Planning to take a home loan? Read on!


Planning to take a home loan? Read on!

You might be ideating to purchase your own house, build a home on a pre-owned plot or renovate your home completely. For either of the above, a home loan can be seen as the solution to your financial problems.

What is a home loan?

A home loan is the money lent to you by a bank or financial institute which assists you in purchasing a home or renovating it.


For a bank or a financial institution to decide on the loan amount you are eligible for, they will need to ascertain your repaying capacity.  The monthly income, your spouse’s income, your assets and your liabilities are the deciding factor for the same. The assumption for the banks is that 50% of the income you have can be availed for repayment. The interest rate and the loan period also determine on the loan amount.


Mostly a co-applicant is mandatory when applying for a home loan. That individual can be the co-owner of the property. However, if you are the only owner of your property, a member of your family can be your co-applicant.

Documents required to get Home Loan:

A plethora of documents are required for home loan approval. These include:-

  • A photograph
  • Identity proof
  • Residential proof
  • Latest salary slip which should be authenticated
  • Form 16
  • Collateral securities are also required by some lenders.

Interest rate on Home Loan:

The interest rate is either fixed or flexible. In the fixed rate, you are liable to pay a fixed amount of money for the entire tenure of the loan. However, for the flexible rate the amount changes.

Are there any additional costs involved?

You simply do not pay the EMI to the banks. There is more that you are required to pay. And, this alters from banks to banks. There is the processing fee, which is about 0.5-1% of the amount of loan.

Are there any tax benefits on home loans?

For the total annual EMIs the principal component is able to avail the benefit of tax under the Section 80C of the Income Tax Act. In case of a partial prepayment amount for it to qualify for the same, the overall limit is Rs. 1.5 lakhs.

Disbursement of loan:

The bank takes care of the all the documents submitted by you and the application. After careful scrutiny the loan is sanctioned. Then, there is the process of disbursement. The loan is either disbursed in full or in installment. The bank makes sure that the number of installments does not exceed three in number. However, when the property you are making is under construction the installment is given on the basis of the progress of construction.

So, now that you know the pertinent aspects about the home loan, you must be well aware of the guideline to be taken. Do make sure to do a thorough research about the bank you are availing loan from. This is of paramount significance. Asking for advice from colleagues or family comes real handy during the course.


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