About Home Loan

In the latest monetary policy meet held on March 24-27 2020, the RBI has decided to give a 3-month moratorium period for all outstanding loans as on March 1, 2020. Remember, this is not an EMI WAIVER. The move is in line with the economic pressures induced by the Coronavirus outbreak. So, this could mean some savings for you on your loan and help you deal with the likely situation of less or no income. Your credit score will not reduce if you don't pay the EMI. But doing so can raise your interest liability as banks would like to cover their losses, which is likely to be the case on deferred EMI payments, by increasing the interest component of the EMI after the moratorium period gets over. So, if you have the money, keep paying to reduce your interest liability. The moratorium, which was ending on May 31, 2020, has been extended till August 31, 2020.

Banks and other financial institutions offer home loans for the purchase of the property. You can also buy/construct/renovate/extend your house with this money and repay it gradually within the chosen time period. Home loans are secured against the property, and if you fail to repay, the lender can take over the property from you and sell it to recover the dues.

The eligibility for a home loan depends on an applicant's income, credit history, property value and location. Based on these factors, the maximum loan amount is calculated.

Features & Benefits of Home Loan

Interest rate starting from 6.90% per annum

Special rates for women borrowers

Fixed EMI for the entire loan tenure

Interest subsidy available via PMAY CLSS scheme

Tax exemptions up to INR 1.5 lakhs and INR 2 lakhs on principal and interest portion, respectively, throughout the loan, even if the money is used for home renovation/extension/reconstruction

Option to take top-up loan for the above purposes

Home loan balance transfer facility

The maximum tenure is up to 30 years

The loan amount depends on the outstanding balance of the existing home loan subject to LTV ratio

Processing Fee - 0.35% of the loan amount plus GST onwards

Availability of substitute income documents - ITR or annual turn over

Importance of additional income in loan eligibility.

Co-borrowers of the loan can also avail tax benefit if they are co-owners of the property.

Types of Home Loans

Check out below the different types of housing loans that banks & NBFCs to individuals in India.

Home Purchase Loan

Land Purchase Loans/Plot Loan

Home Construction Loan

Home Improvement Loan

Home Conversion Loan

Home Extension Loan

Top Banks Offering Lowest Home Loan Interest Rates Sep 2020

Here's a list of top banks offering lowest housing loan interest rates in India. You can compare and apply online for the best home loan.

HDFC Home Loan Interest Rate at 6.90%* onwards for women applicants. All loans are at the sole discretion of HDFC Limited

Note - Please note that there are different types of charges which a borrower has to pay upfront. These charges are not negotiable and processing/application fee is one of them. So, do check all these details before applying for the loan.

Grab the lowest rate deal to ensure a greater reduction of the home loan EMI.

Why choose Wishfin?

Home loans are available at almost all top banks/NBFCs , so choosing one might be a little time-taking. Wishfin helps you in selecting the best lender based on your requirements. Here are the reasons to choose Wishfin:

Online Marketplace - Wishfin is an online marketplace for loans with unbiased suggestions. 19 Million Satisfied Customers - More than 19 million customers have fulfilled their wishes through Wishfin. Instant Quotes from Top Lenders - You get instant quotes from top banks and NBFCs. Expert Advice - You get expert advice from experienced Wish Experts. Transparent Process - Experts are there to answer any query related to your home loan application. End to End Service - You get 100% assistance for the loan application Free CIBIL Score and Report - Wishfin gives you free CIBIL score and CIBIL report with your home loan application.

How to Apply for a Home Loan Online?

Wish Experts guide you through the process of selecting a home loan with lowest interest rate as per your eligibility. The process is much simpler as compared to visiting different lenders offline.

Steps to follow to apply for a home loan

You need to provide the following details in the form given at the top of this page:

Enter the desired loan amount Select employment status and mention monthly income Full name, city name, date of birth, contact number and email ID Accept terms and conditions Click on 'Get Quotes'

After the submission of the form, another form appears where you have to mention property details such as property value, applicant's gender, residence address, PAN number, and then click on 'Get Quotes'. Subsequently, you'll get a list of banks where you are eligible for a home loan.

