Given the boom in real estate in India, housing or home loan has become the most popular form of loan. This type of loan benefits the middle class the most in their quest of fulfilling their lifetime dream of owning a house. One should look into the details of a housing loan before deciding on going in for any of the numerous offers available.
What exactly is a ‘home loan’?
Home loan is basically a monetary assistance offered by a bank or other financial institutions to fulfill your residential needs. In this transaction, the purchased home itself stands as ‘security’ until you pay back the entire loan amount with interest.
Basic requirements to procure a home loan
Banks and other financial institutions have various rules concerning this factor. These rules may differ from institution to institution however; the very basic requirements are as follows-
* Have a fixed, dependable source of income (employed/self-employed)
* A acceptable financial record extending to at least 6 months of active banking
* Be of 21-60 years of age if employed or 21-65 years, if self-employed
The first step before embarking on a home-loan application is to decide on your budget. A standard home loan will cover up to 85% of your requirement (the overall cost of the property). You will need to raise a minimum of 15% and also separately, take into account stamp duty, registration charges, brokerage etc.
Are you eligible for a home loan?
This step is the crucial juncture of this process and decides the loan amount for which you are eligible. This eligibility criterion is calculated based on your total income and overall liabilities (other financial commitments such as car loan, etc). In case your spouse also has an active income, he/she can be included in the proceedings as a joint applicant- this increases your eligibility for a higher loan amount. Usually, your EMI (Equated monthly Installment) for the loan can be upto 40% of your monthly income.
Calculating Interest Rates and other Fees
An ‘interest rate’ is additional payment that a bank/financial institution charges over the granted loan. These rates vary from institution to institution and through certain periods