Home Loan Overview

A home loan is a secured loan provided by banks and financial institutions to help individuals purchase, construct, renovate, or extend a residential property. With flexible repayment options, attractive interest rates, and long tenure, home loans are one of the most popular ways to own a house.

Features of a Home Loan

High Loan Amount: Borrowers can avail up to 75%-90% of the property's market value, depending on the lender and property type.

Flexible Repayment Tenure: Home loans generally offer a repayment tenure of 5 to 30 years, allowing borrowers to manage EMIs comfortably.

Affordable Interest Rates: Home loans come with competitive interest rates, which can be fixed or floating.

EMI Calculation: Borrowers can calculate their Equated Monthly Installments (EMIs) using online tools before applying.

Tax Benefits: Borrowers can claim tax deductions under sections 80C and 24(b) of the Income Tax Act for principal and interest repayment, respectively.

Balance Transfer Option: Borrowers can transfer their home loan to another lender offering better interest rates or terms.

Prepayment Option: Many lenders allow partial or full prepayment, helping borrowers reduce the loan burden.

Benefits of a Home Loan

Affordable Home Ownership: Home loans enable individuals to buy a house without exhausting their savings.

Tax Savings: Claiming tax benefits reduces the overall cost of the loan, making it a cost-effective borrowing option.

Low Interest Rates: Compared to personal loans, home loans have significantly lower interest rates, especially for salaried individuals.

Longer Tenure, Lower EMIs: With repayment periods extending up to 30 years, borrowers can enjoy reduced EMI amounts, easing their financial burden.

Capital Appreciation: Property values generally appreciate over time, ensuring the loan serves as an investment.

Enhances Credit Score: Timely repayments of home loans positively impact the borrower’s credit score.

Eligibility Criteria for Home Loans

Age: Most lenders require applicants to be between 21 and 65 years of age at the time of loan maturity.

Income: A stable and sufficient income is crucial. Salaried individuals and self-employed professionals/business owners can apply.

Employment Stability: At least 2-3 years of stable employment or business continuity is usually required.

Credit Score: A credit score of 650 and above is preferred. A higher score improves the chances of approval and better terms.

Property Type: The property should meet the lender's criteria, such as clear titles, legal compliance, and market valuation.

Loan-to-Value (LTV) Ratio: Lenders finance up to 90% of the property value; the borrower must pay the remaining as a down payment.

Documents Required for Home Loans

For Salaried Individuals:

Identity Proof: Aadhaar, PAN, Passport, Voter ID, or Driver’s License.

Address Proof: Utility bills, passport, or rental agreement.

Income Proof: Latest salary slips, Form 16, and bank statements (last 6 months).

Property Documents: Sale agreement, title deed, property tax receipts, and encumbrance certificate.

Employment Proof: Appointment letter and employment continuity proof.

Photographs: Passport-sized photographs.

Credit Report: A copy of the latest credit score or report (if requested by the lender).

For Self-Employed Individuals:

Identity and Address Proof: As mentioned above.

Income Proof:

Income Tax Returns (ITRs) for the last 3 years

Profit and Loss Statement and Balance Sheet.

Business Proof: Certificate of registration or business license.

Bank Statements: Last 6-12 months.

Property Documents: As mentioned above.