Home is a basic need of every individual so, the common man India invests their lifetime earning to own a home. The rising real estate prices will never allow a common man to own a home with spot cash so, people look at home loans when they want to purchase or construct a home. There are many lending institutions like banks and non-banking financial institutions to offer loan to the prospective buyer. It is important to know the terms associated with the housing loan and get familiarise with them before you take an informed decision to avail a loan to buy your home.
Banks extend loans to the customers to help them purchase a home at ease. The loan amount is not sanctioned in full. Banks are authorised to issues 70%-80% of the property value as a loan amount and the rest has to be adjusted by you and this is termed as down payment. Banks are authorised to provide 80% of the property value as loan. They will also provide 90% of the loan if the property value is as low as 20 lakhs. Make sure you have down payment in hand before you approach the lender for a loan. Higher the down payment, higher will the chances of loan approval because the amount you lend from the banks is low.
Home loan approval for a pre- approved property is quite easy. Both banking and non-banking institutions have pre-approval for certain projects. If the property that you are going to purchase has pre- approval from the lending institutions, there is no need for the buyer to get into legal verification. Though pre-approval form the lender does not guarantee home loan approval, it certainly increases the chances of approval and quickens the process.
How is your housing loan disbursed after approval? The disbursement of the loan is done according to the type of home you purchase with housing finance. If you are buying a fully constructed home, the loan amount is disbursed in full. If the house is still under construction, the loan amount is distributed in instalments according to monetary requirements. Irrespective of the mode of disbursement, the bank will charge some fee for disbursement which is added to the principal amount.
The lender will charge two types of interest on the housing loan and this is paid back to the lender along with the principal in monthly instalments. Fixed interest rate remains fixed for during the rest clause and is not subject to market fluctuations during this rest period. Later banks will change the interest rate on home loan per market changes.
Floating interest rates, on the other hand, are subject to market changes and are tied to base rate. Change in the base rate will affect the interest rate too. Irrespective of the type of interest rate, the monthly payments you make for a loan are adjusted to the interest rate first and the principal amount is considered later.