Frequently asked questions

For which purpose I can get a Home Loan?

Home loan can be availed for purchasing a new flat, resale flat, plot with plan to construct home, new house or a row house. You can apply for a Home Loan for any of this purposes

I am a private employee? Can a bank provide me a Home Loan?

A Bank provides loan considering the income of the person, capacity to pay the EMI and value of the Security which is the Home you are purchasing by the Bank Loan. Any person, may he/she be private employee/Govt Employee/Self Employed or Businessman, fulfils the criteria of income and repayment capacity, he/she may apply for a home loan.

A bank gives loan based on your income so that you can repay the loan by regularly paying the equated monthly instalments ("EMI") . This is normally called "Repaying Capacity" of a borrower. A specific portion of the salary/business income a portion is required to live and other portion you can afford to pay the EMI.

What documents are needed to get a Home Loan?

Salaried:

Last Six Months Salary Slips
Last three years Form 16
Last three years ITR
Employment verification documents such as ID Card/Employment Letter
Bank Account Statement of last one year showing salary credit
Support for ITR Verification

Businessman/Self Employed:

Proof of business such as GST, Udyam Aadhar, Rent Agreement
Electricity Bill of the Place of Business
Last three years ITR
Bank Account Statement of last one year showing business transactions
Support for ITR Verification

Other Mandatory Documents:

Agreement for Sale/Sale Deed
Original Payment receipts
Proof of payments already made to dealer
TDS certificate if TDS has been paid
NOC for Mortgage from Builder/Society (After Sanction)

How Banks charge Rate of Interest?

Banks decide Rate of Interest on Floating basis. The Rate of Interest will be the sum of Benchmark rate plus additional rate. Banks are free to choose the the benchmark rate. But in most cases banks choose the repo rate of Reserve Bank of India as benchmark rate. The additional amount of interest is normally based on CIBIL score. Let us understand with an example

For Example, ABC Bank offers the Home Loan Rate of Interest to different customers having different CIBIL score as mentioned below :

CIBIL-Personal Score of 760 and above:
Repo Rate (6.50%) + additional rate (2.75%)+ CIBIL score factor (-0.60%) = 8.65%

CIBIL-Personal Score between 725 to 759:
Repo Rate (6.50%) + additional rate (2.75%)+ CIBIL score factor (-0.50%) = 8.75%

CIBIL-Personal Score between 675 to 759:
Repo Rate (6.50%) + additional rate (2.75%)+ CIBIL score factor (-0.40%) = 8.85%

CIBIL-Personal Score is -1 and 0
Repo Rate (6.50%) + additional rate (2.75%)+ CIBIL score factor (-0.30%) =8.95%

CIBIL score below 675 are normally not considered or if considered, the customer is charged exceptionally high rate of interest. Please contact the Bank directly to know the rate of interest being charged by the bank.

How to know the Monthly EMI to be charged by the Banks?

You can easily calculate how much amount you will pay monthly towards your equated monthly instalments ("EMI") of your Housing Loan you wish to take from a Bank or any finance company. By remaining at Home, you can know to know your EMI if you have three components ready after going through the above steps mentioned in our website:

• Loan Amount you wish to avail

• Rate of Interest to be charged by the Bank

• Tenure upto how many year you want to repay the loan
  
  Here are the links of EMI Calculators of some reputed banks:
  
  State Bank of India: https://homeloans.sbi/calculators
  
  ICICI Bank: https://www.icicibank.com/calculator/home-loan-emi-calculator
  
  Bank of India: https://bankofindia.co.in/emi-calculator
  
  HDFC Bank: https://www.hdfcbank.com/personal/tools-and-calculators/home-loan-calculator
  
  Please contact the Bank directly to know the rate of interest being charged by the bank.

