Professional Documents
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Questions (FAQs)
Eligibility FAQs
1. I bought a property last month. Can I get a home loan for the same right now ?
2. I intend to co-own, the property with my brother, sister, father, mother. Will I be
eligible for a loan?
3. Can a single woman get a loan ?
4. Can I get a home loan for an apartment that I want to purchase in New York ?
5. Do professionals have special eligibility norms?
6. Can I get two home loans against two different properties ?
7. Is there any loan provision for purchase of land ?
8. Can a NRI (Non Resident Indian) avail of a housing loan?
Q1. I bought a property last month. Can I get a home loan for the same right
now ?
Most lenders would consider any property bought during the last 3 -6 months as a regular home
loan application. You would be eligible for the same rates and income tax benefits as any other
home loan . However, if you delay and the property purchase becomes more than 6 months old it
will be treated as Loan Against Property. The rates for the same are higher and there would be no
tax benefits as well.
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Q2. I intend to co-own, the property with my brother, sister, father, mother. Will
I be eligible for a loan?
You would not be eligible for a loan as most home loan lenders allow only immediate relatives to
co-own a property. This means that a parents-son combination and a husband-wife combination is
only allowed. The reason for this restriction is that if some dispute arises between the joint
borrowers, their incomes might not be pooled any longer and there might be a problem in repaying
the loan to the bank.
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Q4. Can I get a home loan for an apartment that I want to purchase in New
York ?
No, currently no home loan lender provides loan for purchasing properties abroad. The primary
reason being operational difficulties in property verification, disbursement and different legal
structure governing both home loan and repossession terms.
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Q5. Do professionals have special eligibility norms?
Most home loan lenders offer special privileges to self-employed professionals. They recognize the
fact that in such cases, income is generally under stated and the earning potential of such
individuals is higher that what has been disclosed. Every Housing Finance Institution (HFI) has its
own conditions regarding the type of professionals they would cater to. The HFI also decides on the
qualifications required for such professionals to qualify for the relaxed norms for loan eligibility
calculations.
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Q6. Can I get two home loans against two different properties ?
Yes, you can have as many loans against different properties. The only criteria being that you
should be able to repay all the EMIs every month.
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Q12. What is a fixed rate home loan ? When should one opt for a fixed rate
home loan ?
A fixed rate home loan is one where the interest rate on home loans charged by the lender is
constant over the tenure of the loan. It is advisable to go in for a fixed rate only if you feel that the
rate of interest prevailing in the market have touched rock bottom and the rates can only move
upwards. Here are the latest offers on a 10 year fixed rate home loan and 20 year fixed rate home
loan from the leading banks and housing finance companies in India.
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Q13. What is a floating rate home loan ? When should one opt for a floating
rate home loan ?
A floating rate home loan is one where the home loan interest rate charged by the lender keeps
changing with respect to the rates in the market over the tenure of the loan. Typically, the rate
charged is on the basis of their cost of funds and the prevailing market rates. These rates change
periodically. Accordingly the tenure increases or decreases or alternatively the EMI increases or
decreases based on whether the rates move upwards or downwards. Every home loan lender decides
whether to change the rate of interest or change the tenure at the time of sanction. It is advisable to
go in for the floating rate if you feel that the interest rates have reached its peak and can only go
downwards. Here are the latest offers on a 10 year floating rate home loan and 20 year floating rate
home loan from the leading banks and housing finance companies in India.
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Q14. Can I convert my loan from fixed rate loan to floating rate loan & vice
versa?
Yes, you can convert floating rate home loan into a fixed rate one with no extra charges. However,
to convert a fixed rate product to a variable rate product, most banks will charge a small fee. The
swap can be done any number of times and at any point of time.
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Q15. Can the Fixed Rate of Interest change during the loan repayment?
The Fixed Rate of Interest ideally remains fixed over the tenure of the loan. This rate does not
change after the final disbursement has been made. It is ideally suited for situations where you
expect the rates of interest to go up in the future and this fluctuation in the rates does not affect you
adversely. In cases where the disbursement is spread out over a period of time and the rates might
have changed in the interim. The rate of interest would remain fixed at the final weighted average
rate at which the loan was disbursed.
Nowadays, many lenders are reserving the option of changing the rate on a fixed rate home loan
after 3 or 5 years. So please read the fine print before you sign up for a fixed rate home loan.
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Q17. What is the difference between monthly rest & annual rest?
In a monthly rest, the interest is calculated on the outstanding principal at the beginning of every
month. Once the interest is calculated at the rate applicable to you for the month it is deducted from
the EMI received during the month.
Annual rest works on the same principal only the interest is calculated on your outstanding principal
at the beginning of every year. It is also commonly known as “Yearly Reducing Balance”.
Monthly reducing balance is a better option all other things being equal as you get immediate credit
for repayment and the interest component keeps reducing almost immediately on a monthly basis.
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Q18. What are the charges other than interest that are levied by home loan
lenders ?
