower when he or she prefers to pay the home loan in advance, whether fully or partially. The foreclosure and prepayment charges may vary across lenders.
  • Legal fee: The legal fee on home loan is charged by the home loan borrower to cover the legal charges involved while paying the home loan process.
  • Franking fee: Franking fee is also called the stamp duty fee and is charged by the home loan borrower in order to pay charges to the State Government for passing on the legal ownership of the property.

Home Loan Eligibility

Before availing a home loan, borrowers must check home Loan eligibility based on specific parameters like age, net income, existing obligations, property type, LTV ratio etc. These parameters vary for every lending institution and evaluate the creditworthiness of the borrower. To increase the home loan eligibility, you can add a co-applicant. Borrowers can add a maximum of 6 co-applicants to improve their CIBIL Score. The eligibility for home loan is listed in the table below:

Parameters Eligibility criteria
Eligible Age 18-70 years
Net Monthly Income ₹ 25,000 or above
Loan Tenure Upto 30 years
Employment History Job continuity of 3 years and more
Work Experience 2 years
LTV 75% to 90%
CIBIL Score 650 and above

Required Documents for Home Loan

To avail a home you would require to submit the following list of documents.

  • Application Form - Signed Application form with photo
  • Identity Proof - PAN card, Passport, Driving License, Aadhaar Card, Voter id, Govt issued i-card.
  • Address Proof - Any residence proof like Passport, Driving License, Election ID card, Electricity/ Telephone/ Mobile bill/ Bank statement (not more than 3 months old) etc.
  • Income Proof - Salary slip, bank statement of 6 months, Form 16
  • Documents related to property: Past title chain - Conveyance deed, Sales deed, Allotment letter, Possession letter, Latest property tax receipt, Copy of approved plan for construction/ extension.

Home Loan Balance Transfer

A home loan balance transfer is the facility provided by Banks and Non-Banking Financial Institutions to pay the outstanding balance of your home loan to another institution. With a home loan balance transfer, you can repay the home loan at a lower interest rate and also avail other additional benefits like top-up home loans. However, before availing a home loan balance transfer, you must compare the interest rates and other charges of different lending institutions to ensure that the total costs of balance transfer do not exceed the present cost of the home loan.

What to do if a home loan application is rejected?

To avoid any risk of rejection of home loan applications, you must check the eligibility criteria of different lending institutions. In case you did not check your eligibility and your application gets rejected follow these steps.

  • Firstly, it is essential to understand the reason for rejection. There are many reasons why your application would have been rejected. Some of these may be errors in the application form or a lower CIBIL Score.
  • If you have a poor CIBIL Score, you can add co-applicants to improve your Credit Score.
  • You can also make a larger down payment of the loan to increase your chances of approval.
  • Finally, if everything does not go well, you can apply for a home loan with another institution.

How to Get instant Approval on Home Loan?

Many banks and NBFCs have an attractive housing loan product which is called instant home loan or pre-approved home loan product. It is provided by lenders to its existing customers. Under this scheme, the amount of home loan you are eligible for is calculated based on your income level, credit score, and FOIR. The sanction letter on such loans is valid for a period of up to 6 months. In this period, you can finalize a property and get the amount disbursed. The bank does a legal and technical evaluation of the property before giving a final approval and disbursing the loan. This pre-approved home loan offer allows buyers to take an instant decision to purchase a property without the need to worry about arranging funds. It also gives the home loan borrower an idea of how much loan they can get.

The steps to get a pre-approved home loan are very simple:

  • You can enquire in the bank with which you have your savings or salary account, whether they have such a product or not.
  • If Instant home loan is available, then you can apply for it right away through their website or by visiting the branch.
  • After you apply and submit the required documents, within a couple of days, you will be issued a pre-approved home loan sanction letter which details out the loan amount, interest rates, tenure, validity of the offer and other terms and conditions.

Home Loan Rejection

Do’s Don’t
Always pay your ongoing EMIs on time so that your credit score never drops. Never apply for the home loan just for the sake of it.
Check your credit score regularly and apply only when it's at least above 650. While filling your application form for the home loan, make sure all information is correct and complete, and they match your relevant documents.
Proper research is a must before you apply with any lender for a home loan. Don’t just blindly apply with the bank in which you have an existing account because of the previous relationship.
You should have stable employment before you opt for a home loan. Make sure you are not defaulting on your current EMIs or accumulating too much credit on your credit card.
Read the fine print of the document carefully before signing it. Don’t blindly sign any document before you have read all its terms and conditions.
Make sure you submit all the necessary documents along with your loan application. Do not apply for a home loan if you already have a number of ongoing loans.
Assess your financials and eligibility and apply for the loan that you are probably going to be eligible for. Do not apply for the home loan in multiple banks at the same time.
Make sure to check the charges applicable for prepayment and foreclosure. Choose your loan tenure wisely. Putting a random number for your tenure can cost you in the long run.

Avail Home Loan in Your City

FAQs

How can I apply for home loan?

