A loan is a sum which a person borrows from a financial
institution or may be from other type of lender with an agreement
to pay back the full amount with addition of some percent of
interest over a mentioned period of time. Loans are usually
guaranteed with assets like a vehicle or home. Until the loan is
paid off, the lender will have a lien on these assets and has the
right to repossess them if the terms of the loan are not met.
WHAT DO YOU MEAN BY HOUSE LOAN?
"Housing Loans are the loans especially made for purchase,
construction, renovation, extension of residential accommodation.
House loan also includes fencing, landscaping, site preparation
and fixtures such as Hot Water Systems, built in furniture, and
fixed floor covering. The overall objective of every house loan is
to reassure safety in Terms of security, ability to repay and
profitability to the Bank.
In Traditional Sense the term house loan means finance for buying
or may be for modifying a property.
As per the result of several experiments, this has been made out
that the value of house and a land never decreases. Therefore,
when someone goes for house loan they might face a problem of high
interest rate. And the basic reason for higher interest rate is
our growing economy. However there are lots of plus points that
apart of higher interest rates also people are looking forward for
house loan. And this is because they realize the value of a house
in coming future and they want to secure themselves.
In house loan this is a very common saying that, The more you
will be prepared to bear a risk and the more you get involved in
financial planning, the more suitable and cheaper house loan you
There are certain questions which grabs the mind of a house loan
seeker, they are:
The percent of risk involved?
What is the maximum amount which I can borrow?
From where I can avail house loan?
How much time does it take to get an application processed and
the loan sanctioned?
What is the mode for repayment of loan?
How the loan eligibility is determined?
What are the documents required?
Well the solution of all these questions depends upon the policy
of different companies. But through our continuous research we
were able to find out the basic solution to these problems. If a
person is looking for house loan, he / she may apply to any bank
or some Housing Finance
Company. And as per the house loan amount is concerned House loans
are generally provided in the range of 75% - 85% of the asset
value. The amount of house loan varies from institution to
And the eligibility of a person is determined by repayment
capacity based on income, age, qualification, number of
dependents, spouse income, assets, liabilities, stability and
continuity of occupation and saving history of the applicant.
Regarding mode of payment again depends on different company
And the common documents required at the pre-approval stage are:
Proof of Age
Copy of Bank A/C statements for the last 6 months
Copy of latest credit card statement
Passport size photograph
Signature verification from the borrowers banker
If salaried person:
Salary and TDS certificate
Latest pay slip
Letter from employer
If self-employed person:
Business track record
Copy of audited financial statements of the last 2 years
Latest income tax return
Types of house loan:
Home extension loan
Home improvement loan
Home equity loan
Converting high interest housing loan into low interest housing
Home construction loan
Home conversion loan
Land purchase loan
LASTLY HERE IS THE REASON WHY WE SHOULD GO FOR HOUSE LOAN
Well it is good to avail house loans, because house loans offer a
number of added advantages to their customers.
One of the most
important benefits of taking a house loan are the choice of
interest rate that is allowed on the house loan. Fixed and
variable interest rates are the options available for house loan.
Many financiers also offer home improvement loans at the same
interest rate as they offer the house loans. Most of the
prevailing interest rates fall in the range of 7.75% to 8.75%.
There is usually a processing fee of 1.00% to 2.00% also that is
The other benefit of taking a house loan is the security that is
to be provided. The benefit is that you can use the property that
is currently being constructed as the security for the house
loans. Of course, most banks and finance companies do not finance
more than 85% of the cost of the property mortgaged.
Perhaps the benefit that is most used is that of the tax benefit.
The interest that is paid on house loans is deductible from the
annual value resulting in a lower taxable income. The house loan
market in India has grown at a rapid and alarming rate from last
four years, which in lieu have increased the value of house loan.