What are the other steps banks take before sanction of a Home Loan

Due Diligence is the process to know a customer more before providing a loan to a customer. If your are an existing customer of the Bank since many years and you have been banking with KYC complied accounts, banks trust you and do not initiate due diligence process. If you are new to the bank, then the banker conducts due diligence before proceeding for sanction of the loan. The normal questions of due diligence are as mentioned below:

• Verification of residence by making visit, obtaining family information, age, marital status, period of current stay at his residence & third party reference to confirm about the customer. Electricity bill of the residence is obtained to confirm owned or rented. If rented, rent agreement is generally requested by the bankers.

• Verification of employment by making visit of office or place of business. Confirm the designation form HR and references. Collects ID Card/Appointment Letter in case of salaried employee and collects Business information such as Udham Aadhar/GST/Govt. Licenses to verify the establishment. Electricity Bill of the Business place is obtained to confirm the place of business is owned or rented. If rented, rent agreement is generally requested by the bankers.

• Verification of Property - The other part of due-diligence remains with identification/verification of the house/flat to be purchased. The property details are normally verified with the public records available with sub-registrars. The property is visited and details of the property is recorded while processing.

• Title Search Report - Eery Banker conducts its own Title Search through their empanelled advocate. The advocate conducts a detailed search on the property normally of last 30 years to confirm if any other charges are there so that the ownership can be claimed by some person.

• Valuation Report - Every Bank conducts fresh valuation of the property before sanction of the loan. The valuation normally consists of Market Value, Govt Value and Distress Value of the property.

• CERSAI Check - CERSAI play very important role in creating Bank's right/charge on the property of the customer. Since 2016, Govt has made CERSAI compulsory for all Banks so that claim can be recorded. Hence Banks carry our check of CERSAI website before processing

• Income Tax Return (ITR) Verification: The most important criteria is to decide the eligibility is income. Hence Income has to be perfectly analysed before sanction. Hence Banks normally insist for ITR verification through the customer or through customer's Chartared Accountant.

• IT Form 16 : Incase of salaried employee, Form 16 is normally mandatory. Customer has to submit form 16. However in some cases customers cannot submit form 16. In those cases, Banks take accommodation based on the genuinely of the justifications. THese are verified from income tax website.

• CIBIL Report - CIBIL report is generated for each applicant. CIBIL score decides the loan rate of interest. We have already discussed in the earlier paragraphs explaining how the rate of interest is linked to CIBIL Score.

• Number of Houses in the applicant's name: Customer is asked about the present loan is being taken for purchase of his First House/Second House/Third House or Fourth House.

  The comprehensive report is prepared should contain necessary information such as personal data of self and family members, residential information, employment/ business information, confirmation from references and all other aspects as discussed above. The due diligence process plays a very important role.

What are the other charges I need to pay to the Bank for getting the loan?

Customers always worried about the charges to be paid for availing a Housing Loan. The major amount of charges goes in Govt Fees.

On receipt of Home Loan application, the Bank carries certain formalities for which customer has to bear the charges. We have illustrated below about the charges:

• Title Search Report of the Property whose papers to be deposited at the Bank. Bank does this to confirm some other person has already not availed loan against this property. It costs approximately Rs. 6,000.00

• Valuation Report of the Property is taken to know the market value, distress value & Govt Value of the property to get an assessment of quantum of loan. It costs approximately Rs. 4000.00

• Stamp-duty of 0.3% of the loan mount required during creation of mortgage after submission of papers (In Mumbai. It differs form state to state)

• Registration of the charge with SRO costs 0.5% of the loan amount or Rs, 15, 100.00 (In Mumbai. It differs form state to state)

• Proposal Processing charges costs 0.25 % of the sanctioned amount. In normal circumstances the Proposal Processing Charges are not taken beyond Rs. 20,000.00 (Differs from Bank to Bank)

• For safety of the Flat/House, all customers are told to purchase insurance which is mandatory. Additional charges for Insurance after possession is handed over.

How much Loan I can get considering the value of the property?

