A housing loan is a secured financing option designed to aid prospective homebuyers to avail required funds to purchase a property. Home loan in India has been more affordable lately, owing to the RBI’s decision to keep the policy rates unchanged. A reduced and unchanged policy rate has helped individuals to get a loan at all-time lowest interest rates.
This affordability has made the benefits of this credit more accessible to borrowers.
Benefits of a home loan in India
Here are some notable benefits of a housing loan in this country:
High loan quantum
One of the notable advantages of home loan is their high loan quantum. Now, this loan amount depends on the property value and the down payment one makes. Additionally, a concept to understand here is the loan-to-value or LTV ratio.
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This ratio represents the amount one can get as a loan against the market value of a property. For instance, a property has a market value of Rs.1 crore, and your lender is offering an LTV of up to 80%. In this case, you will get a loan amount of up to Rs.80 lakh. The rest you need to pay as a down payment.
Affordable interest rate
Being a secured loan option, the interest rate applicable to this financial product is affordable. Furthermore, the cut in policy rates has reduced the current home loan Pumabet
interest rate significantly, and lenders are now extending a more competitive rate than before.
Resultantly, the home loan EMIs have reduced considerably, and it is easier for homebuyers to source funding and repay it. Furthermore, borrowers can take the assistance of online calculators to make an informed decision.
Another notable benefit of this financing option is its tenor, which can go over 20 years in some cases. Owing to this extended repayment period, one can easily pay off his/her debt without any hassle.
Regarding tenor, a point to remember here is that a shorter tenor may increase EMIs, but it will reduce the total interest outgo and vice versa. Thus, it is essential to choose a tenor as per one’s repayment capacity.
While pondering about a home loan in India, you need to consider the tax benefits are associated with it. Borrowers can claim income tax benefits on their housing loan repayment, which is available on both interest and principal amounts. Here is an overview –
- Section 80C: Claim up to Rs.1.5 lakh on principal repayment and stamp duty and property registration charges.
- S 24B: Income tax exemption on the interest payment of a housing loan of up to Rs.2 lakh.
- Section 80EE: Only available to first-time homebuyers; one can get an additional exemption of Rs.50,000.
- Sn 80EEA: Available to the taxpayers who have bought a house under any affordable housing scheme. They can claim up to Rs.1.5 lakh on the interest payment of a home loan.
Apart from these, income tax benefits are available on joint home loans as well. Here both the applicants are eligible for a tax exemption.
Besides knowing the benefits of a home loan, one should also be aware of the eligibility criteria and documents required to complete the application process.
Eligibility criteria of a home loan
It is ideal to review the eligibility parameters of a home loan before applying, and usually, they are different depending on one’s employment type. Here are the details –
For salaried employees
- Age: 23 to 62 years
- Work experience: Minimum 3 years
- Monthly income: Depends on an applicant’s city of residence
For self-employed individuals
- Age: 25 to 70 years
- Business vintage: Continue for at least 5 years
- Monthly income: Varies as per applicant’s city of residence
Documents required for a home loan
Here is a list of documents that one needs to submit to avail credit –
- KYC documents
- Income proof (salary slip and Form 16 for salaried individuals, and P/L statement for self-employed individuals)
- Business proof for self-employed individuals only
- Bank account statement of last 6 months
Moreover, eligibility criteria and documentation of a home loan are lender-specific. Hence, if a financier asks for any additional papers or eligibility parameters, borrowers need to meet them as well.
Meeting these parameters can help individuals to ease their loan applications. Simultaneously, they can also use a home loan eligibility calculator to know about the loan amount they are eligible for in advance.
Furthermore, leading financial institutions can facilitate this loan application process for their current customers by offering pre-approved offers. These offers are applicable to a wide range of financial products, and individuals can check their pre-approved offers online by submitting a few essential details.
The real estate sector of this country holds promise, and an affordable home loan in India only adds to its growth. Thus, becoming a homeowner has become even easier in current scenarios.