Banks/ HFCs determine Loan eligibility based on following:
Although Banks have more or less the same norms for calculation of Eligible Loan amounts, depending upon risk profile of individual client, Banks internal risk guidelines Loan amount offered by different Banks may differ. Banks' main concern would be to judge whether applicant would be in position to service the loan regularly.
Home Loans are generally offered for maximum period of 20 years depending upon the age of applicants. Some Banks offer even higher tenor of 25 years. Home Loans to certain category of borrowers may be however restricted to maximum 15 years.
As such there is no limit on minimum & maximum amount of Home Loan. However most Banks stipulate minimum Rs.5.00 lakhs as it may not be economical for them to process applications for amounts lower than that. There is no upper limit for Home Loan, its depends on property value and your eligibility.
Banks/ HFCs are governed by RBI guidelines and are required to restrict maximum loan amount to 75-80% of Cost of Property.
Floating Rate Home Loans are the ones wherein the Rate of Interest is linked to the Base Rate (Reference Rate) of the Bank (NBFC). All banks are required to declare their Base rates below which Banks are not allowed to lend. Floating Rate Loans are linked Base Rate of Bank + Banks Margin. For example, Home Loan Floating rate of 11.00% is indicated as Base Rate of 10.00% + Margin of 1.00% above Base Rate = 11.00%. As the Bank alters its Base Rate from 10.00% to 9.00%, the applicable Rate changes from 11.00% to 10.00% in this example.
Generally most of the Banks are offering Home Loans at Floating Rates as it gives them flexibility to alter the rate of interest as per their cost of funds. More than 80% of Banks' Portfolio is on the Floating Rate regime.
In case of Fixed Rate Home Loans, The Rate of interest remains fixed over the period of loan. Many Banks also offer Fixed Rates over limited period i.e say 1 year, 3 years or 5 years, instead of entire period fixed rate loans.
In case of Fixed Rate Home Loans, applicants do not stand to get the benefit of lower rate of interests prevailing in the market whereas in Case of Floating Rate Home Loan applicants gains when the Rate of Interest is headed lower in the market.
The processing fee is either a fixed amount not linked to the loan or it may be a percentage of the loan amount. The loan amount received by you can be less than the processing fee. And as for the administrative fee, 1% of the loan amount sanctioned will have to be paid. Both the processing fees and administration fees are payable upfront.
Home Loans may also be accompanied by the following extra costs:
One has to bring in his own margin/ contribution towards the total cost of property. Prevailing norms indicate Banks finance anywhere between 75-85% of Cost of Property, meaning owner's being between 15-25%.
Banks accept certain relationship matrix. As such Husband Wife, Wife-Husband, Son-Father, Son-Mother are few of the acceptable relationship matrix. It may be noted that all co-owners of property need to be co-applicants in the Home Loan, but all co-applicants need not be co-owners in the Property.
All major banks/HFCs offer complete freedom for early prepayment of Home Loan. However minimum Part payment amount per tranche may be different from Bank to Bank. Early Prepayment of Floating Rate Home Loan with most of the Banks invariably without any pre-closure charges. Also Banks generally do not charge any fees on part prepayment as well.
Clients are eligible for tax benefits on the principal and interest components of the loan under the Income Tax Act, 1961. However as the benefits could vary each year, do check out the current benefits available. As per presently prevalent IT Rules, Interest paid on Home Loan upto Rs.150,000/- is eligible for deduction from Taxable Income and Principal Repayment is eligible u/s 80C of Income Tax Act.
Majority of Banks do finance NRIs for Home Loan only. For the reasons of local contact, Banks stipulate that a blood relative who is not NRI, be given Power of Attorney by the NRI applicant. Banks may call for Credit Report from the Local Banks/ agencies like TransUnion in USA to ascertain credit worthiness of the applicant.
More or less similar procedure is followed for person working with Shipping Company. Banks/ HFCs insist on Continuous Discharge Certificate to be produced for verifying continuity of employment in case of Persons working with Shipping Companies.
Real Value Consultants specializes in serving NRIs & we take pride in having completed NRI Home Loan applications of more than Rs.50 cr till date.
LAP can be availed by anyone who is salaried or self employed person.
Although actual list of documents may vary from Bank to Bank, certain basic documents are listed below:
For Salaried Individuals
For Self Employed
Generally following factors determine eligible amount
Basic Difference is the end use of both the loans, Home Loans are essentially end used for purchase of residential Property ,whereas in case of LAP/ LRD , end use can be anything. In LAP /LRD the applicant is in possession of the subject property.
Processing of application may normally take 7-10 working days. However the actual time may vary depending upon Borrower profile, documentation etc.
Yes, All Banks insist on having a duly stamped and registered Lease Agreement stating all the terms like Period of Lease, Lock In Period, Amount of Lease, Frequency of lease payment, Deposit amount, address of property, other outgoes like property tax, maintenance etc.
Many Banks do finance LAP / LRD against properties which are on long lease, especially if the lease is with Development Authority like MIDC/ TNIDC etc. The lease agreement should allow security creation by way of mortgage. In case of LRD, the lease agreement should additionally allow sub-lease of property.
Yes, Banks levy prepayment charges of upto 2% to 4% in case of prepayment of LAP/ LRD facilities.
You can certainly Transfer your existing LAP/LRD loan to a new Bank. While doing so, please bear in mind, are you getting either of the below benefits: