10 Questions of Home Loan Seekers

Top 10  Questions normally Home Loan Seekers ask

1. For what are all purposes Home Loan is given?

You can get home loan for buying a house or a flat, renovation, extension and repairs to your existing house. 

2. How much home loan I am eligible?

Bank will assess your repaying capacity.
Your spouse income
Your assets and liabilities

3. What is an EMI?

You repay the loan in Equated Monthly Installments (EMIs) comprising both principal and interest. 

Click here for SBI emi calculator:

4. What documents are generally sought for a loan approval?

Address proof
ID proof
Salary slips
Bank passbook statements
Sale deeds,etc

5. What are the different interest rate options offered by banks?

 Floating Rate Home Loans and Fixed Rate Home Loans. 
For a Fixed Rate Loan, the rate of interest is fixed either for the entire tenure of the loan or a certain part of the tenure of the loan. 
In case of a pure fixed loan, the EMI due to the bank remains constant.

6. What is monthly reducing balances method?

 In case of monthly resets, interest is calculated on the outstanding principal balance for that month. 

7. How does tenure affect cost of loan?

The longer the tenure of the loan, the lesser will be your monthly EMI outflow. 
 But longer tenures mean payment of larger interest towards the loan and make it more expensive.

8. What is pre-EMI interest?

Sometimes loan is disbursed in installments, depending on the stages of completion of the housing project.  Pending final disbursement, you may be required to pay interest only on the portion of the loan disbursed. This interest called pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement up to the date of commencement of EMI.

9. What precautions do you need to take if you are purchasing a property that is not a newly built one?

Ensure that the documents being provided to you are not colour photocopies. 
Check the internet for other modus operandi to fraud and ensure clear title to the asset. 
Seek advice only from authentic sources such as your bank.

Get the no encumbrance certificate to find the true title holder . 

Obtain all tax papers to ensure that all documents are up to date.

10. Can you repay your loan ahead of schedule? Is pre-payment of loan allowed?

Yes, most banks allow you to repay the loan ahead of schedule by making lump sum payments. However, many banks charge early repayment penalties up to 2-3% of the principal amount outstanding. 

source: Reserve Bank of India

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