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Interest
paid by a person on Home loan is also allowed as a deduction for income tax
purpose. In case of self occupied property, this is restricted to INR 150,000
(subject to change from time to time under tax laws) per borrower. In case of
property which is rented out, the actual interest paid can be claimed as a
deduction, subject to certain conditions.
The
Borrower has the option to prepay the loans whenever they have surplus money.
Some banks have restrictions on minimum period before which the repayment can
be made. However, continuous and regular payments can significantly reduce your
tenure of loan. Refer our Video on how the prepayment of 10,000, 20,000 a month can reduce the tenure of Loan from 20
years for a loan of Rs. 20,00,000, other things remaining the same at the following link : -
Also Watch our Videos explaining
various aspects on Home Loans at http://iedubook.com/tutorial/cl/23/Finance-and-Life/Borrowings.html
Home Loans
Housing Loan is a secured loan given to a Borrower who wants to purchase a House or
property. The loan is given by the bank/ housing finance company, which also
keeps the property purchased through the money borrowed as collateral.
Purpose of Home Loan
- Purchase a residential apartment which could be ready to move in or under construction.
- Transfer outstanding balance from one housing company to another, which may offer a better rate
- Repair and renovation of existing house, which may already have a loan
- Plot for construction of house, along with the cost for construction
Maximum Amount
of Loan
The amount of home loan which a bank
gives to a customer depends on his/her repayment capabilities, like your income, age, job etc, and is generally restricted to a maximum of 70-85% of
the cost of the property. Normally this percentage is more in case of Flats and
little lower in case where a user purchases a plot of land and carries out
construction thereon.
Tenor
Maximum tenure of home loan from various banks is 20 years. In case of salaried individuals who are approaching retirement within a period of less than 20 years, the tenure is capped at retirement age.
Maximum tenure of home loan from various banks is 20 years. In case of salaried individuals who are approaching retirement within a period of less than 20 years, the tenure is capped at retirement age.
Maximum Eligibility
Each bank has its own criterion to
determine the individuals eligibility for loan. However, if the spouse of the
borrower also earn, they can be made co-applicant and their income would then be
considered to arrive at total eligibility.
Rates and
Fees
Rates and Fees on Home Loan depend on the period and amount of
Loan. Normally these have ranged between 7-12% in the past, and vary depending
on the economic conditions and rates fixed by RBI, which are taken as benchmark
by the Banks or Housing Finance Companies to grant Loans.
Insurance
When you take a Home loan, these
days certain companies also insure your Home loans. Many banks are willing to
provide additional loan to cover up the insurance amount, which is normally one
time. The impact is that they increase your EMI on account of insurance premium
so paid.
Tax Break
Increase in rate of interest on Home Loans
Whenever there is an increase in the rate of interest in case of floating
loans, the bank has two options : -
- Increase the Equated Monthly installment
payable by borrower
- Increase tenure of Loan
Prepayment
The Author can be reached
at arinjayjain@iedubook.com
