When can I make an application?
You can make an application at any time after you have decided to acquire/construct a property, even if the property has not been selected or the construction has not commenced.
How do I make an application?
One needs to submit the application form along with the necessary documents. On receipt of your application, the housing finance company will review it, ask questions wherever necessary and convey its decision to you.
What is the maximum I can borrow?
The maximum amount that one can borrow is a function of many factors, which include the purpose of the loan, whether for purchase of property, or improvement or purchase of land for development.
In addition, one's residential status whether resident Indian or non-resident Indian will also have a bearing on the maximum quantum of loan that one can borrow.
Typically, if one is a Resident Indian, then he can borrow upto 85% of the cost of the property, including cost of land, subject to a maximum of Rs 5,000,000.
How is my loan eligibility determined?
Your repayment capacity is determined by taking into consideration factors such as income, age, qualifications, number of dependants, spouse’s income, assets, liabilities, stability and continuity of occupation and savings history.
The primary concern of housing finance companies in determining the loan eligibility is that you are comfortably able to repay the amount you borrow.
What are the fees and charges payable and when are they payable?
Housing finance companies charge fees at the time of application (generally called processing fee) and at the time of loan sanction (termed as administrative fees).
The processing fee could range between 0.8% to of the loan amount applied for, and is generally levied to cover the costs incidental to the application.
Once the loan is sanctioned, an administrative fee of 1% of the loan amount sanctioned will have to be paid.
It should be noted that both the processing fees and administration fees are payable upfront.
What is the rate of interest that will be charged on my loan?
The rate of interest is a function of the quantum of loan sanctioned. Interest rates are applied as per pre-determined slab rates.
For example, HDFC’s interest rates are applicable as;
Loan amount (Rs) Interest rate Upto Rs 10,000,000 13.0% pa
Though interest rates for housing finance are not very volatile, one may well be advised to look out for indication of any rate increases or decreases to finalise the timing and amount of loan.
What are the documents required at the time of application?
Each housing finance company has its own list of documents that one must submit at the time of application.
Who can be co-applicants?
Proposed owners of the property, in respect of which you are seeking financial assistance, have to necessarily be co-applicants. However all co-applicants need not be co-owners.
What is the maximum period over which I can pay the loan?
The maximum duration of period of the loan is a function of your residential status and varies for every housing company, and is also different for every scheme.
As a resident Indian, you could avail of a loan for duration of 5 years to 20 years. As a non-resident, you can avail of a loan only for a maximum period of 7 years.
What is the EMI?
EMI or Equated Monthly Instalments, refers to the fixed sum of money that you will be paying to the housing finance company every month.
The EMI comprises both interest and principal repayment. The size of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan.
What security do I have to provide?
Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary. Interim security may be required if the property is under construction. Collateral could be in the form of life insurance policies, the surrender value of which should be equal to the loan amount, guarantees from sound and reliable guarantors, pledge of shares and such other investments that are acceptable to the housing finance company.
When can I take disbursement of the loan?
You can take disbursement of the loan after the property has been technically appraised, all legal documentation has been completed and you have invested your own contribution in full. Your contribution is the total cost of the property less the loan amount
In how many instalments can the loan be disbursed?
The loan will be disbursed in full or in suitable instalments (normally not exceeding 3) taking into account the requirement of funds and progress of construction, as assessed by the housing finance company.
Can I repay my loan ahead of schedule?
Yes, you can pay your loan ahead of schedule. However, it must be noted that housing finance companies charge a fee for early redemption of loan. This fee can vary between 1-2% of the loan amount being prepaid.
Do I get a tax benefit on the loan?
Yes, you are eligible for tax benefits on the principal and interest components of the loan under the Income Tax Act, 1961. As the benefits could vary each year, please check out the current benefits available.
Does the agreement for sale have to be registered?
In many states in India, the Agreement for Sale between the builder and the purchaser is required by law to be registered. You are advised, in your own interest to lodge the Agreement for Sale at the office of the Sub-registrar appointed by the State Government under the Indian Registration Act, 1908
Does the property have to be insured?
You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, as required by the HFC during the period of the loan and will have to produce evidence each year and/or whenever required by the HFC. The HFC will be the beneficiary of the insurance policy. This is an added cost that will add to the final cost of purchase of the property.