Housing Loans or Home Loans are availed by the
borrowers in order to help them gain monetary benefits
while purchasing a property. Home Loans are generally
considered to be secured loans, as the purchased house acts
as a security or collateral to the loan. Banks often provide
the borrower with a financial margin of up to 80%,
depending on the income and eligibility criteria of the
borrower. Apart from the 80 percent supplied by bank, the
rest has to be arranged by the borrower. Loan borrowers
have to keep in mind the repayment charges which occur
every month called the “Equated Monthly Installments”
(EMI) and whether they can afford to pay this amount on a
monthly basis before availing a loan.
Housing loans gives one an opportunity to purchase a
property without having to pay the whole price of a property
in a single payment. The Home loan interest rates vary from
bank to bank, which is generally based on the loan tenure.
The following are few factors which are very much necessary
to consider before availing a home loan. They include Home
Loans with lower interest rates, low processing fee, and zero
or low prepayment charges.
Home Loans are generally a very important financial
decision, so it is very vital to have a thorough
knowledge on the following aspects:
Effect of Home Loan on one’s personal finance
It is better to have a good idea about the impact of
availing a home loan and its subsequent EMI payments
from a monthly and yearly perspective.
Maximum Loan Eligibility
Banks assess the income criteria based on only those
income heads which can be used to repay the loan
amount; it does not include the salary slip heads which
calculates the net monthly income. For example, banks
do not consider deducted amount of the LTA and
medical allowances in a monthly salary slip.
In the case of higher loan amount, beyond a person’s
eligibility, one can always choose to apply along with an
earning co-applicant. It can either be a spouse or parent.
This helps in increasing the overall loan amount and the
sharing of loans reduces the burden of repayments as well.
Moreover, applying along with co-applicants also helps one
in availing tax benefits on the payment of interest of an
The lower the duration, the higher the EMI amount and
the longer the duration, the lower the EMI amount.
Depending on the capability to repay, one can take a
decision on the number of EMIs to pay. Generally, it starts
with 5 years and can also exceed up to 20 years.
Pre-Payment & Foreclosure Charges
This is the most important aspect to be considered before
going for any loans. Checking for the pre-payment or pre-
closure facility with a zero penalty or penalty of a small
percentage of the principal amount is a must before
choosing your banker. This will help one reduces the
interests’ burden earlier by early repayment of the loan.
Checking the documents to see what we have agreed upon,
the terms & conditions involved, and the various applicable
charges like the processing fees, pre-payment amount, and
late payment fees etc is very important before signing the
Some of the important documents required while applying for a home
loan include income documents, residence proof, age proof, legal
documents, business proof and other legal documents. The borrower
should be clear about his income and repayment capacity, the interests’
rate calculated, monthly EMIs and other kinds of fees that he/she would
have to pay.
Home loans are provided by many renowned banks at more
affordable prices like the Axis Bank, ICICI, Bank of Baroda,
HDFC, SBI, Standard Chartered and Andhra Bank etc.
Many banks generally have a processing fee of 0.5% to 1%.
The interest rates are as follows (as on date):
• HDFC: interest Rate- up to Rs30 lakhs -10.15% and Rs. 30
lakhs & above-10.40%, processing fee – 0.5%, Prepayment
• State Bank of India: interest Rate- up to Rs.30 lakhs-9.95% &
above Rs.30lakhs- 10.10%, processing fee-up to Rs.25lakhs-
0.125% (Rs.1000) & Rs.25 to Rs.75lakhs-Rs.3250 & Rs.
75lakhs and above- Rs5000, Prepayment charges-Nil
• ICICI: interest Rate-10.25% (fixed for first 3years) and
thereafter 10.50%, processing fees-0.5%, Prepayment
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