Home Loan for the First Home Buyer - What You Need to Know



A house loan, often called a home loan, is cash borrowed from a bank or another financial organization to pay for real estate. Home loans also include a fixed or variable interest rate and payment terms. A mortgage, commonly referred to as a home or housing loan, is a sum of money that a person borrows, typically from banks and other lending institutions.

What are the interest rates for home loans in India?

As of March 2021, India's average house loan interest rate ranges from 6.5 percent to 12 percent. The rates typically vary depending on several factors, including the repo rate set by the RBI, inflation, economic activity, and many more. Some banks also offer a 0.05 percent discount on the interest rate for house loans to older citizens, bank employees, and women.

What is the eligibility for applying for home loans in India?

The eligibility to apply for a home loan in India are that you have to be an Indian citizen or NRI between the age of 18-70. You should have a credit score of 750 and above, and your monthly income should be more than Rs. 25000. You must be employed for more than two years and not have an unpaid loan. It also depends on your secured collaterals and assets etc., as per the bank you are applying for your home loans.

 

What documents will you require while applying for a home loan in India?

  • Residence proof
  • Bank Account Statement/Passbook for the last six months.
  • Signature verification by bankers of the applicant.
  • Liabilities statement and Personal Assets.
  • Property detailed documents
  • Loan application form.
  • Three photographs passport sized.
  • Identify proof
  • Salary Certificate (original) from the employer. (salaried individuals)
  • Form 16/IT Returns for the past two financial years. (salaried individuals)
  • Challans as proof of Advance Income Tax payment. (self–employed professionals)
  • Proof of business address for non-salaried individuals. (self–employed professionals)
  • IT returns/Assessment Orders copies of the last three years. (Self–Employed Businessmen)
  • Challans as proof of Advance Income Tax payment. (Self–Employed Businessmen)
  • IT Returns/Assessment Orders copies of the last three years. (self–employed professionals)

What are the types of home loans?

Here are some of the different kinds of home loans you can take-;

  • Home Purchase Loan - With this loan, you can buy any house or home.
  • Construction Home Loan – You can use this loan to cover the costs of building a house
  • Land Purchase Loan - You can use this loan to buy a piece of land
  • Home Improvement Loan – You can use this loan to renovate and improve your house
  • Home Repair Loan – You can use this loan to repair any damaged home corner.
  • Home Extension Loan – Increase the built-up space at your home using this loan.
  • Transfer of Home Loan Balance-You can transfer the remaining balance of the house loan to a new lender.
  • Home Loan Composite- You can use this type of loan to build a house and the land on which it will be made, all in the same loan.

What are the key factors to consider while applying for a home loan?

  1. Principal : - You will be borrowing this sum of money from the bank or other financial institution.
  2. Duration : - How long it will take you to repay the loan.
  3. Interest : - The bank or financial institution charges interest in exchange for money loan services.
  4. Total EMI : - You will pay monthly installments for the duration of your borrowing until the end of the loan period.

What are the benefits of taking a home loan?

  1. Tax advantages
    The main advantage of having a mortgage is the ability to deduct interest and principal payments from your income tax.
  2. Decreased interest rate
    Compared to other loan options, the interest rate on a home loan is significantly cheaper.
  3. Diligent property management
    When you buy a house through a bank, the bank will thoroughly investigate the property from a legal standpoint and determine whether all the paperwork is legitimate. You will be less likely to be scammed due to the bank's diligence assessment.
  4. Long term of repayment
    Home loans have a more extended repayment period than any other type of loan, up to 25 to 30 years.
  5. No early termination fee
    When you take up a floating-rate mortgage, you can pay off the loan early anytime you have a lump sum available without incurring any prepayment penalties.
  6. Facility for balance transfers
    For various factors, including the interest rate, service fees, level of customer care, and others, you can switch your house loan from one lender to another.

Conclusion

The money borrowed to buy a house from a bank or other financial institution is called a home loan. Depending on the loan's terms, the borrower must repay the loan balance plus interest over a period ranging from 10 to 30 years in Easy Monthly Instalments (EMI). Applying for a home loan in India has many advantages, including tax advantages, lower interest rates, long-term repayment choices, thorough evaluation, etc.