So you want to purchase a new house, but don’t have the resources. Borrowing such a large amount of money even from your close relatives or friends is something that might put you in an awkward situation. Don’t worry! There are plenty of banks, financial institutes and non-banking financial institutes which offer a variety of housing financial requirements.
However, there are of course many different factors that need to be kept in mind regarding home loans, other than the fact that a person first needs to be ‘eligible’ to obtain the loan in the first place. Basically monetary assistance that is offered by financial or even non-banking institutes so as to help a person in the purchase of their home is known as a home loan. While the loan that is offered cover up to 85% of the requirement (overall cost of the property), the property itself stands as a form of security until a person re-pays the entire loan amount along with the interest.
7 important factors that a person should keep in mind regarding housing loans include:
1) Eligibility: Did you know not everyone is eligible for these loans? In other words, loan amounts of high value can only be given to those people who have it within their means to re-finance the borrowed money. Lenders determine whether they can provide the loan to the person only after examining certain key factors such as his income level, financial stability, etc. It is easy to find out one’s eligibility by making use of online tools such as the Housing Loan Emi Calculator‘ wherein a person has to enter in key information to find out his eligibility. It also plays an important role in determining the amount of EMI a person has to pay.
2) Application: Once a person is eligible, his/her application is the next step. Whether online or offline a person has to fill in an initial statement of his/her personal and financial information that is required to apply for the loan. These forms can be found online where they can be downloaded or can be physically filled in by visiting the bank branch.
3) Documents: Submitting documents is a mandatory step when availing home loans. The bank may require many different official documents such as income tax returns, copy of PAN card, last six month’s bank statement, proof of identity, form 16 for the last 3 years (for salaried persons), salary certificates, proof of address, passport size photographs of the applicant, etc.
4) Loan Margin: A loan that is given to an applicant will be a percentage of the total value of the property. Depending on this amount, there will be a service tax that will be charged (as a percentage).
5) Tax Benefits: According to the Income Tax Act, people can also benefit from tax deductions on their home loans. This has been mentioned under Section 24, Section 80C & Section 80EE (inserted by Budget 2013)
6) Interest Rate: Varying from bank/financial institute the different interest rates will vary and also through certain periods. One of the key factors home loan seekers look at, the interest rate plays a pivotal role in determining whether one will avail a particular loan or not.
7) Is pre-payment option available? Is there a penalty involved? : Very often, it is wise to know if you can make any pre-payment (early repayment) so as to take advantage of lower interest rates. Based on the lender, it is also important to find out if any penalties are charged in case you transfer your loan or even close your account before maturity.