You need to submit a home loan application to the shortlisted banks to initiate the process of taking a loan. Home Loan application can be submitted by directly visiting the bank’s branch or by applying at the bank’s website. You can also check and compare the best home loan interest rate of all banks online at MyLoanCare and apply for a loan to multiple banks simultaneously to get deal.

How can I apply home loan in my city?

Nowadays, people living in any part of the country can apply for a loan with all leading banks and NBFCs by walking in to the nearest bank or by applying online at the bank’s website or other loans websites.

Can I get a home loan without ITR?

Many banks have launched schemes to provide home loans without ITRs for borrowers who are self employed and are looking to buy affordable houses. HDFC Reach is once such popular scheme which provides loan with lesser documentation, but charge higher interest rate of 9.25%.

Which bank home loan is best?

Most top banks have similar eligibility criteria and interest rate, along with other terms and conditions. No one bank stands out from the rest. However, you can assess the features of various bank’s home loans and decide which one is suitable for your needs better.

How does the home loan work?

To get a home loan, you need to first apply for it and also pick the property you want to buy. When your home loan application gets accepted, then you can show that to the seller who will then get an appointment with the registrar. As the appointment gets fixed, you along with the seller and a bank representative go to the office for registering the property on your name. The property documents are handed to the bank right there, and within a day or two, the loan amount is disbursed as well.

Can I get a 100% home loan?

No, the maximum funding allowed by RBI for a bank to extend on a home loan is 90% of the property’s value.

Which bank gives the cheapest home loan?

Currently, the lowest interest rate on a home loan is offered by SBI, which is 6.95%.

When should I apply for a home loan?

You can apply for a home loan when you have picked the property of your choice and also have the amount ready for the down payment, which can vary between 10-20% of the property’s value.

Which loan is best for buying a home?

If you are looking to buy a house, availing a home loan is the best option considering its lower rate of interest, long tenure, and no charges on prepayment.

What is the minimum salary for a home loan?

The minimum salary required to apply for a home loan is ₹ 25,000. Banks offer discounted rates for borrowers with low income looking to buy affordable houses. In fact in the current situation, rate of interest is lower if the value of property one is looking to purchase is less than ₹ 30 lakh.

Can we pay our home loan early?

Yes, every lender has to abide by RBI prepayment rules and provide an option of prepayment and foreclosure of a floating rate home loan without charging any fees or penalty. So, if you happen to get the required funds to pay your home loan early, you can certainly do so. However, if you have a fixed rate home loan, banks and lenders may include a clause in the home loan agreement explaining the various condition and charges for home loan prepayment and foreclosure.

What kind of loan is a home loan?

A home loan is a secured loan in which the property to be purchased is given as collateral by the borrower to the bank.

What is the lowest interest rate on a home loan?

Presently, the lowest rate of interest rate on a home loan is 6.95%.

How long does it take to get a home loan?

The home loan usually gets disbursed in 15 to 30 days. However, the disbursement may delay if the documents you have submitted to the bank are not complete.

Related Topics
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Home Loan News - Sep 2020
  • 2020-09-21 : ICICI Bank launches Home Utsav
    ICICI Bank launched Home Utsav, a virtual property exhibition. The scheme will digitally showcase real estate projects by renowned developers from key cities across the country. Individuals will get exclusive benefits of low home loan interest rates, special processing fees, and as well as the digital sanction of loans.
  • 2020-09-21 : HDFC sanctions Rs 47K cr home loans to over 2 lakh homebuyers under govt’s CLSS
    Affordable home loans and loans linked credit subsidy scheme of the government targeted at lower and middle income segments have been growing steadily for HDFC. It has dissbursed more than 47k home loans under the government’s Pradhan Mantri Awas Yojana (PMAY) scheme in the past six months, including five months of lockdown period.
  • 2020-09-21 : ICICI Home Finance launched home loan scheme for skilled workers in Delhi
    ICICI Home Finance launched a new loan scheme ‘Apna Ghar Dreamz’, with credit amount in the range of Rs 2 lakh to 50 lakh, for skilled workers employed in the informal sector in Delhi. The scheme is aiming skilled workers such as carpenters, plumbers, electricians, tailors, painters, welders, auto mechanics, manufacturing machine operators, computer mechanics, RO repair technicians, small and medium business owners and grocery store owners in the city.
  • 2020-09-18 : PSBs overtake private banks in 2020
    Public sector banks overtook private sector banks in offering retail loans like home, personal, gold, car, two-wheeler and education loan along with business and mudra loans. Since December 2019, PSBs overall lending has gone up to 57.7% as of June 2020, which is a jump of as much as 60 bpsover six months. During the same period, the share of private banks in overall lending has come down by 60 bps to 34.4%. The share of total loans outstanding that private banks have lost has been taken over by state-owned lenders.
  • 2020-09-16 : Lok Sabha passes bill to bring co-op banks within RBI ambit
    The Banking Regulation Bill, 2020, was passed in the Lok Sabha. The bill, moved by FM seeks to protect the interest of depositors by bringing cooperative banks under the regulatory framework of the RBI.
*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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