"Apna Ghar" is a dream of every human being. And it has really become a dream when the prices of property in India are touching sky. Even after saving tons of money after expenses, a simple middle class employee can not think of purchasing home. Contribution from spouse income also can not fulfill the target.
Increasing price and age, problems with landlords, uncertainty in life and job/business, pressure from parents and in-laws - all these factors results in thinking of only one solution - home loan.
But getting home loan seems to be a tedious process. One needs to understand the complete picture of home loan - starting from eligibility factors to repayment of loan.
In this article, we'll discuss about all these factors in details.
Who can apply for Home Loan
- Any individual whether you're a salaried or self-employed with REGULAR source of income. Sudden credit of huge amount in your bank account does not qualify you for home loan.
- A firm can also apply for home loan.
- You must be 21 years of age and co-applicant's, if any, should be 18 years of age.
- Your complete loan EMI must terminate before or at the age of 65 years or retirement age (applicable to Govt. employees), whichever is earlier. The max. age differs from one bank / financial institution to another.
Eligibility to get Home Loan
Apart from age factors and regular source of income, one important factor is the repayment of loan eligibility. Banks generally considers your 40% of net income as eligible for EMI amount. E.g. if your total monthly income is Rs. 1 lac, you can pay Rs.40,000 as an EMI. The rest of the amount is needed by you to cover regular monthly expenses and savings for emergency like medical etc. Your total eligible home loan amount will then be calculated based on the prevailing interest rate, tenure of loan, price of property.
Another point is that banks generally approve 60% -85% of total value of property value, which is on legal papers.
How to search for your dream home
This is the most tedious process and takes lot of time. You must have great patience, time and ability to judge many factors like locality, electricity and water supply, age of building etc.
You can start with asking your friends, relatives and colleagues about possible sale of property in the area in which they are living.
Daily newspaper is full of advertisements which you're looking for
Check out the local property dealers / real estate agents of the area
Contacting builder directly
Checking online property websites
Documents Required to get Home Loan
- Photographs
- Age proof
- PAN card
- Address proof
- Identity Proof
- Aaadhaar card
- Income proof - last 3 years income tax return file
- Education proof
- Bank statements - last 3 years
- Details about the property for which you want to avail loan
- Employment / business details
Charges
All banks charge certain percentage of loan approved as processing fees. This varies from 0.25% - 1% + service tax. Banks keeps on changing this amount, especially near festival seasons.
You must check out other charges, which occurs in due course of time like prepayment charges, charges for late payment, statement of account, documents retrieval charges, income tax certificate etc.
Tax Benefits
You can claim principal repayment amount of a loan for deduction under Sec-80C, upto max. of Rs. 1 lac in a fincnail year. This limits includes all your other investments - life insurance premium, children's school tuition fees, PPF etc.
You can also claim up to Rs. 1,50,000 or the actual interest repaid whichever is lower under Sec 24. But remember, you can claim this interest when and only when you are in possession of the house and not before that.
If your spouse is a co-owner and co-borrower, then both can claim for tax deductions in the ratio of ownership.
Remember, there is no tax benefit for buying a plot.
Some useful links
https://www.cibil.com/home-loan
http://www.icicibank.com/Personal-Banking/loans/home-loan/index.page
http://www.hdfc.com/loans/home-loan.asp
https://www.sbi.co.in/user.htm?action=viewsection&lang=0&id=0,1,20,115