Housing and Space Management

Housing And Space Management 3(2+1)

Lesson 32: Housing Finance – Public And Private Institutions

Scheme For Choosing Financial Institution For Home Loans

• Home loan means that to buy a house in installments.
• A Home loan is a loan provided by a bank/ financial institution to finance the purchase/ construction/ renovation of a residential property.
• Before getting a housing loan we need to take stock of our finances and assess your loan repayment capacity.
• Home loans are typically long-term loans, with repayment periods of up to 20 years.
• The house financed is mortgaged with the bank providing the loan.
• There is an option of fixed and floating interest rate when one goes in for a bank loan.

Home loans in India are given by many Nationalized, Commercial Corporate and Cooperative banks. A family has the option to choose any financial institution for securing housing loan and become ‘loanee’. During the course of repayment of loan to financial institution, a large portion of money is paid back in the form of interest by the loanee. As is a huge portion, it is necessary for the loanee to explore and examine the home loan options available in different financial institutions. Some of the points to be kept in mind before taking loan are:

• How professional is the financial institution in dealing with customers?
• Does it offer quality service in terms of efficiency and reliability?
• What are the available loan packages and which package suits you best?
• What are the various charges involved?

Before choosing any home loan option in India, you must consider the following points:

Type of Property: One should be aware about type of property in lieu of which to seek loan. There are loans offered by banks to resident Indians and NRIs for ready property, under construction property, self-construction and home improvement.
Loan Tenure : The loan is offered for a specific tenure. Need to check out the tenure for loans available in the market. Some loans are available upto 25 years.
Assessing loan-repayment capacity: One should ensure the monthly loan installment repayment. It should not be more than around 20-30% of gross monthly household income.
Repayment Options: One must choose between fixed and floating rate loans. Some institutions provides us with the option of switching from floating rate loan to a fixed rate loan once a year at no extra cost.
No Penalty Option : some lenders offer any penalty option. In this we can opt to prepay up to 25% of your loan every year. Pre-payment is allowed after a minimum of 6 months following loan disbursal.
Tax Benefits: Resident Indians are eligible for tax benefits on principal and interest components of a housing loan under the Income Tax Act, 1961. Make efforts to avail these, Do check with a home loan expert to understand home loan processes and to avail the best offer on your home purchase.