A Home Loan is a secured loan product where the lender provides finances for the purchase or construction of a residential/commercial property. One can also avail a housing loan to buy a plot of land and construct on it. Home Loans are also issued to extend/ repair/ renovate/ alter a new or second-hand property. The Home Loan is taken by a borrower against the property/security to be bought. This is done by giving the banker a conditional ownership over the property i.e. if the borrower fails to pay back the loan, the banker can retrieve the lent money by selling the property.
Most lenders get the property valued independently and provide loans based on their estimated value. It is important to remember, however, that frequently their valuation is significantly lower than the actual cost and hence the requirement of the borrowers goes up. Home loans in Indian Banks are provided up to maximum of 80% (90% for loan amount below INR 20 lakhs) of the value of the house. Home loans are repaid using Equated Monthly Installments (EMIs) spread over a fixed tenure.
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Home Loan eligibility depends upon various factors. A few of them are listed here
Home Loan in India can primarily be classified into two based on interest rates: fixed rate and floating rate of interest.
Fixed interest rate refers to repayment of home loans in fixed equal installments over the entire period of the loan. In this case, the interest rate doesn’t change with market fluctuations.
During the early part of the tenure, the monthly payments are used to service the interest and the principal is served in the later parts of the tenure.Very few lenders in India offer pure fixed rates where the rate of interest remains constant over the entire tenure. Most lenders have a reset clause of 3-5 years. If the borrower is certain that the rate of interest is the lowest in the market, only then should he opt for fixed rates of interest.
|Interest rate remains fixed irrespective of market conditions||The major drawback with fixed interest rates is that they are usually 1-2.5 percentage points higher than the floating rate home loan.|
|A fixed-rate home loan is ideal for those who are good at budgeting and want a fixed monthly repayment schedule.||If the interest rate decreases, the fixed rate home loan doesn’t get the benefit of reduced rates.|
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A Home Loan is a secured loan product where the lender provides finances for the purchase or construction of a residential/commercial property.
A personal loan is a loan for your personal use, be it your child’s wedding, a dream vacation, or a shopping extravaganza.
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Many people don’t know that banks don’t increase Home Loan EMIs but they increase the tenure of the home loan when the floating interest rate increases