Wishfin has partnered with WhatsApp to enable consumers to apply for a home loan on WhatsApp. This is the first ever facility where a consumer can apply for a loan on WhatsApp just like chatting with your friends. You just need to answer a few basic questions and the chatbot will show you a list of options. The simplicity of the process makes it for a pleasant user experience.

How to get a Home Loan offline?

The offline process for a home loan is very simple. You just need to visit the nearest branch of your desired housing finance company or bank and check the requirements. You need to follow the steps shown below:

Visit your selected lender's nearest branch Ask the executive to provide you with a list of documents to submit Fill the form properly Submit the form, documents and processing fee cheque

Is it the Right Time to Apply for a Home Loan?

The COVID-19 pandemic brought the country to a standstill with offices and factories getting locked down by the government order aimed to curtail the spread of this virus. But now, the country is all set to unlock in phases. With more than 2 months into the lockdown, the Reserve Bank of India (RBI) has slashed the repo rate by 115 basis points, a reduction of 1.15%. As banks are using repo rate as the benchmark to price their floating rate home loans now, it will be worth applying for the same. The effect of the latest 0.40% rate cut made by the RBI on May 22, 2020, will be seen soon as banks will cut their lending rates. With the proposed lending rate cut, home loans will become even cheaper. The interest rate can drop to as low as 7% or even lower. The rate reductions only make it exciting from the point of view of cost. Lenders like ICICI Bank, HDFC Limited and PNB Housing Finance have already started sanctioning home loans online. So, what are you waiting for? If you have figured out the property to buy and have saved enough to pay for the margin money and property registration formalities, the time is ripe for you to buy a home.

Fees & Charges on Home Loan

The list of charges that you need to pay for a home loan are as follows:

Application fee

Processing fee

Administrative fee

Technical evaluation fee

Legal fee

Franking fee on sale agreement

Franking fee on loan agreement

Notary fee

Intimation of registration fee

Indemnity cost

Adjustment fee

Fire insurance fee

Document fee

What are Stamp Duty and Registration Charges?

A home loan comes with an equitable mortgage of the property you want to buy from the seller. The mortgage of the property requires a borrower to pay the stamp duty as applicable. This is fixed by the state government and can vary from one state to another. It constitutes a certain percentage of the market value of the property. The market value is assessed considering the circle rate of the property. The property needs to be registered so that you can justify your ownership. This will require you to pay a registration charge that can be around 1% of the market value of the property. Remember, these charges, like a down payment, are not financed by home loans. You need to pay the same from your end. If we add down payment with these two, the overall amount can be a considerable one. So, planning to buy a home should begin a lot earlier. When done with planning, you can accumulate the required sum and buy your dream home with ease.

Legal & Technical Verification of Home Loans

This is an important step in a home loan process. While certified advocates do the legal authentication of the property, civil engineers will check its construction. While doing the legal verification, advocates will check the chain and map of the property and certify it when satisfied with the details provided. Whereas, engineers will check the property map to find whether the house is constructed as per the specifications mentioned in it. These engineers set the value of the property based on the construction, the circle rate of the area in which it is located, etc. They will mention it in their technical report to the lender, which will read it and decide on the loan amount for you.

What is the eligibility criteria for Home Loans?

Home loan eligibility is based on income, age, credit score, property value and location, etc. The table shows general eligibility criteria at all banks/NBFCs.

Parameters Salaried Self-employed Age Should be between 21-60 years Must be between 21-65 years Income Minimum income of INR 1,80,000 p.a. Minimum income of INR 1,80,000 p.a. Current Experience 2-3 years of current job stability 3 years of current business stability CIBIL Score 720 or above 720 or above

You can also check your home loan eligibility to know the maximum loan amount you are eligible for. This will only help you plan your purchase better. Your income, CIBIL score, age and professional stability, property location are very important. Lenders demand a CIBIL score of 720 or above with the property in an authorized location. However, if you have a genuine reason for your credit score to be lower than 720, some NBFCs can consider your application, but will approve the loan at a higher rate of interest.

How much loan amount can you get based on your salary?

