Home Loans are typically an amount borrowed by a person from any financial organization like a housing finance company or a bank to buy, sell or renovate a house. Housing loans are borrowed at a particular interest rate and repaid at a specific time. These home loans are paid in small, equated monthly installments or EMIs. The types of housing loans available in India include the following:
- Home Loans
- Home Construction Loans
- Plot Loans
- Home Extension Loans
- Home Renovation Loans
- Balance Transfer Loans
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Features and Benefits of Home Loans
The high real estate prices make it difficult for people to buy a house for themselves. However, housing loans can make it easy for them to own one. There are a lot of benefits and features that a customer can get through housing loans. The following are some of the benefits of housing loans in Kolkata:
High Value
The banks offer up to 70 – 90% of the property's market price as a loan. The owner gets to pay only the rest of it as a down payment. Therefore the pressure of paying the entire cost of the house at the same time can be considerably reduced.
Reasonable rate of interest
The banks also offer reasonable interest rates to the customers to benefit from home loans. The customers are also given a decent tenure of up to 30 years to repay the loans with interest.
Taxation Benefits
With Home Loans, you can easily claim deductions on income tax on the principal and interest. Some of the tax benefits are as follows:
- A tax benefit of up to Rs. 150000 on principal repayment under section 80C
- A tax benefit of up to Rs.200000 on the home loan interest repayments under Section 24
- A tax benefit of Rs.150000 under section 80EEA for first-time homeowners.
Applicable only for those who got home loans sanctioned from 31 March 2019 – 1 April 2022
Speedy disbursal of Loans
The banks also ensure that the loans are disbursed immediately at the customer's request so they can start their work soon.
Prepayment charge options
The banks do not ask for prepayment charges if the customer chooses to repay the loan amount before the given tenure. However, this is applicable only if the customer chooses the floating interests or closes the loan early during the repayment tenure.
Eligibility Criteria for Home Loans
The customer must fulfill certain eligibility criteria before applying for a home loan. The following are some of the requirements for home loans in Bengaluru:
Eligibility Criteria for Home Loans
The following are the required documents for the application for Home Loans:
- KYC Documents – Any one Document required (Driving License, Passport, Aadhaar, Voter ID)
- Employee ID Card of the Customer
- Salary Slips of the previous 2-3 months
Bank statements for the previous 3 months for a salaried person and 6 months for a self-employed person
Proof of Business Documents for people who are into business and for self-employed people.
Cibil Score
A cibil score is a 3-digit number that describes the customer's credit history summary. The credit history from the CIR (Credit Information Report) calculates the score. A CIR records the credit payment history of the individual's loans and credit institutions for a particular period of time. While applying for loans, the banks usually check for the Cibil score of the customer to check for his worthiness of credit. A credit score of 750 and above is a good score for applying for a house loan.
Employment Status
A person applying for the loan must be employed for at least 2- 3 years period. In contrast, self-employed people should have work experience of more than 5 years to be eligible for home loans.
Age
Young people have more chances of getting loans than older people. The following are the eligible age criteria:
- Salaried People: between 20 – 60 years of age
- Self Employed people: between 24 – 65 years of age
Minimum Salary
A person should earn around Rs.10000 monthly and a minimum business income of Rs.200000 per annum to be eligible for a home loan.
Interest Rates
The interest rates include the following components:
Loan EMI Calculator
A loan EMI calculator helps users to properly calculate the amount to be paid each month to repay the loan. However, the EMI is calculated using the following formula:
EMI = [P x R x (1+R) ^N]/ [(1+R) ^ (N-1)]
- P stands for Principal amount, which is the original amount lent by the bank
- R stands for Rate of Interest
- N stands for the tenure of the loan
Types of interest rates
The owner is free to choose between three types of interest: fixed interest rates, floating interest rates, and Hybrid Loans.
Fixed Interest Rate includes the same EMI throughout the tenure.
Floating Interest Rate varies with the interest rates in the real estate market. It is usually 1 – 2.5% lesser than the fixed interest rates.
Hybrid Loans are a mixture of fixed and floating interest rates. This type has fixed loan rates first and then changed to floating interest rates.
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