Home Loan Guide

What is a Home Loan?

A home loan is a secured loan provided by financial institutions for purchasing or constructing a residential property. The property itself serves as collateral for the loan, making it one of the most significant financial commitments for most individuals and families.

Key Features of Home Loans

• Secured Loan: The property being purchased serves as collateral
• Long Tenure: Repayment period up to 30 years
• Lower Interest Rates: Compared to unsecured loans
• High Loan Amount: Up to 90% of property value
• Tax Benefits: Deductions available under Income Tax Act
• Flexible Repayment Options: Choose from various EMI options

Types of Home Loans

Home loans come in various types to suit different needs. Understanding these types will help you choose the right loan for your specific requirements:

1. Home Purchase Loan

The most common type of home loan used for purchasing a ready-to-move-in property, under-construction property, or resale property. This is the standard home loan most people apply for.

2. Home Construction Loan

Specifically designed for constructing a house on a piece of land you already own. The loan amount is disbursed in phases based on the construction progress.

3. Home Extension/Renovation Loan

For extending, renovating, or repairing an existing home. These loans typically have shorter tenures and lower amounts compared to purchase loans.

4. Land Purchase Loan

For purchasing a plot of land for residential construction. These loans typically cover up to 70-80% of the land value and may have higher interest rates.

5. Balance Transfer Loan

Transfer your existing home loan from one lender to another to benefit from lower interest rates or better terms. This can help reduce your EMI burden.

6. Top-up Loan

Additional loan amount over your existing home loan for personal needs like home renovation, education, or medical emergencies. The interest rate is usually slightly higher than the home loan rate.

7. NRI Home Loan

Special home loans for Non-Resident Indians (NRIs) looking to purchase property in India. These loans have specific eligibility criteria and documentation requirements.

Eligibility Criteria

To qualify for a home loan with Finvare, you need to meet certain eligibility criteria. These may vary slightly between lenders, but the following are the general requirements:

Age Criteria

• Minimum Age: 21 years
• Maximum Age: 65 years at loan maturity
• For salaried: Up to 60 years
• For self-employed: Up to 65 years

Employment Type

For Salaried Individuals:

• Minimum work experience: 2 years
• Minimum 1 year with current employer
• Minimum monthly salary: ₹25,000 (may vary by city)

For Self-Employed Individuals:

• Business vintage: Minimum 3 years
• Minimum annual income: ₹3 lakhs
• Profitable business for the last 2 years

Property Criteria

• Property should be approved by local authorities
• Clear title and marketable
• Within municipal limits
• Age of property: For new properties, should not be more than 50 years

Credit Score Requirements

• Minimum CIBIL score: 700
• Preferred CIBIL score: 750 and above (for better rates)
• No history of loan defaults in the last 24 months

Documents Required

Having all the necessary documents ready can significantly speed up your home loan application process. Here's a comprehensive list:

Identity Proof (Any one)

• Aadhaar Card
• PAN Card
• Passport
• Driving License
• Voter ID Card

Address Proof (Any one)

• Recent Utility Bill (Electricity, Water, Gas) - not older than 3 months
• Bank Account Statement - not older than 3 months
• Rental Agreement
• Property Tax Receipt
• Passport

Income Proof

For Salaried Individuals:

• Last 3 months salary slips
• Last 6 months bank statement showing salary credit
• Form 16 for the last 2 financial years
• Latest IT returns
• Appointment letter and experience certificate

For Self-Employed Individuals:

• Business registration proof
• Last 3 years IT returns with computation of income
• Last 6 months bank statement
• Profit & Loss Statement and Balance Sheet for the last 3 years
• Business proof (Shop & Establishment Act, GST registration, etc.)

Property Documents

• Allotment letter/Sale agreement
• Share certificate (if applicable)
• Copy of approved building plan
• No objection certificates (NOCs)
• Property title deed
• Receipt of payments made to builder

Other Documents

• 2 recent passport size photographs
• Processing fee cheque
• Completed loan application form

Interest Rates & Fees

Home loan interest rates are typically lower than other types of loans due to the secured nature of the loan. Here's a detailed breakdown:

Interest Rate Types

• Fixed Rate: Interest rate remains constant throughout the loan tenure. Provides stability in EMIs but may be higher initially.
• Floating Rate: Interest rate changes based on market conditions (usually linked to RBI's repo rate). Starts lower but can fluctuate.
• Hybrid Rate: Fixed for initial period (usually 2-5 years), then converts to floating rate.

Current Interest Rate Range

• Fixed Rate: 8.5% - 10.5% per annum
• Floating Rate: 7.5% - 9.5% per annum
• Rates vary based on loan amount, tenure, and borrower profile

Factors Affecting Interest Rates

• Credit Score: Higher score (750+) gets better rates
• Loan Amount: Higher amounts may have different rate structures
• Loan-to-Value Ratio: Lower LTV (more down payment) gets better rates
• Employer Category: Working with reputed companies may get preferential rates
• Property Location: Properties in prime locations may get better rates
• Gender: Some lenders offer special rates for women applicants

Fees and Charges

Fee Type	Amount	When Applicable
Processing Fee	0.25% - 1% of loan amount	At the time of application
Legal & Technical Fees	₹5,000 - ₹15,000	During property verification
Valuation Fees	₹3,000 - ₹10,000	During property valuation
Prepayment Charges	Nil (for floating rate loans)	On prepayment
Late Payment Charges	1.5% - 2% per month	On delayed EMI payment
Cheque Bounce Charges	₹500 - ₹1,000 per instance	On cheque bounce

