FAQ’S RELATED TO HOUSING LOAN

What Security does one provide against the loan amount to be borrowed?

Generally, by way of deposit of title deeds and / or such other collateral security as may be necessary.

Does the property have to be insured?

In case you are going in for loan, the Institution / Bank will insure your property. However if you are funding on your own it is advisable to Insure your property from Fire and other Hazards.

How do Financial Institutions determine whether to approve my loan or not?

The foremost criterion is your repayment ability for the loan. This is generally assessed based on the following factors:

•  Monthly income

•  Monthly CPF contribution

•  Existing funds in CPF Ordinary Account

•  Other financial commitments

•  Employment Profile

•  Age of borrower

•  Nationality

•  Debt servicing ability,

•  Bankruptcy

•  Credit record

•  Financial strength of Joint borrower (if any),

•  Liquidity.

Home Loans: What is the maximum loan amount that can be sanctioned?

Banks/ Financial institutions sanction loan amount based on certain criteria depending upon your repayment capacity. (Taking into account your age, qualification, assets, liabilities, stability of occupation, saving History) and according to your income. The maximum that can be sanctioned varies with Housing finance companies. Generally the maximum loan amount is 80% - 85% of the cost of your home

What is the time required for loan disbursement?

On an average, loans are disbursed within 7-15 days after complete documentation and completion of all relevant procedures, including proof that 15% of the cost has been paid upfront to the seller of the property

What are the repayment period options?

Repayment period options range generally from 5 to 20 years.

Can one repay the loan ahead of schedule?

It is possible for one to repay a loan ahead of schedule. A form of a penalty termed as pre-payment penalty may be payable to institutions.

How does one get tax benefit on the loan?

There is eligibility for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. Moreover, you can get added tax benefits under Sec 88 on repayment of principal amount

What is meant by PRE-EMI Interest?

From the first disbursement to the last disbursement, the interest amount charged by a HFI is called PRE-EMI Interest.

What is meant by an EMI (Equated Monthly Installments) and when does it start?

An EMI is the monthly amount to be repaid to the bank or financial institutions against a loan amount borrowed for a fixed period of time. An EMI has two components, viz., principal component and interest component. Upon disbursement of the entire loan sanctioned, EMI will start..

What is meant by Principal amount?

The loan amount disbursed is meant by principal amount.

What is meant by an EMI (Equated Monthly Installments) and when does it start?

An EMI is the monthly amount to be repaid to the bank or financial institutions against a loan amount borrowed for a fixed period of time. An EMI has two components, viz., principal component and interest component. Upon disbursement of the entire loan sanctioned, EMI will start..

What is a fixed interest rate?

Fixed rate of interest means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit if rates of interest drop in the market. However, if the rates of interest goes higher than the rate fixed for the term, you stand to benefit.

What is a Floating Interest Rate?

A loan taken on a floating interest rate is a loan where the interest rate payable is linked to the market rate. E.g. the Bank lending rate.

What are the other costs that usually accompany a home loan?

Home loans are usually accompanied by the following extra costs:

•  Processing Charge: It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. One time fee.

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

•   Miscellaneous Costs: It is quite possible that some lenders may levy a documentation or consultancy charges.

•   Registration of mortgage deed.