Definition of Home Loan
It is the funds or finance that are offered by national or private banks, financial institutions or housing financing companies to the customer, who wants to purchase a house or plot or flat. The funds are given for a certain period, and the person has to repay the amount through EMI. In India, all profile people and even NRI can avail this loan.
Different types of Home Loans
The person can avail various types of the home loans that are:
- Home purchase
- Home construction
- Home Improvement
- Home extension
- Land Purchase
- Loan against property
- NRI home loans
- Refinance or Transfer of Balance
Definition & calculation of EMI
EMI means Equated Monthly Installments, i.e. the person can repay the loan amount back through monthly installments that are divided equally among all the months till the tenure of the home loan. The EMI amount comprises of interest as well as the principal amount. It is calculated on the basis of the tenure of loan, interest rate and the loan amount.
The person should have minimum age of 21 years for availing the loan, and maximum age is 60 for salaried person and 65 in case of self employed. The person should have a regular source of income.
The person can avail the loan either at floating interest rate or floating interest rate. The banks normally charge around 10% to 16%, which depends upon the loan amount and on the customer’s profile.
Fixed Interest rates
The fixed rate of interest of home loan means that the interest rate will remain fixed for the whole tenure. It will not change with the market changes.
Floating Interest rate
The floating interest rate means that the interest rate will modify with the change in the market interest rate. It will go up if the market rate goes up and vice-versa.
The additional charges are processing fee and prepayment charges.
The banks or financial institutions provide loan only after, when the customer provide property documents to them. The bank keeps the property documents with them till the person does not repay the entire loan amount. Some banks or financial institutions also ask for the guarantor.
Rough time for loan sanction
The banks or financial institutions usually, take 15 days, if the customer provides all the documents that are required by the bank for assessing the customer creditability, income and repaying ability.