Tax Benefits

One of the biggest advantages of home loans is the tax benefits available under the Income Tax Act, 1961. These benefits can significantly reduce your tax liability:

Important Notes on Tax Benefits

• Tax benefits are available only after the construction is complete
• For under-construction properties, pre-construction interest can be claimed in 5 equal installments after completion
• Joint owners can claim tax benefits proportionally
• Benefits are available for both resident and non-resident Indians

Application Process

Applying for a home loan with Finvare is a systematic process. Follow these steps to get your home loan approved:

Step 1: Property Selection and Documentation

Select the property you wish to purchase and collect all necessary property documents. Ensure the property has clear title and is approved by local authorities.

Step 2: Check Eligibility and Loan Amount

Use our online eligibility calculator to check your loan eligibility and estimate the loan amount you qualify for. This will help you plan your finances better.

Step 3: Submit Application

Fill out our online application form with accurate personal, professional, and financial details. Upload all required documents through our secure portal.

Step 4: Property Verification and Legal Check

Our team will conduct a legal and technical verification of the property. This includes checking title documents, building approvals, and property valuation.

Step 5: Loan Sanction

Once all verifications are complete, you'll receive a sanction letter with loan details including amount, interest rate, tenure, and terms & conditions.

Step 6: Agreement Signing

Review and sign the loan agreement. Make sure to read all terms and conditions carefully. You may need to sign the agreement in the presence of witnesses.

Step 7: Disbursal

The loan amount is disbursed in stages based on the construction progress or as per the agreement with the builder/seller. For ready properties, disbursal is usually done in one go.

Tips for Quick Approval

Want to get your home loan approved quickly? Follow these tips to increase your chances of fast approval:

1. Maintain a Good Credit Score

Ensure your CIBIL score is above 750. Pay all your bills and EMIs on time, maintain a healthy credit utilization ratio, and avoid multiple loan applications.

2. Choose the Right Property

Select a property with clear title and all necessary approvals. Properties from reputed builders with good track record get faster approvals.

3. Have Sufficient Down Payment

Arrange for at least 20% of the property value as down payment. Higher down payment reduces the loan-to-value ratio and improves your approval chances.

4. Keep All Documents Ready

Organize all required documents before applying. Missing or incorrect documents are the most common reason for delays in home loan processing.

5. Maintain Stable Employment

Lenders prefer applicants with stable employment history. If you've recently changed jobs, ensure you have at least 6 months of stable employment with your current employer.

6. Consider Co-applicants

Apply with a co-applicant (spouse or family member) who has a good credit profile. This can increase your eligibility and improve approval chances.

7. Avoid Multiple Loan Applications

Don't apply for multiple home loans simultaneously. Each application results in a hard inquiry on your credit report, which can lower your credit score.

8. Get Pre-approved

Get pre-approved for a home loan before finalizing the property. This gives you better negotiation power with sellers and faster processing.

Frequently Asked Questions

What is the minimum and maximum home loan amount I can get?

At Finvare, you can avail home loans starting from ₹5 lakhs up to ₹5 crores, depending on your eligibility, income, and property value.

What is the maximum tenure for a home loan?

The maximum tenure for home loans is typically 30 years. However, the actual tenure depends on your age at loan maturity, with most lenders requiring the loan to be fully repaid by the time you reach 60-65 years of age.

Can I get a home loan if I'm self-employed?

Yes, self-employed individuals can get home loans. You'll need to provide business registration proof, last 3 years IT returns, and other business-related documents. The eligibility criteria may be slightly different from salaried individuals.

What is the difference between fixed and floating interest rates?

Fixed interest rates remain constant throughout the loan tenure, providing stability in EMIs. Floating rates change based on market conditions (usually linked to RBI's repo rate) and can be lower initially but may increase over time.

Can I prepay my home loan?

Yes, you can prepay your home loan. For floating rate home loans, most lenders don't charge any prepayment penalty as per RBI guidelines. For fixed rate loans, prepayment charges may apply, typically 2-3% of the prepaid amount.

What happens if I miss an EMI payment?

Missing an EMI payment can result in late payment charges and negatively impact your credit score. If you anticipate difficulty in making payments, contact us immediately to explore restructuring options or temporary relief measures.

Can I avail tax benefits on home loan?

Yes, you can avail tax benefits under Section 80C (for principal repayment) and Section 24 (for interest payment) of the Income Tax Act. Additional benefits may be available under Section 80EE for first-time homebuyers.

What is the loan-to-value (LTV) ratio?

LTV ratio is the percentage of the property value that the lender is willing to finance. For loans up to ₹30 lakhs, LTV can be up to 90%, and for loans above ₹30 lakhs, it's typically 75-80%. The remaining amount needs to be paid as down payment.

Can I get a home loan for under-construction property?

Yes, you can get a home loan for under-construction properties. The loan is typically disbursed in phases based on the construction progress. You may need to pay interest only on the disbursed amount until the construction is complete.

What is the difference between home loan and mortgage loan?

A home loan is specifically for purchasing or constructing a residential property. A mortgage loan is a loan against an already-owned property (residential or commercial) and can be used for any purpose. Home loans typically have lower interest rates than mortgage loans.