Loans

How do I apply for a Home Loan?



Step 1

Approach a Housing Finance Company with the latest salary slip and TDS Form 16 of the last two financial years of yourself and your co-applicant. The loan officer will informally tell you the amount of loan you are eligible for, the areas in which they finance flats and the terms of the same. Collect a loan application form and confirm the needed documents (mainly proof of income). Visit more than one company since you are likely to get better terms/ larger loan amount if you shop for the best deal.



Step 2

At your chosen HFC, submit the duly filled loan application, along with the requested documents and an application fee (around 1%). They will then interview you on the same. After conducting an appraisal of your application, the HFC will give an in-principle sanction of your loan.

Step 3
You now have to submit your property documents, which should show a clear title. The HFC will check these and levy an administrative fee (around 1%). It will then disburse the loan, either fully or in installments, directly to the builder/ seller of the flat.

How much housing loan can one get?
It depends on a persons repaying capacity based on your income. You can add your spouse's income to increase the amount of loan.

What tax benefits are available in regards to the housing loans?
Tax benefits are available to consumers of house loans for the interest component as well as principal component of the housing loans. The current budget has left the upper limit of the interest payment deduction at Rs 150,000 per annum. The section 88 also allows tax benefits on principal repayments.

What is the reducing balance method of interest payment?
In reducing balance you reduce the amount of principal payment already paid by you from the initial loan amount. You pay interest only on principal unpaid till that point of time and not the entire loan amount.

What is floating interest rate?
In a floating interest rate, you interest payment will vary according to the market lending rate. If interest rates rise your interest payments will rise and vice-versa. You bear the risk of interest fluctuations in the market. Floating rates are slightly cheaper than fixed interest rates.

What is fixed interest rate?
In a fixed interest rate, your interest rate is fixed over the entire tenure of loan. For your loan requirements please contact:

What are the types of housing loans available?
Various housing loans are offered by financial institutions. Prominent among these are:

a)Home Loans - This is the basic housing loan for the purchase of a new home which covers cost of the flat and parking space, deposits and charges, stamp duty and registration charges.

b)Home Improvement Loans - For implementing repair works and renovations in a home that has already been purchased by you.

c)Home Construction Loans - For the construction of a new house.

d)Home Extension Loans - For expanding or extending an existing house.

e)Home Conversion Loans - The existing loan on a house is transferred to a new house, including the extra amount required, eliminating the need for pre-payment of the previous loan.

f)Land Purchase Loans - For both home construction or investment purposes.

g)Bridge Loans - For people who wish to sell the existing house and purchase another and need finance for the new house, until a buyer is found for the old house.

h)Balance Transfer - To pay off an existing housing loan and avail of the option of a loan with a lower rate of interest.

i)Refinance Loans - To pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present house.

j)Loans To NRIs - As per requirements of NRIs who want to buy a house in India.

Who can apply for a housing loan?
Any person, including Non Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks.

Can a Non Resident Indian avail of housing loans?
Yes. Repayment of loan should be made within a period not exceeding 20 years out of inward remittances or out of funds held in the borrower's NRE/FCNR/NRO accounts.

How much can a person borrow?
Loans are generally disbursed up to a maximum of 85% of the cost of the flat. The balance 15% cost of the flat is to be funded by the flat purchaser from his own contribution.

How does GHP assist a flat purchaser for procuring Housing Finance?
All projects at GHP are pre approved for grant of home loans by leading housing finance companies and banks. The GHP sales team liaise with the all leading Housing Finance Institutions for processing the loan, documentation and disbursement of loans.

What is an EMI?
Equated Monthly Installment ("EMI") is the amount comprising a portion of the interest and the principal loan amount which is payable by a borrower to the lender every month.

How is the rate of interest calculated in India?
Interest rates vary from time to time and from institution to institution. The current trend ranges from about 9% to 11% pa. The interest calculated either on a daily or monthly reducing or yearly reducing balance.

What is a fixed-rate housing loan?
A fixed-rate housing loan is a loan where the rate of interest is constant through the entire term of the loan period.

What is a floating interest rate housing loan?
A floating interest rate loan is a loan where the interest rate payable is linked to the market conditions such as the bank retail prime lending rate and rises and falls with the bank rate varies. Hence a borrower bears the risk of interest rate fluctuations. Floating interest rates offered are usually lower than the fixed interest rates.

What is the difference between monthly reducing interest rate and yearly reducing interest rate?
In a monthly reducing interest system the principal on which interest is paid reduces every month as EMI is paid. In the annual reducing system the principal is reduced at the end of the year, and the borrower pays interest on a certain portion of the principal, which is actually paid back to the lender. The EMI for the monthly reducing system is effectively lesser than the yearly reducing system of calculating interest.

What are the repayment period options?
Repayment period options range generally from 5 to 20 years.

What are the charges for availing a housing loan?
Processing Fees - payable to the lender on applying for a loan and is either a fixed amount not linked to the loan or may also be a percentage of the loan amount.

Commitment Fees - in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned then some institutions levy a commitment fee.

Prepayment Penalty - between 1% and 2% of the amount being pre paid is charged by some institutions when a loan is paid back before the end of the agreed duration.

Stamp duty and registration fee on a deed of mortgage.

Miscellaneous costs - such as administrative costs, legal documentation charges, technical consultant charges.

What security is required for a housing loan?
The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.

Do lending companies require guarantors?
Yes. Many lending companies require 1 guarantor.

What is the time required for approval of a loan application?
About 15 - 20 days

What is the time required for disbursement of loans?
Usually loans are disbursed within 5-7 days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale / lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrower's own contribution has been paid by him to the Vendor / Builder / Developer.

Do institutions accept joint loan applications?
Yes.

What are the documents required at the time of making an Application for a housing loan?
Latest salary slip (proof of income for salaried individuals)
Photographs
Proof of age
Identity papers
Proof of residence
Bank statements for the previous six months
For self employed, certified copies of balance sheet, profit and loss statement and tax
challans / tax returns for the previous 3 years For partnership/private limited companies, the
Articles of Association, partnership deed and details about the firm
For NRIs Latest salary certificate specifying, Name (as it appears in the passport), Date of
joining, Passport Number, Designation, Perquisites and salary, Photocopy of labour
card/identity card, Photocopy of valid resident visa stamped on the passport, Photocopy of
monthly statement of local bank account, Property related documents.

Do lending institutions offer incentives for housing finance?
Sometimes lending institutions offer incentives for a specified period or under a special scheme. Incentives could be any of the following:

Free accident insurance
Waiving of pre payment penalty
Waiving of processing fee
Property insurance

Which sources, other than housing finance companies, can give loans for purchasing a flat?
A loan for purchasing a flat can be availed of from the following sources:
Housing Finance Companies
Banks
Employer
Insurance company
Against Provident Fund Account, Fixed Deposits, Post office Savings
Against Shares and Debentures of listed companies, government bonds and securities.
Private parties such as relatives, friends