FAQs

Q) Which factors determine my home loan eligibility?

Banks/financial institutions consider the following factors when determining your loan eligibility:

• Age
• Annual Income
• Occupational stability
• Resident type [Indian Citizen, Non-Resident Indian (NRI), Person of Indian Origin (PIO)]
• Number of co-applicants
• Co-applicants' income
• Credit score
• Other ongoing loans, if any

Q) What is the difference between a fixed rate and floating rate home loan?

The rate of interest associated with fixed rate loans remain unchanged during the entire tenure of the loan. On the other hand, the interest rates applicable on floating rate loans can be revised from time to time depending on the RBI key policy rates. The equated monthly instalments can increase or decrease depending on the prevailing RBI rates in the case floating rate type loans.

Q) Can I prepay my outstanding home loan amount?

Yes, you can choose to prepay your outstanding loan amount either partially or in full before the completion of your loan tenure. While banks do not charge any prepayment fee on floating rate loans, fixed rate home loans attract a penalty up to 2% of the loan amount if prepaid through refinance.

Q) Can I avail tax deductions on my home loan?

Yes, you can avail tax benefits on both the interest and principal component paid against your home loan. As per Section 80C of the Income Tax Act, you can avail deductions up to Rs.1.50 lakh on the principal amount repaid annually.

Under Section 24 of the IT Act, taxpayers are also eligible for benefits up to Rs.2 lakh on the interest repaid against a home loan annually.

Q) Who can be a co-applicant?

The co-applicant can be an immediate family member such as your spouse, your parents or even your major children. It is also mandatory for all co-owners of the property to be co-applicants while applying for a loan. However, the co-applicant need not be a co-owner.

Q) What is Pre-EMI?

Pre-EMI is defined as the interest that is to be paid to the loan provider until the entire loan amount is disbursed. The Pre-EMI is payable on a monthly basis until the last disbursement, post which the regular EMI will be applicable comprising the principal and interest components.

Q) What are the types of home loans available?

• Home Purchase Loan: Suitable for those looking to purchase a new house/flat or an under-construction property.
• Home Construction Loan: Can be availed by those looking to construct a house/property according to his/her plan.
• Home Conversion Loan: Suitable for those looking to purchase and move to another property when they have already bought a house with a home loan.
• Plot Loan: Can be availed by eligible borrowers looking to purchase a residential plot for the purpose of construction of a house/dwelling unit.
• Home Improvement Loan: These loans are sanctioned to those looking to repair/improve/renovate an already existing property.
• Home Extension Loan: Suitable for those looking to extend/expand/alter the structure of an existing property.
• Home Loan Balance Transfer: Can be availed by those who wish to transfer their outstanding home loan balance from their existing lender to another lender due to reasons such as reduced interest rates or better customer service.
• Home Loans for NRIs: These home loans cater to the housing needs of NRIs in the country. They also include PIOs and OCIs.

Q) What is MCLR?

Marginal Cost of funds based Lending Rate is the benchmark rate set by a lending institution below which they cannot provide loans to their customers.

Q) Can I switch from a fixed rate to a floating rate during my home loan tenure?

Yes, you can switch from a fixed to floating rate of interest on your home loan during the repayment tenure. However, you will be charged a conversion fee by the lender in such cases.

Q) When does my loan repayment period begin?

The loan repayment period begins only after the loan provider has disbursed the entire home loan amount. However, you will be required to pay the interest i.e. pre-EMI on the partially disbursed loan on a monthly basis, in most cases.

Q) Can I take 2 home loans at the same time?

Yes, you can take 2 home loans at the same time provided that your lender approves your eligibility to manage 2 Equated Monthly Instalments (EMIs) at the same time. However, the tax benefits on the second house will be different and you will be required to establish the property as self-occupied or let-out property.

Q) Can I get 100% financing on a home loan?

No. Banks/financial institution do not grant 100% of the property value as home loan. Home loan lenders establish a margin on their loan i.e. the percentage of the cost that the lending institution will be covering. For example, if the margin on the loan is set at 10%, the bank will cover 90% of property value. In such cases, you will be required to a make a down payment of the balance amount, i.e. 10% in order to cover for the rest of the cost.

Q) Does having a personal loan affect home loan eligibility?

When determining your home loan eligibility, the lender makes sure that your monthly repayments are not being affected by any other ongoing loans such as personal loan, two-wheeler loan, etc. However, other ongoing loans ultimately tend to affect your eligibility as your overall spending power is reduced. If your other loan commitments exceed 50%-60% of your monthly income, your home loan application may be rejected.

Q) Is personal loan better than home loan?

If you are buying a house, home loan is the best option. Usually you will not be eligible for a personal loan for as high an amount required for the purchase of a house. If you want extra money for non-specific personal needs, then go for a personal loan. Home loans also have an added advantage of top-up loans wherein you can request a top up on your loan amount to cover additional needs such as furnishing your house.

Q) Can I buy a house with two loans?

No, you cannot avail two home loans for the same property. Any such practice will be considered fraudulent. The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) ensures that fraudulent practices such as availing two housing loans for the same asset/property are prevented.

Q) How do joint home loans work?

A joint home loan can be availed by adding a co-applicant such as your spouse, parents, or an immediate family member on your application. Adding a co-applicant will increase your home loan eligibility as the lending institution will also be considering the co-applicant's income and credit score when determining your loan eligibility. All co-owners of the property are required to be the co-applicant for a loan. However, the co-applicants need not necessarily be the co-owner of the concerned property.