What is the eligibility criteria for a housing loan?
The following person can apply for a loan:
- A person who has attained 21 years of age.
- A salaried/ self-employed individual with regular income.
A person can apply for a home loan before the purchase of property or before the construction of a property.
There are two stages in the housing loan process
- Sanction of loan
- Disbursement of the loan amount with the progress of construction of a property.
Generally, every co-owner is required to become a co-applicant, but very co-applicant must not be an owner.
Yes, housing loans can be provided to any individual who has the audacity to pay. The loan may be taken for the same property (repairs/extension) or different properties.
A Net Monthly Income (NMI) is an income from all sources of a salaried individual and it includes:
- The NMI from the salary of the individual.
- The NMI from the salary of the co-applicant/spouse of the individual.
- Income from other sources, for instance, rent of flat, agricultural income, income from tuition, other businesses, etc.
In case of the professionals/self-employed, the NMI stands for income after deduction of income tax divided by 12 (as per IT Return) plus other income as above.
The borrower can take a loan up to 80% of the agreed amount.
EMI: it refers to Equated Monthly Installments. It is the sum of money to be paid monthly by the borrower to the lender of the bank. It comprises of repayment of part of principal amount and monthly interest rate.
Pre-EMI: it is the amount paid before the final disbursement of the loan amount. It includes the principal amount and the interest on the amount of loan disbursed. This interest is called as pre-EMI interest and is payable monthly or quarterly up to the date of commencement of EMI.
If there is any revision in the rate of interest, then EMI can be made flexible.
Any sum of money on a prepayment basis, more than EMI can be made for repayment of housing loan.
The loan for both floating rate and fixed rate can be paid in the time period of 20 years from the date of taking the loan.
The loan period shall not exceed the lower of retirement period of 65 years of age. In case the loan exceeds the prescribed amount, then the person may be required to take a Life Insurance Premium to cover the risks up to the payment of the loan.
Floating rate: it is the rate that is not fixed throughout the period of the loan. It is referred to as floating interest rate loan, fixed interest rate loan, variable interest rate loan. Its rate of interest is linked to a specific margin or index.
Fixed-rate: it is the loan whose rate of interest stands fixed throughout the term of the loan.
The following tax benefits can be claimed if you have a house loan:
- Deduction of interest can be claimed under Section 24. The interest to be claimed will be the lower of actual amount or Rs. 1,50,000.
- Deduction for principal amount can be claimed up to Rs. 1,00,000 under Section 80C. The maximum deduction allowed under Section 80C is Rs. 1,50,000.
- To provide for the above deductions, documents regarding the payment of interest or repayment of the principal amount must be provided for.