The government has announced various home loan subsidyschemes like PMAY to encourage the availability of housing loans. Home Loan subsidy scheme is a Credit Linked Subsidy Scheme under which beneficiaries are eligible to get an interest subsidy on their home loan if they apply a loan to buy or construct a house. The subsidy in interest ranges from ₹ 2.30 Lakh to ₹ 2.67 Lakh depending on the income group of the borrower. Recently, RBI has linked home loan interest rates to repo rate and hence, it has been constantly reducing the repo rate in the last few monetary policies to ensure availability of easy loans. Some common features and benefits of home loans that make it a go-to option for fulfilling housing dreams, are listed as follows:

• Multi-Purpose: Housing loans are multi-purpose loans available for various purposes such as buying a new residential flat or building, constructing a new house on a plot, home renovation or for extending your current house.
• Long Tenure: Since the loan amount involved in housing loans is high, the tenure to repay that loan can go up to as high as 30 years. This allows the borrower to choose an affordable EMI and ensure that his monthly budgets are not under any kind of pressure.
• High Loan Financing: Banks fund 75% to 90% of your property’s market value as home loan. The remaining amount to be paid by you as down payment at the time of availing housing loan.
• Prepayment and Foreclosure: Home loans offer the facility of foreclosing or prepayment of a loan, wherein housing loan borrowers can pay more than the EMI or can prepay the loan. This makes home loans a customer-friendly product. However, as per the Reserve Bank of India, banks and NBFCs cannot charge any fee or penalty on prepayment or foreclosure of a home loan.

• Tax Benefits on Housing Loan: The housing loan has attractive tax benefits associated with it. A deduction of up to ₹ 1.50 Lakh is available under Section 80C for repayment of the principal amount. Further, a deduction of up to ₹ 2 Lakh is available for the interest amount accrued in a financial year on home loan under Section 24.

  In addition to the above mentioned, as per the regulations under budget of 2019-20, tax benefits can be availed on home loan as per Section 80EEA. Under this section, an additional deduction on interest of the housing loan is provided if the housing loan is availed between 1st April 2019 to 31st March 2020, and the stamp duty value of the property is ₹ 45 Lakh or less. However, in the Budget 2020-21, the time limit of the loan was extended from 31st March 2020 to 31st March 2021.

Tax Benefit on Home Loan
• Tax Benefits on Second Home: In case you have availed a housing loan to buy a second house, the entire interest amount accrued on that loan for a financial year is available for deduction without any ceiling limit under Section 24B.
• Affordable Rates and EMI: Housing loans are affordable as the interest you pay on home loan is very low starting @ 6.75% and repayment can be done in easy affordable EMIs.

Step by step home loan procedure is explained below:

Step 1 : Check Eligibility and Calculate EMI
Before you apply for a housing loan, check your loan amount eligibility and calculate monthly home loan EMI. Home loan eligibility is calculated based on age, monthly income, current obligations, LTV ratio, property type and other factors. EMI can be calculated based on the loan amount, interest rate and tenure. It is advisable to shortlist the banks which offer the maximum loan amount once you check your EMI and eligibility.

Step 2 : Check Legal Documents and Property Approval Status
In case you are buying a builder property, then check for the banks who have approved the shortlisted projects. In case of a resale property, map plans are to be approved. Ensure that the property registration documents are accurate for both the first and the current owner. On ensuring the authenticity of the documents, shortlist the banks who give loan on your selected property.

Step 3 : Decide on Home Loan Interest Rate Type

• Choose between floating and fixed rates: Most of the banks offer home loans at either floating or fixed interest rates. As per the fixed interest rates on home loans, the interest rate remains constant during the loan tenure. On the other hand, as per the floating home loan rate, the rate changes after periodic intervals in response to MCLR, PLR and external benchmarks like RLLR and TBLR. It is preferable to do a home loan interest rates comparison before you apply for a home loan.
• Home saver loan option: Banks offer overdraft facilities to allow borrowers to save interest on home loan. A surplus amount can be deposited in the loan overdraft account as and when available with an option to withdraw the amount anytime. The interest rate on overdraft loans is higher than regular home loans.

  You can also evaluate a mortgage guarantee home loan as it covers any default risk and allows the lender to give you a loan at a lower rate of interest. You will however need to pay a mortgage guarantee fee to the bank.

Step 4 : Compare Shortlisted Banks
You can compare home loan interest rates of all banks and NBFCs at online marketplace like ₹ upee Bazaar.in. Along with rates, you can also check processing fee, prepayment charges and any other associated cost on loan. Compare all the rates and charges to shortlist the banks further and reduce the options to 2-3 banks.

Step 5 : Select the bank based on other service related parameters
Finally, as you decide to take the loan, consider other services and related transparency parameters of the chosen banks. Some of these factors are turnaround time, quick loan delivery, doorstep services, transparency in the loan process. In addition to that, understand the trends and changes in MCLR, PLR and external benchmark rates over time. Lastly, read reviews of existing customers of banks on their services, interest rates and transparency to take your decision to borrow from a bank.

