Advice

• Registered Development Agreement between the owner of land and the builder, Power of Attorney to the builder from land owner for sale of flats.
• Commencement Certificate granted by Corporation / Nagar Palika.
• Letter of Allotment from private Builder / Housing Board / Society.
• NOC and Transfer Letter from development authority.
• NOC from Private Builder in Bank’s Standard format.
• Tripartite Agreement
• If leased land then Registered Agreement of Lease.

There are a variety of home loans made available by the different finance companies.
a) Home Purchase Loans
b) Home Improvement Loans
c) Home Construction Loans
d) Home Extension Loans
e) Home Conversion Loans
f) Land Purchase Loans
g) Bridge Loans
h) Balance-Transfer Loans
i) Re-finance Loans
j) Stamp Duty Loans
k) Loans to NRI's

An application for home loans can be made any time after you have decided to acquire/construct a property, even if the property has not been selected or the construction has not commenced. An application form along with the necessary documents has to be submitted to the respective finance company after which they would review the application and decide on its status.

The maximum home loan amount one can borrow depends on many factors, which include the purpose of the loan, whether for purchase of property, or improvement or purchase of land for development. Also the residential status of the applicant, whether resident in India or non-resident will also have a bearing on the maximum quantum of loan that one can borrow. Typically, a Resident Indian can borrow up to 85% of the cost of the property, including cost of land, subject to a maximum of Rs 5,000,000.

A Fixed interest rate for Home loans is one where the rate charged by the HFC on the loan amount is constant over the tenure of the loan. A fixed interest rate protects the borrower from a rise in home loan rates. While on the flip side, he may not benefit if the market rates were to fall. Therefore, it is advisable to go in for a fixed rate if you feel that the rate of interests in the market have touched rock bottom and the rates can only move upwards.

A Floating interest rate for home loans is a loan where the interest rate which is payable is linked to the market rate e.g. the bank lending rate. The interest rate payable by you will also rise and fall as per bank lending rates which may fluctuate.

Home loans interest rate in India is usually calculated either on monthly reducing or yearly reducing balance. In the Monthly reducing system, the principal on which you pay interest reduces every month as you pay your EMI. While in the Annual Reducing system the principal is reduced at the end of the year, thus continuing to pay interest on a certain portion of the principal which you have actually paid back to the lender thus making EMI for the monthly reducing system effectively lesser than the second system of calculating interest.

You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, as required by the HFC during the period of the loan and will have to produce evidence each year and/or whenever required by the HFC. The HFC will be the beneficiary of the insurance policy and will be an additional cost that will add to the final cost of purchase of the property.

It is possible to repay a loan ahead of schedule. A form of a penalty termed as a pre-payment penalty is payable to certain institutions which varies from one HFC to another

Collateral securities are the additional securities taken by the HFCs which may be in the form of guarantee from one or two persons, assignment of life insurance policies, deposit of shares and units or other securities. These additional securities are taken so that if a loan is not paid back, recourse may be taken to such securities instead of depending upon the mortgage of the property which is the last resort.

The processing of a home loan application, if the documents are in order takes around 15 to 20 days and it takes another week for the company to check out the property papers and make the disbursement.

• Original sanction letter of financer. • A/c statement of the financer. • Copy of title papers in the name of applicant. • Possession Certificate-where house is complete, and repayment has started. • Detail of Interim security. • Foreclosure letter. • List of documents held by the financing institute. • letter undertaking to issue NOC, from the current lender ban

Valid Residence Proof. • Employment profile for last 5 years. • Copy of passport including page containing visa stamping. • Copy of valid work permit/work contract and Appointment letter. • Proof of Income in case of self employed/ professionals. • Copy of Identity card issued by the employer. • Statement of Overseas Bank account for the last six months which reflects credit of salary, saving etc. • Salary slips for the last 3 months or Tax returns ( if applicable) • Copy of Continuous Discharge Certificate in respect of applicable employed in Merchants Navy. • Power of Attorney, if applicable, in Bank’s standard format duly stamped and notarized /attested by Indian Embassy /Consulate.

