Home loan FAQs

If you're unfamiliar with the bank jargon, you are bound to come home a wee bit confused after a day of loan shopping. Here's help:

If you're unfamiliar with the bank jargon, you are bound to come home a wee bit confused after a day of loan shopping. Here's help:

What is an EMI?
You repay the loan in the form of Equated Monthly Instalments (EMIs) which is made up of 2 parts -- principal and interest. Loan repayment EMI begins from the month in which you take full disbursement.

What is pre-EMI interest?
Pending final disbursement, you pay interest on the portion of the loan disbursed. This interest called pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement upto the date of commencement of EMI. Some financial institutions, on your request, could consider to start the EMI before the loan is fully disbursed.

What are the different interest rate options available?u00a0
>> Floating Rate of Interest: The rate of interest is reviewed periodically every six months based on the prevailing market conditions and RBI policies. The revised Floating Rate of Interest could increase, decrease or remain the same.
>> Fixed rate of Interest: The rate of interest ordinarily remains the same throughout the term of the loan.
>>u00a02 in 1 rate of interest: This home loan provides customers with a choice of breaking up the loan requirement into Floating and Fixed Rate loans.

What is the method of calculation of Interest Rate?
Methods of calculation would include
>>u00a0Flat Rate: Total interest calculated for the term and then divided by the number of months.
>> Reducing Balance (monthly/Quarterly/Annually): Compounded

Can I repay my loan ahead of schedule?
Yes, you can repay the loan ahead of schedule but some companies have prepayment charges.

How much does a Housing Finance company lend?
Loan amount is determined on the basis of the repayment capacity of the applicant/s. Repayment capacity takes into consideration factors such as age, income, dependents, assets, liabilities, stability of occupation and continuity of income, savings etc. The maximum loan varies from company to company. Most companies extend loans upto 85 per cent of the cost of property (including Stamp duty, Registration charges, and other govt. charges).

What is the period for which one can get a Loan?
The maximum period of the loan is 20 years subject to age of retirement or completion of 70 years whichever is earlier.

What Is Security For The Loan?
The security for the loan is the first mortgage of the property to be financed by way of deposit of the title deeds, subject to local laws. Guarantors are usually asked for.

Does the applicant get a tax benefit on the loan?
Resident Indians are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. Interest repayment of '1,50,000 p.a. can get you a tax saving upto about '50,490 p.a. Moreover, you can get added tax benefits under Sec 80 C on repayment of principal amount upto '1,00,000 p.a. that can further reduce your tax liability by about '33,660 p.a.

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