Home Loans!

Home Loan Features and Benefits

Home loan offers numerous benefits to the borrower including lower interest rates, tax benefits, flexible repayment time frame and much more. 

1) Attractive Interest Rates Plan

Home loans are accessible at lower interest rates than other types of loans. Obtaining a home loan is better than going for any other loan type to purchase your dream property. Housing loans are offered at cheap interest rates since the lenders do not want to deal with missed EMIs and unpaid dues.

2) Due Diligence Of the Real Estate Property

The finest aspect about housing finance is that the bank will carry it out if you missed out to determine the property’s validity. Furthermore, while evaluating the house loan documentation, bank employees conduct legal checks to verify that the borrower is not defrauded. Due diligence evaluates areas where the bank approves the transaction and alerts you if your property purchase is risky in any aspect. 

3) Tax Benefits With Housing Loan

People who have mortgages are eligible for income tax benefits. The deduction of income tax is a fantastic benefit of getting a property loan. It is available for the interest paid on a yearly basis. The amount of interest paid is subtracted from the income tax that must be paid.

4) Flexible Home Loan Repayment Period

Another feature that distinguishes a home loan from other types of loans is the payback period. You can request longer payback terms whenever it is most convenient for you. One can stretch the loan repayment tenure up to 25 to 30 years. The monthly instalments decrease as the repayment period lengthens, easing the EMI burden on the borrower.

5) Availability of Home Loan Balance Transfer

A housing loan allows you to transfer the remaining loan balance from one lender to another. There could be a variety of reasons for this, including interest rates, service fees, an unpleasant customer experience, among others.

6) Capital Growth

As per real estate data, the cost of properties has been constantly rising over the last decade. According to analysts, the capital appreciation of the real estate properties is significantly greater as compared to the paid interest amount. It therefore serves as a lucrative opportunity for property owners as now they can sell them for a higher profit.

Home Loan Tax Benefits

The repayment of a home loan consists of two parts: repayment of the principal amount and the interest rate. When filing income tax returns, these parts are claimed as a home loan interest deduction or a tax deduction. 

Section 80 EEA allows you to claim tax benefits for the interest component paid on a house loan. This part offers house loan borrowers tax incentives of up to INR 1.5 lakhs on the interest rate they must pay.

Home Loan Eligibility Criteria

Banks and finance companies have pre-determined home loan eligibility criteria to verify and provide maximum ease to loan borrowers. Apart from the eligibility criteria, banks look at the applicant’s credit history to establish creditworthiness and repayment patterns. 

• Applicant must be between 21 to 65 years
• Salaried or self employed
• Annual income
• Collateral security
• Assets, financial stability and occupational continuity
• Residence status (Indian or NRI)

Reasons of Home Loan Rejection

Some of the home loan rejection reasons are given below:

• Unpaid dues and other ongoing debts
• Applicant’s address present on the defaulter’s list
• Applicant’s age does not come within the eligible age range
• Credit score below 600
• Multiple rejected loan applications
• Frequent job change
• Faulty repayment of ongoing debts
• Absence of required documents

How to Close Existing Home Loan?

A home loan can be closed either on the completion of the repayment tenure when you have successfully paid the entire loan amount or via foreclosure. 

If your repayment tenure is completed, you just need to visit the lender and fill out the required form for loan closure. Once you are done, the lender will provide you with the loan closure certificate and your property documents that were kept as mortgages at the time of loan approval.

If you have decided to repay the loan amount before completion of loan tenure, i.e. loan foreclosure, you will have to pay associated foreclosure charges. 

Once you pay the outstanding amount and the foreclosure, your debts will be cleared. The bank will process your foreclosure application and provide you with a loan closure certificate.

Home Loan: Service Charges And Fees

Following fees and charges are associated with home loans throughout the loan tenure:

Types of Home Loans For Different Purposes

When you finally decide to seek a home loan, you’ll discover multiple options and types available. Choosing the right home loan isn’t just about picking any financial aid; it’s about selecting a solution that fits your life plans and financial goals. Each type of loan caters to unique needs that aim to simplify every step. Different home loans offer specific flexibility and benefits if you want to buy your first home or refinance an existing loan. Here’s a breakdown to simplify decision-making, helping secure the most cost-effective and purposeful loan option.

Home Purchase Loan

A Home Purchase Loan is a primary financing option for individuals buying a home. This loan type covers a significant portion of the property’s value and makes homeownership achievable with affordable EMIs. It’s ideal for first-time buyers and those looking to invest in residential property. Here’s a detailed look at the essential aspects:

Home Construction Loan

A Home Construction Loan helps you with the finances to build a new home on your plot. Unlike a standard home purchase loan, banks disburse the funds in stages based on the construction progress. This step ensures that the amount aligns with the building expenses at every step. It is ideal for those who prefer a custom-built home rather than a ready-made property.

