What are the different interest rate options available to a home loan prospect?
1. Adjustable Rate Home Loans
2. Fixed Rate
Can a HFC assist me in selecting accommodation of my choice?
Prominent HFC's like HDFC, ICICI can assist you in finding the property of your choice.
What are the documents that one needs to be prepared with for a loan to be approved?
Common documents required for the following categories – Salaried customers | Self employed professionals | Self employed businessmen.
1. Application form with photographs
2. Identity and residence proof specific documents that would be required.
What is an EMI
Repayment of a loan is done in Equated Monthly Installments (EMIs) - this amount is paid every month to the HFC from which the loan is taken.
EMI would comprise an amount towards repayment of the principal taken and the calculated interest component. Payment of EMI would start from the month after the month in which the full disbursement of home loan is done.
What is Pre-EMI?
Pending final disbursement of the home loan, one has to pay interest on the portion of the loan disbursed until that point in time. This interest is called Pre-EMI. This is payable every month from the date of each disbursement till the date of commencement of EMI.
What is Tranche Based EMI payment?
To enable customers to save on the Pre-EMI interest on a home loan taken, certain banks provide a Tranche Based EMI payment. For under construction properties customers can choose the installments they wish to pay, till the time the property is ready for possession. Anything paid over and above the interest by the customer goes towards Principal repayment.Customers benefits by commencing payment of the EMI and hence close the home loan/ mortgage early.
What is RPLR (Retail Prime Lending Rate)?
Housing finance companies benchmark their Floating/ Adjustable rate home loans against a set retail prime lending rate (RPLR) which, in turn, is dependent on the HFC's cost of borrowings. What this means is that whenever there is a change in the company's cost of funds (be it an upward or downward revision), RPLR is adjusted accordingly.
Can one repay a home loan ahead of schedule?
Yes, one can pay back a home loan taken ahead of schedule. This is normally done by paying back the home loan in lump sum amounts which would in turn offset the principal taken and reduce the EMI to be paid back.
For example – HDFC enables customers repay home loans ahead of schedule by payment of lump sum amounts or opt to choose the accelerated repayment scheme. There are NO charges for choosing an accelerated repayment scheme and for lump sum payments under Adjustable Rate Home Loan with HDFC.
Adjustable Rate Home Loan [ARHL]
If a prepayment is made within 3 years of the first disbursement, under Adjustable Rate Home Loan (ARHL) option early redemption charges of 2% of the amount being prepaid is payable if the amount being repaid is more than 25% of the opening balance.
Fixed Rate Home Loan [FRHL]
Redemption charges of 2% of the amount being prepaid is payable if the amount being repaid is more than 25% of the opening balance. In case of commercial refinance under both the FRHL and ARHL an early redemption charge of 2% is payable. You may be required to submit copies of your Bank Statements or any other documents that HDFC deems necessary to verify the source of prepayment.
Does one get a tax benefit on the home loan taken?
Resident Indians are eligible for certain tax benefits on both principal and interest components of a home loan under the Income Tax Act, 1961. Interest repayment of Rs. 1,50,000 p.a. can get you a tax saving upto about Rs. 50,490 p.a. One can get added tax benefits under Sec 80 C on repayment of principal amount up to Rs. 100,000 p.a. that can further reduce your tax liability by about Rs. 33,660 p.a.
What security has to be provided which one avails a home loan?
A first mortgage of the property to be financed will be a mandatory security requirement from the HFC; this is normally done by way of deposit of title deeds and/or such other collateral security pertaining to the same that may be necessary. Interim security may be additionally required, if the property is under construction. Collateral or interim security could be assignment life insurance policies, the surrender value of which is at least equal to the loan amount, guarantees from sound and solvent guarantors, pledge of shares and such other investments that are acceptable to HFC's.
What definite checks are to be taken by a person looking to purchase a property?
Do ensure that the title to the property is clear, marketable and free from encumbrance. To elaborate, there should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely.
Will HFC's finance persons of Indian origin holding foreign passports?
As per current guidelines of the Reserve Bank of India persons of Indian origin holding foreign passports are eligible for loans with HFC
How is a home loan reassessed on change in status from Non-Resident Indian to Resident Indian?
The repayment capacity of the applicant(s) based on Resident status is reassessed by the HFC and a revised repayment schedule worked out. The new rate of interest will be as per the currently applicable rate of Resident Indian loans (for that specific loan product).