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Things one must know before applying for home loan
You have chosen your dream home, decided upon the furniture, explored banks which provide you the right home loan products. Wondering what next!! You have inadvertently missed on one of the most important processes which is to create a list of queries you need to ask your customer service person at the bank. Though taken lightly by many this is the one step that would go a long way in ensuring that your home loan product is in line with your financial needs and requirements. Do not fret! Comparing and understanding home loan information is no Morse code. Following are a set of questions that would come handy when you meet your banker to either purchase or refinance your home loan.
Can I get the loan for all kind of purchases like ready, under-construction, land, self-construction etc. or is there any other product restriction?
Yes, one can get loans for all kinds of purchases depending upon the bank opted for. While all major banks provide loans for ready property, there are certain banks that do not provide loan for purchase of land or under-construction property.
Banks do have restrictions, which are specific to the profile of the borrower in terms of their annual / monthly salary, loan amount to name a few. How much loan can I get as per my income as well as per the cost of property?
Loan eligibility of an individual primarily depends on two factors i.e an individual's ability to pay and cost of the purchase. These parameters are generally adjudged by the person's monthly income, the agreement value & the market value of the property. For instance if a person needs a loan of Rs 50 Lakhs, he should have a monthly income of approximately 95,000/- for a loan tenure of 20 years.
Percentage funding from the banks also depends on the cost of property. If the loan amount is 75 lakhs or below then the banks would fund 80% of the property cost, while if the price is above 75 lakhs then banks would only fund 75% of the property cost. Will you be considering statutory expenses?
Statutory expenses including the stamp duty, registration, VAT, service tax, legal charges are generally not covered by the banks. Banks only consider the cost of property and car parking while funding. Although, there are certain NBFCs that fund the statutory expenses only if the market value supports.
How much time will the loan approval and disbursal take?
After the submission of the requisite documents, banks generally sanction loans for salaried individuals within 5-7 working days and for self employed individuals within 10-15 working days. Considering that there are no major issues with an individual's income verification and credit checks, the bank will provide conditional sanction of the loan within 5 to 15 working days. Once the sanction letter is handed to borrower within 2 working days the loan amount is disbursed.
Do I have to buy an insurance mandatorily to avail a home loan from you?
Buying insurance is a matter of solicitation. Although buying insurance cover is not mandatory, but it is advisable to purchase the same. A loan cover policy is like a jacket that safeguards the asset mortgaged in unforeseen situations such loss of job, loss of limbs, fatal illness or even death.
Is there is part or full Pre-Closure Penalty?
Individuals generally tend to close their loans at the first opportunity, but many hesitate to do so due to the pre closure charges levied on the same. This is a big misconception that individuals have, that there will be a penalty imposed if a loan is foreclosed. Actually, according to a directive by RBI pre payment penalty on floating rate home loans has been discontinued. This has ensured that the discrimination between existing and new borrowers is reduced and the competition amongst banks will result in finer pricing of home loans with floating rate.
Will the penalty be applicable if I switch the loan to another lender?
There is no penalty liable on the borrower in case he opts to transfer the loan to another bank, if the loan is under floating scheme. Individuals tend to switch banks only if they find the rates in another relatively lower or in case the product offering of the other suits the current requirements of the borrower.
Is there any lock-in period?
There is no lock in period as far as the home loans are concerned.
Who will service my requirements like issuing provisional tax certificates, part closing the loan time-to-time, switching loan from floating to fixed etc., for the next number of years I am going to remain your client?
These administrative requirements are serviced by the bank's centralized call centers who store your data. However, if you have a mortgage broker & advisor, who acts as a bridge between the banker and you, then their professional in-depth knowledge and experience, can enable you to gauge future trends and you can receive timely advice in the interest of yours. In absence of a mortgage broker, these requirements are not fulfilled.
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