Home Renovation Loan

A Home Renovation Loan is a housing loan that helps you turn your current home into your dream space. It covers modern finishes and undertakes essential repairs, offering a practical way to fund improvements that add comfort and value without depleting your savings.

Home Extension Loan

A home extension loan is ideal for homeowners who need extra space. This loan helps fund extensions like adding a room, expanding an existing area, or creating an additional floor, allowing you to develop your living space without relocating.

Home Equity Loan

A Home Equity Loan is a home loan that allows homeowners to leverage the property’s equity to secure funds for significant expenses like education, medical bills, or starting a business. It’s a practical way to access a large sum by using the home’s value, often with favourable interest rates due to the secured nature of the loan.

Balance Transfer Loan

A Balance Transfer Loan lets homeowners switch their existing types of home loans to a different lender, typically to take advantage of a lower interest rate or better terms. This option helps reduce overall interest costs and can shorten the repayment period.

Top-Up Loan

A Top-Up Loan is an additional loan offered on top of an existing housing loan. It provides extra funds that can be used for various purposes, such as home improvement, debt consolidation, or personal expenses. Overall, it’s convenient for borrowers needing extra financial support without a separate loan.

Home Loan Refinance

Home Loan Refinance is a lesser-known option among home loan types that allows borrowers to replace their existing home loan with a new one. This funding option will enable you to use better interest rates, different repayment terms, or improved loan features. It reduces the loan cost and modifies repayment conditions to align with current financial goals.

Land Purchase Loan

A Land Purchase Loan is specifically designed for individuals looking to buy a plot of land for future construction or as an investment. Unlike a home loan, this housing loan focuses on financing land acquisition and is flexible for residential and commercial plots.

NRI Home Loan

An NRI Home Loan is designed specifically for Non-Resident Indians (NRIs) who wish to purchase property in India. Among different kinds of home loans, this loan allows NRIs to invest in residential property. It offers tailored eligibility criteria and flexible options to accommodate their unique circumstances.

Types of Home Loans Based on Professions

Your profession also plays a role in availing a home loan. Different professions have unique financial profiles; lenders recognise this by offering tailored home loans. These options are designed to meet the specific needs of various professionals. This is done by providing better flexibility, special rates, and favourable terms to help make homeownership achievable and affordable. Let’s look at different types of home loans based on your profession.

Home Loan for Government Employees

Home Loan for Government Employees is customised for employees in official services, offering benefits like lower interest rates and special terms. It’s designed for those with stable incomes and job security, making it suitable for affordable and flexible financing.

Home Loan for Self Employed

A home loan for self-employed individuals is crafted considering the unique financial dynamics of business income by the banks and similar institutions. This loan type is flexible with documentation requirements and caters to various business profiles.

Home Loan for Senior Citizens

A Home Loan for Senior Citizens is designed to meet the needs of individuals above a certain age, typically 60 or older. It provides financial assistance for purchasing or renovating a home. This loan offers favourable terms and shorter tenures, allowing senior citizens to access home financing while considering retirement income and stability.

Home Loan for Salaried Person

A Home Loan for a Salaried Person is specifically designed for individuals with a stable monthly income from employment. This type of loan typically offers competitive rates and flexible terms, considering the reliable repayment capacity associated with salaried employees.

Home Loan Interest Rates

Housing loan interest rates play a crucial role in determining the affordability of your dream home. So, To make an informed decision, it’s essential to compare the housing loan interest rates of all banks and financial institutions with each other. These rates, which vary among lenders, are usually influenced by many factors such as your credit score, home loan tenure, loan amount, and each lender’s policies. A lower interest rate will lower your monthly EMIs and total cost of your loan, making homeownership more affordable. With many lenders offering competitive interest rates, researching and comparing housing loan interest rates of all banks can help you secure the best deal, ensuring that your dream home doesn’t become a financial burden.

Required Home Loan Documents

To avail of a home loan with utmost ease, you need to prepare the below depicted documents:

Documents for Identity Proof

Documents for Address Proof

Other Documents

Essential Tips for First-Time Home Loan Borrowers

The infographic below offers step-by-step instructions to help first-time borrowers navigate the process smoothly and secure the best possible terms.

1. Check Your Credit Score

Ensure your credit score is healthy. A good credit score can help you secure a lower interest rate and better loan terms.

2. Determine Your Budget

Calculate how much you can afford to borrow. Consider your income, expenses, and future financial goals to avoid overextending yourself.

3. Compare Multiple Loan Offers

Use the Urban Money website to review over 70+ lenders and compare interest rates, processing fees, and other charges.

4. Understand Different Loan Types

Familiarise yourself with different types of home loans. Fixed-rate, adjustable-rate, and government-backed loans have unique features that may suit your needs.

5. Scrutinise Loan Terms

Carefully read the loan agreement’s terms and conditions. Pay attention to prepayment penalties, processing fees, and other hidden charges to avoid unexpected costs.