No matter how well enough you have saved to pay for the price of the property, there are chances that you may fall short of money. In this situation, banks and non-banking financial companies offer loans in the form of a housing loan.
Why Buying a Home Is Better than Renting?
Home Sweet Home! That’s what we all want, right? Home Loan is a Secured Loan offered against the security of a house/property which is funded by the bank’s loan, the property could be a personal property or a commercial one. There are also certain tax benefits available on your home loan under the Section 80C/80EE of Income Tax Act.Primarily, there are two types of home loans based on the interest rate- floating and fixed. In case of fixed rate loan, the interest rate doesn’t change with market fluctuations and is usually capped at 1-2.5% higher than floating rate home loan. Whereas, floating interest loan varies as per the market conditions.The borrower can avail home loan from banks or financial institutions either for purchase of a new house from builder or a house meant for resale or for construction of house or for extension of an existing house.
Some of the financial institutes offer pure Fixed interest rate that remains fixed for the entire tenure of loan or for certain period. Nowadays, some lenders offer Dual Rate where the interest rate remains fixed for certain tenure like 1- 10 years and then gets converted to floating rate of interest.
In Floating rate, the interest rate fluctuates with market conditions. The rate of interest is tied up with the Base Rate (BR) of the bank or Prime Lending Rate (PLR) of the Housing Finance Companies and gets affected whenever there are changes in the Repo Rates announced by RBI or any changes in Base Rate / PLR of the lender.
As per norms, all the banks and NBFCs finance 80% to 90%of the agreement value of the property. As per RBI circular, banks do not fund Stamp Duty and Registration Charges anymore.
The final loan amount is dependent on the factors like income and regular outgoings, existing loans, repayment track record, valuation of the property by the bank or lender etc.
To increase the eligibility amount, you can add the earning of your parents / spouse / children and in some cases, earning of brothers, as co-borrowers to the loan or your rental incomes etc.