Lenders calculate the maximum loan amount eligibility based on your salary. Only 50% of your net take home salary is considered for calculating the eligibility which means you can get a higher loan amount if your salary is high. The existing loan EMIs, if any, can also impact your home loan eligibility. If a home loan applicant is already paying an EMI, that will be deducted from the 50% of the salary and the remaining amount would decide your maximum loan amount eligibility.

Lenders calculate Fixed Obligations to Income Ratio (FOIR) based on your existing EMIs and net monthly income. The percentage of FOIR should be 75% or less. For instance, if your in-hand salary per month is INR 1,00,000 and you are currently paying a car loan EMI of INR 6000 and personal loan EMI of INR 10,000 and you want to know how much loan amount you can get for a home loan, your FOIR would be:

Your disposable income for a new loan is: INR 50,000 - INR 6,000 - INR 10,000 = INR 34,000

FOIR = Sum of existing obligations/Net take home salary*100

= ((INR 6000 + INR 10,000)/ INR 1,00,000) * 100

= (INR 16,000/ INR 1,00,000)*100

= 16%

So, lenders will approve the loan amount having monthly installment of INR 34,000 or less even for the longest tenure. Other factors such as your credit score help you fetch a better deal from the lender.

Loan to Value Ratio

A home loan is not financed to the extent of the property cost. So, as a borrower, you should be fully aware of the loan you are likely to get for the property you wish to buy. Most lenders, especially banks follow the loan to value (LTV) ratio as shown below.

Loan Quantum LTV Upto INR 30 Lakh Upto 90% of the property cost Above INR 30 Lakh - 75 Lakh Upto 80% of the property cost Above INR 75 Lakh Upto 75% of the property cost

Shall You Check the Home Loan EMI Calculator?

You shall check the home loan EMI calculator in advance to get an idea of the monthly installment amount applicable. The calculator computes the EMI based on the loan amount, interest rate and tenure. The calculator is available online to make it easy for you. Just enter these three variables at their respective space in the calculator and see the EMI flashing on the screen. You will even get to see the total interest payable to the lender over the loan tenure you opt for.

What are the documents required for a home loan?

The documents required to apply for a housing loan are a bit different for salaried and self-employed applicants. Below are the documents you need to submit along with loan application form:

Documents required for Salaried

Filled home loan application form

Identity Proof- Aadhaar Card/ Passport /PAN Card/ Voter ID Card /Driving License

Address Proof - Passport/Aadhaar Card /Utility Bill

Residence Ownership Proof - Property Documents/Maintenance Bill/Electricity Bill

Income Proof - Latest 3 months Salary Slips and Form 16

Job Continuity Proof - Current Employment Certificate /Current Job Appointment letter (if more than 2 years)/Experience Certificate (including your previous job certificate or appointment and relieving letter)

Bank Statements - Latest 1 year statement where your salary is getting credited

Property Documents - Copy of agreement executed / Sale Deed, Share Certificate, Latest Maintenance Bill, List of documents & sanction letter given by Existing Banker (If applicable)

Advance Processing Cheque

Investment Proof - Fixed Deposit/Shares/Fixed Assets, etc.

Passport size photograph/s

Documents required for Self-Employed (Professionals and Non-Professionals)

Filled home loan application form

Identity Proof - Aadhaar Card/ Passport /PAN Card/ Voter ID Card /Driving License

Address Proof - Passport/Aadhaar Card /Utility Bill

Residence Ownership Proof - Property Documents/Maintenance Bill/Electricity Bill

Income Proof - Latest 3 years Income Tax Returns including Computation of Income, Profit and Loss Account, Balance Sheet, Audit Report, etc.,

Business Existence Proof - 3 years old Saral Copy /Shop Establishment Act /Any Tax Registration Copy /Company Registration license

Bank Statement - Latest 1 year bank statement both current and savings.

Property Documents - Copy of agreement executed / Sale deed, Share certificate, Latest maintenance bill, list of documents & sanction letter given by existing banker (If applicable)

Advance processing cheque

Investment Proof - Fixed Deposit/Shares/Fixed Assets, etc.