It differs from Bank to Bank. For Example, ABC Bank can provide loans as per the details given below:

All Metro Cities/All State Capitals/All Cities & Towns having big malls and airports - Rs. 750 Lacs
All other places - Rs. 500 Lacs

Till what age a person can get Housing Loan ("Repayment Period")

As a normal practice, Banks consider the repayment period upto the age of 60 till the date of retirement. However, the repayment can be increased upto age of 70 years, if the Bank satisfies the income source and repaying capacity of a person. The normal repayment period remains 300 EMIs i.e. 25 years. However the same can be decreased and increased by the Bank if found the borrower have the proper justifications about the repaying repaying capacity.

How much I have to pay and How much Bank will give me loan towards the total cost of the property?

Borrower’s contribution (“Margin”): A bank does not give 100% loans of the cost of the flat/house to be purchased. A certain percentage amount of the total cost has to be brought by a person who is desiring to avail a housing loan. The percentage depends upon the quantum of the loan he is availing. This maximum amount is called loan-to-value ratio (LTV) which determines the maximum amount of a housing loan can be given based on the market value of the asset.

If the Housing Loan Upto Rs.30 lac, customer can avail upto 90% of the cost of the flat or house. The borrower has to arrange his own contribution called “margin” amount of remaining 10%.

For example, if the total cost of the flat or house is approx Rs. 33 lacs, Rs. 29.70 lacs can be availed in the form of housing loan and 10% of Rs. 33 Lacs i.e. Rs. 3.30 Lacs has to be paid by the customer. This is for illustration purpose only and in this way it is calculated for other percentage of borrower’s contributions of 20% and 25% in case the loan amount is more.

If the Housing Loan Above Rs.30 lac and Upto Rs.75 lac, customer can avail upto 80% of the cost of the flat or house. The borrower has to arrange his own contribution amount of remaining 20%.

If the Housing Loan Above Rs.75 lac, customer can avail upto 75% of the cost of the flat or house. The borrower has to arrange his own contribution amount of remaining 25%.

Charges e.g. stamp duty, registration charges and other documentation charges shall be borne by the borrower and shall not be considered towards margin money. However such charges may be added to the cost of the house/dwelling unit for the purpose of calculating LTV ratio in cases where the cost of the house/dwelling unit does not exceed Rs.10 lakh.

How many days a Bank does take to sanction my loan after submission of all documents from my side?

It depends upon the quantum of the loan you are applying. If the amount is more then the approval lies with the higher controlling authority. Hence, the amount of the loan play a crucial loan for timeline of the loan sanction process. It also differs from Bank to Bank.

For Example:

If the loan amount is within Rs. 1 Crore, it may get sanctioned maximum within one weeks after all formalities are completed.
If the loan amount is 1 Crore to 5 Crore, it may get sanctioned maximum within one-two weeks after all formalities are completed.
If the loan amount is beyond 5 Core, it may cross two weeks to get the sanction.

What is the process after sanction of the loan?

After the loan is sanctioned, the Bank intimates you to come with the original documents to deposit at the Bank. You need to get NOC from the Society or the Builder to deposit the Title Deed for crating a mortgage. Mortgage means Bank creates right on your property. It provides the authority to the Bank to sell your property in case you do not repay the loan.

You have to visit the Bank with the Loan Documents, Demand from the Builder of Seller, Receipt of the payment which you have already paid to the builder/Seller, TDS Certificate for the TDS remitted towards selling of the property and Title Deeds to deposit the original title. You have to pay the necessary Charges to the Bank. You sign all necessary legal documents of the loan. Upon receipt of the Original Documents and Charges, Bank opens an account in your name. Then Bank makes disbursement of the loan as per the demand letter to the builder or the seller.

The builder need to 4 years to handover me the possession the flat as it is under construction. Does the bank remits the entire amount of final cost of the flat at a time?

No. Bank will make the disbursement as per the demand letter of the builder. Bank will also release the payment after verification of the construction level by inspection and after receiving certification from an architect that the certain portion of the construction is completed. Then only Bank honours the demand of the builder. The disbursement will be made phase wise as per the demand letter/cost sheet of the builder.

My flat is ready to be handed over. The builder/seller will give me the possession after receiving the final amount. Did the Bank disburse the entire amount.

Yes. If the Builder has completed all the constructions and got Occupancy Certificate (OC), you may request the banker to get the entire amount disbursed to the builder/seller.

