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The procedure is as follows:
Responded by:Responded on25th May 2015
"1. All the PSU Banks, Private Banks as well as Housing Finance NBFCs like LICHFL, CanFin Homes etc. extend Home Loans. The Terms and Conditions are naturally bound to vary from Bank to Bank and from case to case, but the variations will be only minimal and not very significant as to make any huge difference. It is always preferable to approach the Bank with which you have a long standing relationship, like maintaining salary or corporate accounts, substantial personal or family deposits, and even availment and repayment of earlier loans.The bankers, as a rule, are risk averse, and would prefer to sanction loans to known persons with a good track record rather than to a totally unknown person, and it is here that your earlier/longer association with the Bank will facilitate the positive and prompt processing of your loan requirement.
2. Your eligibility for the loan will be determined by your satisfactory compliance with the statutory KYC norms of the Banks, your financial status and repayment capacity. Within this, the banks will consider the quantum of the loan as the least imporant as compared with the following three criteria:
a. FOUR Times of your Annual Income, based on the average of Last Three years Income Tax Returns or Audited Balance Sheets. If necessary, you can add some very close relative (Father, Mother, Spouse, Son or Daughter) as a joint borrower, so that the joint incomes of both can be considered for the purpose of this calculation.
b. 80 to 85% of the registered value of the property proposed to be acquired. The balance 15 to 20% will be considered your margin, and has to be borne by you.
c. This is by far the most difficult and complicated criteria, which most of the people may find some what difficult. The EMI (Equated Monthly Instalment) should not exceed 30 to 35 % of the Net Monthly Income/ Cash Flow. This again can be managed to some extent by (1) the combined monthly income of the joint borrowers, and (2) opting for a longer repayment schedule to reduce the amount of EMI.
Now, based on the above, let us see what is needed to have a home loan of INR One Crore:
(a) A Minimum Average Annual Income of INR 25,00,000
(b) The property to be acquired must have a minimum Registered value (cost/price) of INR 1,25,00,000 (the margin taken as 20%) and most importantly,
(c) The EMI should not exceed 35 % of the Net Monthly Income. So, for a 15 years repayment, the EMI for INR One crore will work out to about INR 92,000.So the minimum monthly income of the borrower(s) should not be less than INR 2.60 Lakhs.
So, now you have a fair idea about the value of the property you would prefer to purchase, and the quantum of the loan amount you will be eligible for.
Further, the bank will insist on the following Documents for considering the loan:
1.Title Verification and Legal Opinion from the Bank's APPROVED Advocate, regarding the correctness of the Title to the property, and compliance with other statutory requirements like Plan Approval, Building Permit etc.
2.Valuation Report from the Bank's APPROVED Architect, as to the correctness of the building plan and the value of the property.
3.The property acquired out of the bank's loan needs to be mortgaged to the bank during the currency of the loan.
Over and above these, the banks may, and usually do, insist on Surety/Guarantee of a third party of adequate means.
Although this appears to be somewhat tedious, in reality, all these can be completed smoothly, if the required documents are in good order. While availing the loan, insist on Fixed Rate of Interest rather than Floating Rate ( but, Banks generally do not entertain this). It is generally better to go in for a 15 years repayment period to minimize the stipulated EMI, as you can always pay more than the EMI, which will reduce your loan period as well as interest burden. If you choose, you can even pre-close / pre-pay your loan with nil to nominal pre-payment charges.
This is only a practical guide to the technical aspects of getting Home Loans from banks in India.The terms may vary from bank to bank.
Rate Of Interest: Differs from bank to bank, and also according to the quantum of the loan and the repayment period. Anyway the rates are likely to be in the 9% to 11% band.
Period Of Loan: Better to go in for 15 years tenure. You can always pay more or even pre-close the loan at a later date if you so choose.
The Banks charge interest on a reducing balance basis only, and you will be paying interest only on the outstanding amount on any day.This may not reduce your EMI, if you pay more, but will certainly reduce your loan repayment period and the total interest outgo."
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