What is a Home loan?
A Home loan is a loan that is taken to either buy a house, apartment or a land for construction of a house, or renovation, extension and repairing your existing house.
Housing Loan Interest Rates of India’s Top 5 Largest Banks
The interest rates for home loans can either be fixed or flexible. In fixed rate, the interest rate is fixed for the entire duration of the loan. In flexible rate of interest, the rate changes throughout the tenure. Here is the flexible/floating home loan interest rates of India’s five largest banks.
|SBI||8.35% – 8.90%||8.50% – 9.10%|
|HDFC||8.40% – 9.15%||8.40% – 9.20%|
|ICICI||8.80% – 10.20%||8.80% – 10.20%|
|PNB||8.85% – 11.25%||8.85% – 11.25%|
|Axis||8.40% – 8.70%||8.45% – 8.75%|
As you could see in the above table, State Bank of India has the lowest interest rates for housing loans.
Pradhan Mantri Awas Yojna (PMAY)
What is Pradhan Mantri Awas Yojna?
Pradhan Mantri Awas Yojna is a program run by Government of India whose purpose is to ensure Housing for everyone by 2022. The program has a Credit Linked Subsidy Scheme on home loans. Property should belong to either Economically Weaker Section (EWS), or Low Income Group (LIG), or Middle Income Group 1 & 2 (MIG). The scheme can be availed for new or resale purchase of home, construction, or for extension or improvement of rooms, kitchen, toilet etc.
PMAY eligibility criteria
Your eligibility depends on which income group you fall in.
|Income Group||Annual Family Income|
|EWS||Up to INR 3 lakh|
|LIG||INR 3.01 to INR 6 lakh|
|MIG1||INR 6.01 to INR 12 lakh|
|MIG2||INR 12.01 to INR 18 lakh|
To be eligible for EWS and LIG criteria, the owner of the property should be a female. There are a few cases of exception of which the lender will inform you. Another criterion is that the applicant or its dependents should be a first time home buyer and should not own any pucca property in the town at the time of availing the scheme.
Benefits and subsidy offered under Pradhan Mantri Awas Yojna
The amount of subsidy offered is dependent on the amount of loan and the income group you fall in. Applicants with annual income less than INR 6 Lakh can avail maximum of INR 2.67 lakh as subsidy.
Applicants with annual income up to INR 12 lakh can avail maximum subsidy of INR 2.35 lakh.
Applicants with annual income up to INR 18 lakh can avail maximum subsidy of INR 2.30 lakh.
|Income Group||Subsidy on maximum Loan Amount||Interest Subsidy (%)||Maximum Subsidy Tenure (In years)||Maximum Subsidy Amount
|Up to 3 lakh||6 lakh||6.5%||20||2.67 lakh|
|Above 3 lakh and below 6 lakh||6 lakh||6.5%||20||2.67 lakh|
|Above 6 lakh and below 12 lakh||9 lakh||4%||20||2.35 lakh
|Above 12 lakh and below 18 lakh||12 lakh||3%||20||2.30 lakh|
What are the required documents?
- KYC documents and photographs.
- Aadhar Card is mandatory
- Salary slip or certificate and updates bank statements for salaried applicants.
- Income Tax Returns of last two years and bank statement for those who are self-employed.
- Self-certificate/ Affidavit as proof of income
- Customer declaration undertaking
- Additional application form
How can one avail this scheme?
The benefits of this scheme can be availed by visiting any bank or housing finance company and enquiring about Pradhan Mantri Awas Yojna.
Home Loans in India: All You Need to Know About
What is meant by Home Loan EMI?
EMI stands for Equated Monthly Installments. Clearly, Home Loan EMI is the monthly repayment amount that the borrower should pay to repay the home loan as per amortization schedule of the loan.
What document will bank send you acknowledging the EMIs you pay?
When the year begins, all the home loan lenders are supposed to furnish you with a statement which reflects how much of total interest and principal is expected to be repaid in the following year. The statement is useful when you have to declare the figures to your accounts department as a declaration of investment proof for deduction of tax. Another statement is sent by the lender at the end of the year, reflecting all the EMIs that you have paid.
Read also: Home Loans Depend on your CREDIT SCORE
What amount of loan am I eligible for?
It is important to determine your total eligibility before getting started with the loan process. Majorly your eligibility depends on your repaying ability. Your repaying capacity is decided based on your monthly disposable/surplus income, which also depends on factors such as total monthly income/surplus less monthly expenses, and some other factors like spouse’s income, assets, liabilities, stability of income, etc.
The bank will only grant you a home loan if it is satisfied that you will be able to repay the loan in time. Your monthly disposable income is directly proportional to the eligible loan amount, the higher your disposable income the more loan amount you are eligible for. Normally, a bank assumes that you will dedicate 50% of your monthly disposable income to repay the loan. Loan amount also depends upon the tenure and interest rate of the requested loan. Further, the banks generally limit the allowed upper age to apply for a home loan this can impact one’s eligibility.
What is the maximum amount that can be borrowed?
Most of the lenders ask for 10 to 20 percent of the purchase price of the home as a down payment. Some lenders even call it “one’s own contribution”. The rest is 80-90% of the property value and this is what the lender finances. However, the complete financed amount will also include the registration, transfer, and stamp duty charges.
Check: Top Credit Cards
What documents one will need for a loan approval?
Inside your loan application form, there will be a checklist of all the documents required by the bank and yes, don’t forget your photographs. Generally, in addition to all legal paperwork related to purchase of house, the banks also ask for identity and residence proofs, latest salary slips (authenticated by employer and self-attested by you) and form 16 from your employer or your income-tax return filing (for businessmen/ self-employed) and the bank statements of last 6 months.
What should you consider while searching for a home loan?
- Try to get the lowest EMI i.e. you pay substantially less in repayments.
- Those lenders with the longest tenure, say 30 years, may not always be good. Opt for it only if you’re sure that you will repay the loan earlier without any prepayment charges.
- Opt for the lender which covers the cost of furnishing as well in the project cost.
- Choose the lender who is offering daily or monthly reducing balance, unlike the annual reducing balance method used by several financiers.