Will I be charged interest on the entire amount in case of under construction flat when phase wise disbursement is being done?

No. Bank charges the interest on the outstanding amount on the loan means the amount which has been disbursed not the entire sanctioned amount. For Example, The sanctioned amount is Rs. 1 Crore which is to be disbursed in 3 years in 5 phases. Presently the loan 20 lakhs have been disbursed in 1st phase. You have to pay interest of the 20 lakhs till the next phase of disbursement occurs. Say after six months again 10 lakhs have been disbursed in 2nd phase, you have to pay the interest on the 10 lakhs plus easier 20 lakhs from the date of second disbursement occurs.

I cannot pay EMI/Interest till the builder handover me the possession? Is there any option available to avail the "Holiday Period"?

There are two options of getting a "Holiday Period". It is also called "Moratorium Period".

Holiday Period with payment of Interest: Almost all Banks have the option to provide Holiday Period/Moratorium Period with payment of interest on the outstanding amount till the handover of possession from the builder is completed. It is much beneficial, because you need to pay only interest on the disbursed amount and EMI does not get started till the handover of possession gets completed.

Holiday Period without payment of Interest: Some banks offer Holiday Period/Moratorium Period to you, without you pay a single rupee till the possession is completed. These are very exceptional cases. In these cases, banks calculate the interest and keep adding to the loan amount. Once possession from the builder is completed, a new EMI is calculated on the entire amount i.e. outstanding amount plus interest amount.

For Example: Say interest amount at the end of the 3 years is 20 lakh. The new amount will be 1 Crore plus 20 lakhs i.e. 1,20,00,000.00. A new EMI is calculated on the entire amount of Rs. 1.20 Core on the remaining period.

Remaining period means, Say the Housing Loan is sanctioned for 25 years. Holiday Period/Moratorium Period is for three years completed. Leftover period is 22 years. Hence EMI of 1.20 Core is calculated for 22 years.

These are very complex calculations. Bankers have to be convinced fully to provide moratorium period /Holiday Period to you. On the other hand Moratorium Period/Holiday Period normally becomes costly to you. Because, bank will add the interest on the outstanding amount and adds interest on the total amount. For example, Rs. 30,000 is charged and you are not paying the interest amount. Outstanding before charge of interest 20 lakhs. The total becomes Rs. 20 Lacs plus Rs. 30,000.00 i.e. Rs. 20,30,000.00. The bank will charge interest an entire amount of Rs, 20,30,000.00. Hence, If you can, you should always start paying the regular Interest during moratorium period. It saves a lots of money.

If I get some additional amount as bonus, can I make prepayment of my loan.

Normally Banks charge a fee for prepayment of loans. However some banks, do not charge for prepayment. A little adjustment of Home Loan payment provides a huge relief. I suggest to see these videos to get the maximum benefits. We suggest to watch the following videos which are really helpful.

https://youtu.be/Pgb2z0LG8VE

https://youtu.be/yydb_gBpEA0

How much loan a person can get based on his income?

i. Salaried Employees can get loan upto 72 times of gross monthly salary OR 6 times of gross annual income based on Income Tax Returns;

ii. Self-employed Professionals Doctors, Chartered Accountants/ individuals engaged in Trade/ Commerce/Business, can get 6 times of their gross annual income based on Income Tax Returns.

Out of this eligibility, Banks have their own guidelines which decides how much percentage of the salary should be mandatorily taken to home after all deduction. This is called Net Take Home Pay ("NTHP").

We are giving the following examples adopted by a bank named ABC Bank (for example) to understand the NTHP concept better:

If Gross Monthly Income of a person is upto Rs.1 lac, then 40% NTHP is required after meeting all mandatory payments & deductions from income;

If Gross Monthly Income of a person is over Rs.1 lac to 5 lacs, then 30% NTHP is required after meeting all mandatory payments & deductions from income;

If Gross Monthly Income of a person is over 5 lacs, then 25% NTHP is required after meeting all mandatory payments & deductions from income.