Passport size photograph/s

Please note that income proof is the most important document to get a home loan approval. If you do not get your salary in a bank account, you can not apply for a home loan. Only a few NBFCs will consider your application. But they will most likely approve the loan at a higher rate of interest. Recently, the Union Cabinet declared 10 per cent reservation for economically weaker upper castes recently and now ministry might bring in another surprise for the middle class people of India. The finance ministry might increase the tax exemption limit under Section 80C of the Income Tax Act.

Facing Salary Cuts Due to Lockdown? The Lender May Ask You to Submit Your Financials Again Even if the Loan was Sanctioned

As the lockdown has caused serious troubles to the common man with many having to live with a reduced salary, lenders are fearing this could affect their asset quality adversely. To avoid such an incident, lenders have started telling customers to resubmit their financials even if their home loan was sanctioned before. Most likely, the disbursal amount will reduce if you are getting a reduced salary. So, you may require to use more of your savings to buy a home. However, if the dip in salary is not significant, the transaction may go through as planned earlier.

What is a Home Loan Balance Transfer?

A home loan balance transfer is a tool by which you can lower the interest burden by shifting your existing loan to another lender at a lower rate of interest. You have two options with you - continue the loan at the new lender for the time that is left or cut the tenure by some years. In either of these two cases, the interest liability will come down. But by reducing the tenure on a balance transfer, the interest will reduce more. The EMI will rise though. Check how much the EMI increases with a shorter tenure, see the interest payment it saves for you and then decide about it. An example below will help you understand balance transfer math better.

Example - Ravi Malhotra is servicing a home loan of INR 50 lakh for the last 5 years at 8.35%. He still has 15 years of loan payment ahead of him. Now, he is getting a balance transfer offer at 7.50% per annum. He is confused about whether he should curtail the tenure to another 12 years on a balance transfer or continue paying for the remaining years. Let’s check out how he should approach his balance transfer.

Loan Aspects Repayment Scenario When Curtailing the Tenure to Another 12 Years on a Balance Transfer Repayment Scenario When Going for the Remaining 15 Years on a Balance Transfer Original Loan Amount INR 50,00,000 INR 50,00,000 EMI @ 8.35% INR 42,918 INR 42,918 Interest Outgo @ 8.35% Over 20 Years INR 53,00,236 INR 53,00,236 Interest Paid Till 5 Years INR 19,72,508 INR 19,72,508 Outstanding Balance at the End of 5 Years INR 43,97,449 INR 43,97,449 EMI @7.50% on a Balance Transfer INR 46,403 INR 40,765 Interest Payable @ 7.50% on a Balance Transfer INR 22,84,589 INR 29,40,232 Interest Paid @ 8.35% + Interest Payable @ 7.50% INR 42,57,097 INR 49,12,740 Savings INR 10,43,139 (53,00,236-42,57,097) INR 3,87,496 (53,00,236-49,12,740)

You can see how by curtailing the tenure to 12 years (17 years overall), Ravi could save around INR 10 lakh on a balance transfer, which is around 6-7 lakh more if he continues to pay for the remaining 15 years. The EMI rises by just INR 3,485 on curtailing the tenure.

Frequently Asked Questions (FAQs)

Here's a list of questions that people ask with respect to home loans.

Will the EMI Change with the Change in Home Loan Interest Rates?

The Equated Monthly Installment (EMI) would most likely remain unaffected with the change in home loan interest rates. The change in rates would, however, ensure a change in the proportion of interest and principal over the years. If the lender raises the interest rate, the interest portion of the EMI will increase. The principal portion would decrease in such a case. When the lender cuts the rate, the interest portion will come down. The principal portion of the EMI would increase. Apply Home Loan Now

What are the Benchmarks Used by Lenders to Price Home Loans?

Since October 2019, banks have started following the external benchmark i.e. Repo-linked Lending Rate (RLLR) to price floating rate home loans. So, whenever the Reserve Bank of India (RBI) makes a change to the Repo Rate, the rate at which the central bank lends to commercial banks, there will be a change in the home loan rate in the same proportion. A spread will be charged over the external benchmark rate and will remain fixed throughout the loan tenure unless the credit profile of the borrowers undergoes a substantial change. Since October 2019, the RBI has slashed the repo rate by as much as 140 basis points (1.40%), including the latest 40 basis point reduction on May 22, 2020.