It is often believed that a home loan is only available for buying a new property or for construction. There are various types of home loan available catering to a variety of requirements. These are as follows:

• Home Purchase: The most common house loan type is the loan which is availed to buy a residential property, it can be a house or a flat. The maximum financing available for it is up to 90% of the property's value.
• Home Improvement Loan: If you already own a house but don't have enough funds to renovate it, then Home Improvement Loan is best suited for you. It includes works like repair, painting the walls, rewiring, waterproofing, etc.
• Home Extension Loan: You can also avail a loan for expanding or extending your current house. Some lenders have curated a separate loan product for this purpose, while some of them include this purpose as part of their home improvement loan product.
• Home Construction Loan: Housing loan is also available for those who want to construct their own house. Although there are certain aspects which you need to keep in mind in this case, they are:
  • The land or the plot on which the house is to be constructed should have been bought within a year.
  • If you do not include the cost of the plot in loan amount, then only the cost of construction would be estimated.
  • A rough estimate of the cost has to be made for the cost that will be incurred in construction.
• Loan for Land Purchase: Banks and NBFCs also provide loans for buying a plot on which an individual is looking to construct their own house. Usually, the maximum financing for plot loans is done up to 70-80% of the value of the land.
• Home Loan for NRI: Home loan is also available for the non-resident Indians who want to buy their own house in India. The structure of this loan is similar to a regular housing loan. However, the documentation part is comparatively lengthy.
• Joint Home Loan: This type of loan is taken with a co-applicant to increase the eligibility of the loan. You can add an earning member of your family like parents, spouse or children as a co-applicant. Banks allow a maximum of six co-applicants for a joint home loan.
• Affordable Housing Loan: PMAY scheme was launched by the Modi Government in 2015 to provide affordable housing to the urban poor by 2022. Under this scheme, applicants are eligible for interest subsidy if they take a loan to buy or construct a house.
• Home Loan Top-Up: After a certain period of time, you can also opt for a top-up loan on your home loan. A top-up is an additional loan amount that is borrowed in between the home loan tenure for varied purposes like, home renovation, meeting an emergency, etc.
• Home loan Balance Transfer: A home loan balance transfer is the facility provided by Banks and Non-Banking Financial Institutions to pay the outstanding balance of your home loan to another institution. With a home loan balance transfer, you can repay the home loan at a lower interest rate and also avail other additional benefits like top-up home loans. However, before availing a home loan balance transfer, you must compare the interest rates and other charges of different lending institutions to ensure that the total costs of balance transfer do not exceed the present cost of the home loan.

✅ How can I apply for home loan?

You need to submit a home loan application to the shortlisted banks to initiate the process of taking a loan. Home Loan application can be submitted by directly visiting the bank’s branch or by applying at the bank’s website. You can also check and compare the best home loan interest rate of all banks online at ₹ upee Bazaar and apply for a loan to multiple banks simultaneously to get deal.

✅ How can I apply home loan in my city?

Nowadays, people living in any part of the country can apply for a loan with all leading banks and NBFCs by walking in to the nearest bank or by applying online at the bank’s website or other loans websites.

✅ Can I get a home loan without ITR?

Many banks have launched schemes to provide home loans without ITRs for borrowers who are self employed and are looking to buy affordable houses. HDFC Reach is once such popular scheme which provides loan with lesser documentation, but charge higher interest rate of 9.25%.

✅ Which bank home loan is best?

Most top banks have similar eligibility criteria and interest rate, along with other terms and conditions. No one bank stands out from the rest. However, you can assess the features of various bank’s home loans and decide which one is suitable for your needs better.

✅ How does the home loan work?

To get a home loan, you need to first apply for it and also pick the property you want to buy. When your home loan application gets accepted, then you can show that to the seller who will then get an appointment with the registrar. As the appointment gets fixed, you along with the seller and a bank representative go to the office for registering the property on your name. The property documents are handed to the bank right there, and within a day or two, the loan amount is disbursed as well.

✅ Can I get a 100% home loan?

No, the maximum funding allowed by RBI for a bank to extend on a home loan is 90% of the property’s value.

✅ Which bank gives the cheapest home loan?

Currently, the lowest interest rate on a home loan is offered by Citibank, which is 6.75%.

✅ When should I apply for a home loan?

You can apply for a home loan when you have picked the property of your choice and also have the amount ready for the down payment, which can vary between 10-20% of the property’s value.

✅ Which loan is best for buying a home?

If you are looking to buy a house, availing a home loan is the best option considering its lower rate of interest, long tenure, and no charges on prepayment.

✅ What is the minimum salary for a home loan?

The minimum salary required to apply for a home loan is ₹ 25,000. Banks offer discounted rates for borrowers with low income looking to buy affordable houses. In fact in the current situation, rate of interest is lower if the value of property one is looking to purchase is less than ₹ 30 lakh.

✅ Can we pay our home loan early?

Yes, every lender has to abide by RBI prepayment rules and provide an option of prepayment and foreclosure of a floating rate home loan without charging any fees or penalty. So, if you happen to get the required funds to pay your home loan early, you can certainly do so. However, if you have a fixed rate home loan, banks and lenders may include a clause in the home loan agreement explaining the various condition and charges for home loan prepayment and foreclosure.

✅ What kind of loan is a home loan?

A home loan is a secured loan in which the property to be purchased is given as collateral by the borrower to the bank.

✅ What is the lowest interest rate on a home loan?

Presently, the lowest rate of interest rate on a home loan is 6.75%.

✅ How long does it take to get a home loan?

The home loan usually gets disbursed in 15 to 30 days. However, the disbursement may delay if the documents you have submitted to the bank are not complete.