1. What are the types of Housing Loans Available ?

Various housing loans are offered by financial institutions. Prominent among these are :

Home Loans : This is the basic housing loan for the purchase of a new home which covers cost of the flat and parking space, deposits and charges, stamp duty and registration charges.
Home Improvement Loans : For implementing repair works and renovations in a home that has already been purchased by you.
Home Construction Loans : For the construction of a new house.
Home Extension Loans : For expanding or extending an existing house.
Home Conversion Loans : The existing loan on a house is transferred to a new house, including the extra amount required, eliminating the need for pre-payment of the previous loan.
Land Purchase Loans : For both home construction or investment purposes.
Bridge Loans : For people who wish to sell the existing house and purchase another and need finance for the new house, until a buyer is found for the old house.
Balance Transfer : To pay off an existing housing loan and avail of the option of a loan with a lower rate of interest.
Refinance Loans : To pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present house.
Loans To NRIs : As per requirements of NRIs who want to buy a house in India.

2. Who can apply for a Housing Loan ?

Any person, including Non Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks.

3. Can a Non Resident Indian avail of Housing Loans ?

Yes. Repayment of loan should be made within a period not exceeding 20 years out of inward remittances or out of funds held in the borrower's NRE/FCNR/NRO accounts.

4. How much can a Person Borrow ?

Loans are generally disbursed upto a maximum of 85% of the cost of the flat. The balance 15% cost of the flat is to be funded by the flat purchaser from his own contribution.

5. What is an EMI ?

Equated Monthly Installment ("EMI") is the amount comprising a portion of the interest and the principal loan amount which is payable by a borrower to the lender every month.

6. How is the Rate of Interest Calculated in India ?

Interest rates vary from time to time and from institution to institution. The current trend ranges from about 9% to 10% pa. The interest calculated either on a daily or monthly reducing or yearly reducing balance.

7. What is a Fixed-Rate Housing Loan ?

A fixed-rate housing loan is a loan where the rate of interest is constant through the entire term of the loan period.

8. What is a Floating Interest Rate Housing Loan ?

A floating interest rate loan is a loan where the interest rate payable is linked to the market conditions such as the bank retail prime lending rate and rises and falls with the bank rate varies. Hence a borrower bears the risk of interest rate fluctuations. Floating interest rates offered are usually lower than the fixed interest rates.

9. What is the Difference between Monthly reducing Interest Rate and yearly reducing interest rate ?

In a monthly reducing interest system the principal on which interest is paid reduces every month as EMI is paid. In the annual reducing system the principal is reduced at the end of the year, and the borrower pays interest on a certain portion of the principal, which is actually paid back to the lender. The EMI for the monthly reducing system is effectively lesser than the yearly reducing system of calculating interest.

10. What are the Repayment Period Options ?

Repayment period options range generally from 5 to 20 years.

11. What are the Charges for Availing a Housing Loan ?

Processing Fees : Payable to the lender on applying for a loan and is either a fixed amount not linked to the loan or may also be a percentage of the loan amount.
Commitment Fees : in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned then some institutions levy a commitment fee.
Prepayment Penalty : Between 1% and 2% of the amount being pre paid is charged by some institutions when a loan is paid back before the end of the agreed duration. Stamp duty and registration fee on a deed of mortgage.
Miscellaneous Costs : Such as administrative costs, legal documentation charges, technical consultant charges.

12. What Security is required for a Housing Loan ?

The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.

13. Do Lending Companies require Guarantors ?

Yes. Many lending companies require 1 guarantor.

14. What is the Time required for approval of a Loan Application ?

About 15 - 20 days.

15. What is the Time Required for Disbursement of Loans ?

Usually loans are disbursed within 5-7 days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale / lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrower's own contribution has been paid by him to the Vendor / Builder / Developer.

16. Do Institutions accept joint Loan Applications ?

Yes.

17. What are the Documents required at the time of making an application for a Housing Loan ?

Please note these requirements are for Indian Citizens.

For Salaried Individuals :

- Salary slip/Form 16 A.
- A photocopy of the first and last pages of Ration card or copy of PAN/Telephone/Electricity bills.
- A photocopy of Investments (FD Certificates, Shares, any fixed asset etc. or any other documents supporting the financial background of the borrower.
- A photocopy of LIC policies with the latest premium payment receipts (if any).
- Photographs (as applicable).
- A photocopy of bank statement for the last six months.

For Self-Employed/Businessmen :

- A brief introduction of Business/Profession.
- Balance Sheet, Profit and Loss account and statement of income with Income Tax returns for the last 3 years certified by a CA.
- A photocopy of Advance Tax payments (if applicable).
- A photocopy of Registration Certificate of estatblishment under shops and Establishments Act/Factories Act.
- A photocopy of Registration Certificate for deduction of Profession Tax (if applicable).
- Bank statements of Current and Saving accounts for the last 6 months.
- A photocopy of Certificate of Practice(if applicable).
- A photocopy of any bank loan (if applicable).
- A photocopy of the first and last pages of the Ration card or a copy of PAN/Telephone/Electricity Bills.
- A photocopy of LIC policy (if applicable).
- A photocopy of investments (FD Certificates, Shares, any other fixed asset).

If a Flat is Purchased from the Builder :

- Original copy of your agreement with the builder.
- 7/12 extract or property register card of the land under construction.
- Index II extract of your agreement with the builder.
- Copy of N.A. permission for the land from the collector.
- Search and title report (with the details of documents) for the last 30 years.
- Development agreement between the owner of land and the builder.
- Copy of order under the Urban land Ceiling Act.
- Copy of building plans sanctioned by the competent authority.
- Commencement certificate granted by Corporation / Nagar Palika.
- Building completion certificate(if available).
- The latest receipts of taxes paid.
- Partnership deed or memorandum of association of the builders firm.

If the Property is being Purchased is in a Cooperative Society :

- Original share certificate of the Society.
- Allotment letter from the society in your name.
- Copy of the lease deed, if executed.
- Certificate of the registration of the society.
- Copy of the byelaws of the society.
- No objection certificate from the society.
- 7/12 extract or property register card in the society's name.
- Copy of N.A permission for the land from the collector.
- Search and title report(with the details of documents) for the last 30 years.
- Copy of order under the Urban Land ceiling Act.
- Copy of the building plans sanctioned by the competent authority.
- Commencement certificate granted by Corporation / Nagar Palika.
- The latest receipts of taxes paid.
- Original Agreement to assign / Deed of assignment.

If Constructing on own land :

- Original sale deed of land and extract of Index II.
- 7/12 extract or property register card in your name.
- Copy of N.A. permission for land from the collector.
- Search and title report (with the details of documents) for the last 30 years.
- Copy of order under Urban Land Ceiling Act.
- Copy of the building plans sanctioned by the competent authority.
- Building permission granted by Corporation / Nagar Palika.
- The latest receipts of taxes paid.
- Estimate of cost of construction certified by the architect.

18. Do lending institutions offer incentives for Housing Finance ?

Sometimes lending institutions offer incentives for a specified period or under a special scheme. Incentives could be any of the following :

- Free accident insurance
- Waiving of pre payment penalty
- Waiving of processing fee
- Property insurance.

19. Which sources, other than Housing Finance Companies, Can give loans for Purchasing a Flat ?

A loan for purchasing a flat can be availed of from the following sources :

- Housing Finance Companies
- Banks
- Employer
- Insurance company
- Against Provident Fund Account, Fixed Deposits, Post office Savings
- Against Shares and Debentures of listed companies
- Government bonds and securities.
- Private parties such as relatives, friends.