Before 2019, banks used to offer floating home loans on the basis of the Marginal Cost of Lending Rate (MCLR), a loan pricing mechanism that was introduced by the Reserve Bank of India (RBI) in April, 2016. Before that, banks used to charge home loans on the basis of base rate.

Housing Finance Companies (HFCs), on the other hand, benchmark Retail Prime Lending Rate (RPLR) or any other reference rate. The actual rate is arrived by deducting a few percentages from the said benchmarks. Contact Us

What is a Teaser Home Loan and Should You Apply for it?

A teaser home loan is an offering where the rate of interest will remain fixed for the first few years before floating rates will apply to the outstanding loan balance. As these loans are offered at higher rates than a full-fledged floating rate loan, having them won’t be good. Currently, as the economy continues to face challenges due to weak demand that has got accentuated further by the COVID-19 induced lockdown, floating rates will come down even further. The RBI, which advanced its monetary policy meet scheduled to be held in June to May 20-22, 2020, has lowered the repo rate by a further 40 basis point to 4%. So, possibly from June 1, 2020, you could see floating interest rates coming down to even below 7%. The weak demand may continue for some more time. This could only widen the difference of interest rate between a teaser home loan and a complete floating rate loan. So, choosing a teaser home loan will translate into massive interest payments which can be avoided using the repo-linked floating rate home loan.

Will the Interest Rate Change Whenever the Lender Changes the MCLR?

No, the interest rate won’t change whenever the lender changes the MCLR. For example, if the lender has provided you a loan on 1-year MCLR, the rate will be subject to change after a year from the date of home loan sanction. The same pattern will follow afterward. When the reset date arrives, the loan will be repriced according to the prevailing MCLR. Contact Us

What is Pre-EMI Interest on Home Loans?

The concept Pre-EMI interest is applicable to partly disbursed home loans. A borrower has to pay only the interest portion of the loan till the time it is fully disbursed. Contact Us

What is a Plot Loan?

It is a loan extended by banks and housing finance companies to individuals wanting to buy a plot. However, this loan would be given when you construct a home on the plot. Apply Now

What are the Documents Needed to Buy a Property?

You need to submit the following documents

Title Deed

Sale Deed

Approved Building plans

Completion Certificate (For Newly constructed property)

Commencement Certificate (For Under-construction property)

Conversion Certificate( If agricultural land is converted to non-agricultural)

Encumbrance Certificate

Latest Tax Receipts

Occupancy Certificate

How Much Loan Can I Get to Buy a Home?

The home loan amount would depend on a variety of factors such as your income, age, property value, etc. Contact Us

What is Loan to Value Ratio?

It means the amount of home loan you can get on the total value of the property. Loans up to 30 lakh can be financed at up to 90% of the property value. Loans above 30 lakh to 75 lakh can be granted at up to 80% of the property value. Loans above 75 lakh can be offered at 75% of the property value. Contact Us

Can I Avail Home Loan Balance Transfer?

Yes, you can avail the home loan balance transfer facility to save on the overall interest outgo. The balance transfer is a process by which the outstanding loan balance gets transferred to another lender at lower rates of interest. Contact Us

How Much Tax Can I Save on a Home Loan?

Home loans come with tax benefits for borrowers to avail. The tax benefits apply to both principal and interest repayments. You can get a maximum tax savings of up to 1.5 lakh on principal repayment in a financial year under Section 80C of the Income Tax Act. On the other hand, you can get a maximum tax savings of up to 2 lakh on interest repayment in a financial year under Section 24 of the IT Act. Contact Us

When Should You Make a Home Loan Balance Transfer?

A home loan balance transfer will be ideal when there’s a lot of time for the repayment to be over. More repayment period means a scope for massive interest payments is prominent. For example, you still have more than 10 years left to repay a 20-year home loan, you can transfer your home loan to a new lender and make significant savings. You also need to ensure the new lender offers you the balance transfer facility at an interest rate at least 0.25%-0.50% lower than the existing one.

How Will the Home Loan Repayment Change Post Balance Transfer?

The balance transfer will result in a reduced EMI that you need to pay every month. This will also reduce the overall interest payments on a home loan.