1) 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: A Home Improvement Loan is one that is made available for you to do certain external work like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting etc.
c) Home Construction Loans: For the construction of a new house.
d) Home Extension Loans: A Home Extension Loan is a loan which helps you to meet the expenses of any alteration like extension / expansion or modification of your home. You can avail of a Home Extension Loan, after obtaining the requisite approvals from the Municipal Corporation.
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.
2) 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.
3) 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 borrowers NRE/FCNR/NRO accounts.
4) How much can a person borrow?
Loans are generally disbursed upto 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.
5) 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 is calculated either on a daily or monthly reducing or yearly reducing balance.
6) 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.
7) 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.
8) 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.
9) What are the repayment period options?
Repayment period options range generally from 5 to 20 years.
10) 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 off 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.
11) 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.
12) Do lending companies require guarantors?
Yes. Many lending companies require 1 guarantor.
13) What is the time required for approval of a loan application?
About 15 - 20 days
14) 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 borrowers own contribution has been paid by him to the Vendor / Builder / Developer.