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08 Nov 2020

Home Loans - everything you need to know

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Home Loans are the type of loans offered to individuals by various banks and other financial institutions to buy/construct a house. An interest is levied by Banks and NBFCs on advances, which is how banks generate revenue and earn a profit.
Home loans can be repaid in flexible installments or as a whole, depending on the convenience of the borrower.

Home loans fall under the category of secured loans, meaning that loans are issued to borrowers upon provision of a security/collateral; and in most cases, the house itself is mortgaged.
As per Home loan regulations, lenders can provide home loans between 75% and 90% of theCost of the property, depending on the borrower’s home loan eligibility.

Types of Home Loans-

Home Purchase Loan: A home purchase loan is sanctioned to purchase a house.

Home Improvement Loan: Home improvement loans are sanctioned to improve/renovate a house.

Home Construction Loan: This loan comes in handy when one is building a new house.

Land-Purchase Loans/Plot Loans: This loan is sanctioned for the purchase of a land/plot to construct a house.

Home Extension Loan: This loan is sanctioned for individuals who want to extend a specific portion to their house, like a bathroom, room, etc.

NRI Home Loans: These are the loans sanctioned to Non-Resident Indians to construct a house or renovate an existing one.

Home Loan Transfer: Home loan transfer is usually availed by individuals who want to transfer an existing home loan from a bank/NBFC to another provider/lender, mostly due to more flexibility of repayments and lower interest rates.

Home Loans also differ in terms of the type of interest rate charged. They can be of three types-

  • Floating Rate Loans- These are the type of loans which are directly linked to a benchmark rate of the borrower, which changes as and when the benchmark rate changes.

  • Fixed-Rate Loans- These are the type of loans that have a fixed rate of interest throughout the entire duration of the loan (tenure of the loan).

  • Combination Loans- These are the type of loans under which part of the loan is offered at a fixed interest rate and part of the loan at a floating rate.

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Home Loan EMI Calculator-

Before taking a decision of availing of a loan, we advise our readers to indulge in proper financial planning and indulge in laying out a proper financial roadmap. Although sanctioning of loans can be relatively a hassle-free task, one should have a proper plan ahead of themselves to check how much money will be going out every month in the form of EMIs and how they can completely clear off the loan taken without defaulting even once.You can use our Home Loan EMI calculatorHome Loan EMI calculator to calculate your EMI by entering just your home loan interest rate, amount, and tenure.

Best Bank for Home Loan-

Given below is the list consisting of some of the best banks and the interest rates offered. In India, SBI is a renowned bank providing home loans at competitive rates. The home loan SBI interest rate too can be found below.

Best Bank for Home Loan
Bank NameInterest RateAmount of Loan Sanctioned
State Bank Of India (SBI)7% - 9.65%Upto Rs. 5 crores
HDFC Bank6.95% - 8.20%Upto Rs. 10 Crores
AXIS Bank7.75% - 8.40%Upto Rs. 5 Crores
Kotak Mahindra Bank7.20% - 9.30%Upto Rs. 10 Crores
Punjab National Bank7.15% onwardsUpto Rs. 1 Crore
ICICI Bank6.90% - 8.05%Upto Rs. 3 Crores
Yes Bank8.95% to 11.80%Upto Rs. 5 crores
Bank Of Baroda6.70% onwardsUpto Rs. 5 Crores
Canara Bank6.90% - 8.90%NA
IDBI Bank7.40% - 8.00%NA

Home Loan Eligibility-

Home Loan eligibility for Indian Residents- One is required to be a minimum of 18 years and up to 70 years for a home loan to get sanctioned, with a minimum salary of Rs. 25,000 per month or Rs. 2.4 Lakh per annum conventionally. At least a minimum of 2 years work experience is required in the case of salaried employees and a minimum of 3 years work experience is required in the case of self-employed individuals (varies from bank to bank). Banks also expect good CIBIL scores, with a minimum score of 700. Up to 90% of property value can be sanctioned as a loan.

Home Loan Documentation-

Conventionally, these are the documents required for the purpose of home loans for Indian residents

  • Employer Identity Card

  • Loan Application: Completed loan application form duly filled in affixed with 3 Passport size photographs

  • Proof of Identity (Any one): PAN/ Passport/ Driver’s License/ Voter ID card

  • Proof of Residence/ Address (Any one): Recent copy of Telephone Bill/ Electricity Bill/Water Bill/ Piped Gas Bill or copy of Passport/ Driving License/ Aadhar Card

Property Papers-

  • Permission for construction (where applicable)

  • Registered Agreement for Sale/ Allotment Letter/ Stamped Agreement for Sale

  • Payment Receipts or bank A/C statement showing all the payments made to Builder/Seller

Account Statement

  • Last 6 months Bank Account Statements for all Bank Accounts held by the applicant/s

  • If any previous loan from other Banks/Lenders, then Loan A/C statement for last 1 year

Home Loan apply-

Conventional procedure to apply for a home loan across major public/private sector banks

1. Application: The first step would be to apply for a home loan. This can be done online or at bank branches or at loan centers.

2. Loan Sanction: Post submission of your application and review of necessary KYC and documents of financial stability, the bank sanctions the loan amount.

3. Review: Once the loan is sanctioned, applicants are required to submit the documents pertaining to the property against which the applicant’s loan is sought, for technical and legal review.

4. Approval & Disbursal: Upon validation of the applicant’s loan amount and the property papers, the bank shall approve and disburse the loan.

We advise our readers to go through all the fees and charges of the lender before availing of a loan to ensure that you are not paying any hidden charges.North Loop offers a wide range of loans and related services like Personal loans, Student Accounts, Overdraft on FDs, Line of Credit, Credit Cards, immigrant loans, and personal loans with some services not even requiring a credit history. With low-interest rates, high flexibility, rewarding spends, and quick approvals, North Loop is a one-stop-solution app for all your credit requirements. Sign upnow!

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.