Interest rates and tenures. Home loans and loans against property are secured loans. This means you have to mortgage your property with the lender in order to get one, thus considerably reducing the risk level of the bank or NBFC that’s giving it to you. A reduced risk means lower interest rates, of between 9% - 15%, depending on a lot of factors including your current employer, income, CIBIL score and market value of the property pledged. You can have tenures as low as 5 years and up to even 30 years depending on your earning potential, loan amount required, stability and patience.
Loan amount. Banks and NBFCs typically only give you between 50% - 65% of the market value of your property as a loan. Lenders consider your repaying capacity as the difference between your income and current EMIs, and decide how much you can pay back on a monthly basis after interest and in the tenure you choose. Loans can be sanctioned from Rs.2,00,000 to a few crores depending on your ability to repay and the tenure you want.
Charges. Lenders take a sizeable chunk under what’s called a “one-time processing charge” which can range from 0.50% to 5% (in addition to a 14% Service Tax) and can be entirely avoided depending on your negotiating and offer-leveraging skills. Processing charges are sometimes deducted from your sanctioned loan amount. Another common charge is the “pre-payment” charge, which is levied if you wish to clear off your loan before the tenure ends. There are also charges in the form of penalties which will be charged if you don’t make payments on time or default on your loan, which vary between lenders but are generally in the range of around 3% - 8%. These penalties hurt you in multiple ways, as they will also negatively impact your CIBIL score. Stamp duties and other charges are levied as per state laws.
Documents required. When applying for a home loan or a loan against property, you’ll need the following documents: Photo proof of identity. Proof of residence. Proof of income through salary slips (for the last 6 months) or bank statements. Form 16. Income tax returns. Profit and loss account statement (for self-employed persons). Taking a home loan is as dangerous as taking any other kind of loan. If you miss payments and become a defaulter, the bank will take your property and levy crippling charges and penalties on you. Choose wisely, and ensure you have a regular income and sufficient funds to repay your loan EMIs as and when they become due. Shop around, better deals are around the corner. Try the eligibility calculator and home loan comparison tool on BankBazaar.com to find the best deal for you.
