Facts about Home Loan
What is a Home Loan?
A wide range of schemes is available in the home loan, which one can avail as per one’s needs. The interest rates on Home loans starts from 6.90% per annum, which makes them quite affordable. These loans are beneficial for people who want to own a house but are lacking in finances. Many private banks and NBFCs offer this loan at less cost. The loan disbursal takes 3 to 4 working days.
Additional Charges in home loans:
Some miscellaneous charges are involved in home loan approval as-
Application fee- A negligible amount is charged as an application fee for loan disbursal. Processing fee- It covers the cost of loan disbursal amount where 0.50% of the loan amount with GST is charged.
Foreclosure charges- These charges are mostly levied. A small amount is charged as the loan is completed before the term period.
Repayment penalties- These are the sum of money charged when the borrower fails a repayment or missed repayments. These are also applicable when the borrower wants to extend his/her loan term. These are common charges imposed, whereas there are other charges, such as switching costs, CERSAI charges, EMI bounce charges, etc.
Do you need collateral in a Home Loan?
As in mortgage loans, one has to keep something as collateral to avail the colossal loan amount as liquid cash. The mortgages have to be a valuable asset that acts as a security towards the loan. Due to this asset, fewer interest rates are incurred on the loans. In Home Loan, the applicant doesn’t need to keep anything as collateral as the property itself as an asset for the banks or lending institutions or NBFcs. The loan amount of upto 90% value of the property is obtained as a loan amount. The bank has the authority over the house until the debt has been cleared off.
Thus, you've to determine how much money you'll require, and you also need to know how much you'll be able to borrow. Lenders and banks evaluate the amount of house loan you are qualified for based on various variables, including your wage, repayment ability, age (to calculate how many years you have till retirement), savings history, and credit history, among others. Home Loan EMI Calculator can help estimate the EMIs for repayment of the debt.
What are the tax advantages of a house loan?One of the significant parts of receiving a house loan is the tax benefits. If you get a home loan for a residence you intend to reside in (a self-occupied property, or SOP), you will get the following tax breaks:
i. You can repay up to Rs. 1 lakh in principle every year under Section 80C.
ii. Interest payments of up to Rs. 1.50 lakhs are made every fiscal year (which is considered negative income and deducted from total gross income).
Equity in Home Loans:
A Bank of India Home Loan is a loan obtained to purchase a liveable property or residential home or its construction, renovation or expansion purposes. If you are not a first-time home buyer and already own a home, you may be eligible to utilise its worth as a deposit if you wish to refinance your mortgage or buy a second house as an investment. Your equity is the current market worth of your home; less the mortgage owed on it. If your house is in a location where property values have grown in recent years, you may find it difficult to sell.
This might be useful if you first purchased your house with a modest deposit and had to pay Lenders Mortgage Insurance(LMI), if you refinance and have more than 20% equity available, you will not be charged for LMI a second time. If you are buying a second home as an investment, you may only be able to utilise a certain portion of the equity in your first house as a deposit. Also, bear in mind that there are hazards to this technique since you might lose both if you can't afford the payments on one home.