Almost all lenders charge certain administrative or processing fees apart from interest for providing
a home loan in India . You must compare all these charges as well before signing on to a home loan
contract.
• Legal fees - payable to the lender or to the legal consultants of the lender
• Technical or Valuation charges - payable to the lender or to his technical consultant.
• Stamp duty on creation of mortgage - some banks charge this fee whilst other banks
normally just have a clause that requires this to be paid in the event the state government
actually charges this amount. The escape route for non-payment of this duty are
progressively being eliminated and the fact that the consumer carries the liability to pay this
duty in the future if demanded by the state government along with interest and penalties in
the future. So, this should not really be used by a consumer to eliminate a lender just
because he is paying this stamp duty to the government.
• Prepayment Charges - This is the biggest charge that most consumers miss taking into
account. A loan can be prepaid either in part or in full at any given point of time. You can
also prepay a loan even when it is only partly disbursed. However, most banks have an
upper limit on the number of times a person can prepay his loan in a year as well as on the
minimum amount you can prepay each time. Until recently, banks charged a penalty for part
or full prepayment. Increased competition has forced most banks to allow repayment
without any charges if it is funded from own sources. In case the borrower, is transferring
the loan to another lender he will need to pay the full charges.
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Q19. What are the tax benefits that I can avail of for repaying a home loan ?
You will be eligible to claim both the interest and principal components of your repayment during
the year.
• Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or
the actual interest repaid whichever is lower. (You can claim this interest only when you are
in possession of the house)
• Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is
subject to the maximum level of Rs 100,000 across all 80C investments.
• You will need to show the statement provided by the lender showing the repayment for the
year as well as the interest & principal components of the same.
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Q20. Can I take advantage of tax benefits from a home loan as well as claim
House Rent Allowance (HRA) ?
If you took a home loan and are still living in a rented place, you will be entitled to:
1. Tax benefit on principal repayment under Section 80C
2. Tax benefit on interest payment under Section 24
3. HRA benefit
Of course, you can claim tax benefits on the home loan only if your home is ready to live in during
that financial year. Once the construction on your home is complete, the HRA benefit stops. If you
took a home loan, got possession of the house, have rented it out and stay in a rented
accommodation, you will be entitled to all the three benefits mentioned above. However, in this
case, the rent you receive would be considered as your taxable income.
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Q21. I have a home loan in which I am a co-applicant. However, the total EMI
amount is paid by me. What is the total income tax exemption that I can avail
of ?
Yes, you can claim income tax exemption if you are a co applicant in a housing loan as long as you
are also the owner or co owner of the property in question. If you are only person repaying the loan,
you can claim the entire tax benefit for yourself (provided you are an owner or co-owner). You
should enter into a simple agreement with the other borrowers stating that you will be repaying the
entire loan. If you are paying part of the EMI, you will get tax benefits in the proportion to your
share in the loan.
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Q22. I have two housing loans on two different properties. Can I get tax rebate
under sec 80 C of both the loans?
Yes, you can get the 80C benefit on both loans. However, the total amount that you will be entitled
to will be a total of Rs 100,000 across both the homes.
The interest paid on a home loan is not directly deductible from your salary income for either of
your flat loans. Income from house property will be calculated for each flat you own. If either of
theses calculations shows a loss, this loss can be set off against your income from other heads.
As for Section 24 deduction, on your self occupied house you can take advantage of interest
payments up to Rs.1,50,000. For the other property, you can claim actual interest repaid, there is no
limit for the same.
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Q23. Is the EMI amount or the tenure of the loan affected if the value of the
underlying property falls ?
Fluctuating value of the property does not affect your EMI or your home loan liability. If you fail to
repay your home loan you will be damaging your credit profile and any chances of getting a loan in
the future. In such a case, where you want to dispose of the property because of loss in value – you
will be much better off if you prepay your home loan and then sell the property.
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Q25. Can I sell the property, even when the home loan is outstanding ?
Yes, you can sell the property with the consent of the lender. This consent letter usually mentions
the amount at which the home loan can be considered fully paid off. This amount is inclusive of
prepayment charges as applicable and calculated at a future date to give you enough time to find a
buyer. Based on this letter, you can negotiate with potential buyers.
If the buyer, wants to take a loan to purchase the property the process is much simpler if he
approaches the same lender. Then the lender does not need to release the title papers to another
lender before getting the payment.
If the buyer wants to make an outright payment- he can make the payment out to the bank directly
based on the consent letter. And the balance amount is paid out to you. The property papers will be
released only after the bank has recovered the entire amount including prepayment charges.
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Q26. Can I increase or decrease the amount of the loan even after it has been
sanctioned ?
Yes, the change in amount can be done at any point before disbursement. Any increase in loan
amount will however be subject to the eligibility conditions. The bank might also charge you
excess fees on requesting an increase in the loan amount. The bank is not obliged to return excess
fees paid in case you are requesting for a reduction in the loan amount.
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