• Photocopies of IT returns/ Assessment orders for the last 3 years. • Photocopies of Challans evidencing payment of Advance Income Tax. • Balance Sheet and Profit and loss A/c for the last three yeas (certified true copy) • Proof of Business address. • Business Proof ( Registration Certificate of establishment, Gumasta/Trade License, Sales Tax Registration etc.) • A Photocopy of Certificate of Practice ( If applicable). • A Photocopy of Registration Certificate for deduction of Profession Tax ( if applicable) • TDS Certificate (Form 16 A, if applicable)

• Salary slips for the last 3 months. • Copy of Identity card issued by the employer. • Form 16 or IT returns for the last 2 years. • Employer Certificate, Appointment Letter, Increment Letter, (Duly attested by the employer)

Yes, most banks allow you to repay the loan ahead of schedule by making lump sum payments. However, many banks charge early repayment penalties up to 2-3% of the principal amount outstanding. Prepayment penalty may vary according to the reasons and source of funds - if you obtain a loan from another bank for pre-payment the charges are usually higher than when you pay from your own sources. However, you may credit more than your EMI amount into your loan account on a periodic basis and bring down your interest burden as and when funds are available with you. Most banks do not charge a pre-payment penalty if you deposit more than your EMI payable on a periodic basis. Please check such stipulations while availing the loan.

Borrowers benefit more from a loan that's calculated on a monthly reducing basis than on an annual basis. In case of monthly resets, interest is calculated on the outstanding principal balance for that month. The principal paid is deducted from the opening principal outstanding balance to arrive at the opening principal for the next month and interest is computed on the new, reduced principal outstanding. In case of annual resets, principal paid is adjusted only at the end of the year. Hence, you continue to pay interest on a portion of the principal that has been paid back to the lender

Your bank will assess your repayment capacity while deciding the home loan eligibility. Repayment capacity is based on your monthly disposable / surplus income, (which in turn is based on factors such as total monthly income / surplus less monthly expenses) and other factors like spouse's income, assets, liabilities, stability of income etc. The main concern of the bank is to make sure that you comfortably repay the loan on time and ensure end use. The higher the monthly disposable income, higher will be the amount you will be eligible for loan. Typically a bank assumes that about 55-60 % of your monthly disposable / surplus income is available for repayment of loan. However, some banks calculate the income available for EMI payments based on an individual’s gross income and not on his disposable income. The amount of the loan depends on the tenure of the loan and the rate of interest also as these variables determine your monthly outgo / outflow which in turn depends on your disposable income. Banks generally fix an upper age limit for home loan applicants.

Sometimes loan is disbursed in installments, depending on the stages of completion of the housing project. Pending final disbursement, you may be required to pay interest only on the portion of the loan disbursed. This interest called pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement up to the date of commencement of EMI. However, many banks offer a special facility whereby customers can choose the installments they wish to pay for under construction properties till the time the property is ready for possession. Anything paid over and above the interest by the customer goes towards Principal repayment. The customer benefits by starting EMI payment earlier and hence repays the loan faster. Please check with your banker whether this facility is available before availing of the loan.

The security for a housing loan is typically a first mortgage of the property, normally by way of deposit of title deeds. Banks also sometimes ask for other collateral security as may be necessary. Some banks insist on margin / down payment (borrowers contribution to the creation of an asset) to be maintained / made also. Collateral security assigned to your bank could be life insurance policies, the surrender value of which is set at a certain percentage to the loan amount, guarantees from solvent guarantors, pledge of shares/ securities and investments like KVP/ NSC etc. that are acceptable to your banker. Banks would also require you to ensure that the title to the property is free from any encumbrance. (i.e., there should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely).

The longer the tenure of the loan, the lesser will be your monthly EMI outflow. Shorter tenures mean greater EMI burden, but your loan is repaid faster. If you have a short-term cash flow mismatch, your bank may increase the tenure of the loan, and your EMI burden comes down. But longer tenures mean payment of larger interest towards the loan and make it more expensive.

In addition to all legal documents relating to the property being bought, banks will also ask you to submit Identity and Residence Proof, latest salary slip ( authenticated by the employer and self attested for employees ) and Form 16 ( for business persons/ self-employed ) and last 6 months bank statements / Balance Sheet, as applicable . You also need to submit the completed application form along with your photograph. Loan applications form would give a checklist of documents to be attached with the application. Do not be in a hurry to seal the deal quickly. Please do discuss and seek more information on any waivers in terms and conditions provided by the commercial bank in this regard. For example some banks insist on submission of Life Insurance Policies of the borrower / guarantor equal to the loan amount assigned in favour of the commercial bank. There are usually amount ceilings for this condition which can also be waived by appropriate authority. Please read the fine print of the bank’s scheme carefully and seek clarifications.

Most Housing Finance Companies offer the fixed rate as well as the adjustable rate (Variable – Floating rate) home loan to customers •Fixed rate: where the rate of interest charged by the HFC on the loan is constant over the tenure of the loan. •Variable rate : Commonly known as Floating Rate, where the rate of interest charged by the HFC on the loan keeps changing with respect to the rates in the market over the tenure of the loan.

You repay the loan in Equated Monthly Installments (EMIs) comprising both principal and interest. Repayment by way of EMI starts from the month following the month in which you take full disbursement.