Shop around for the most suit­able one be­fore fi­nal­is­ing an op­tion

HT Estates - - HTESTATES - HT Es­tates Cor­re­spon­dent

In a very real way, the home l oan i s t he driv­ing force be­hind the In­dian res­i­den­tial real es­tate mar­ket. With­out a home loan, a large por­tion of the In­dian pop­u­la­tion would be forced to live in rented homes. Be­cause of this fa­cil­ity, one can be a proud home owner with­out hav­ing to have enor­mous amounts of ready cash. Since they play an ex­tremely vi­tal role in sus­tain­ing the real es­tate mar­ket, it is not only home buy­ers who de­pend on home loans, but de­vel­op­ers as well.

To clear up a com­mon mis­con­cep­tion – home loans are not avail­able only for the pur­chase of a house. One can avail of such fi­nanc­ing to buy land and to con­struct on it, and also to ren­o­vate an ex­ist­ing prop­erty. Of course, there are lend­ing norms at­tached to the grant­ing of a home loan.

A bank will usu­ally lend be­tween 75-80% of the agree­ment value, and the bor­rower has to pro­vide the rest from per­sonal re­sources. To clar­ify - while the RBI stip­u­lates a ceil­ing of 75%, some banks are will­ing to in­clude the stamp duty and reg­is­tra­tion charges within the purview of the loan, which tech­ni­cally makes the loaned amount 80% of the agree­ment value, says Kishor Pate, CMD - Amit En­ter­prises Hous­ing Ltd.

The lend­ing rate at­tached to the home loan also changes from time to time, de­pend­ing on how the econ­omy is far­ing and how much liq­uid­ity ex­ists on the mar­ket.

A bor­rower will qual­ify for home fi­nance if he or she meets cer­tain base­line re­quire­ments. The pa­ram­e­ters on which a po­ten­tial bor­rower’s el­i­gi­bil­ity for a home loan is de­ter­mined in­clude em­ploy­ment sta­tus, du­ra­tion of cur­rent em­ploy­ment, per­sonal in­come and credit sta­tus.

The credit his­tory of an in­tend­ing bor­rower is par­tic­u­larly im­por­tant to banks, who need to ver­ify whether there is any record of de­fault with an­other fi­nan­cial in­sti­tu­tion. The ex­is­tence of other loans, the type and age of prop­erty and over­all trans­parency of the pro­posed pur­chase are also taken into ac­count.

Most banks also re­quire that the bor­rower take out an in­surance pol­icy to pro­tect the home loan. This is to en­sure that they will get their money back if the bor­rower dies or is for some other rea­son in­ca­pable of ser­vic­ing his or her loan. Af­ter all, such an agree­ment be­tween bor­rower and lender is over ex­tended pe­ri­ods of time. A home loan is gen­er­ally re­paid over sev­eral years, un­less the bor­rower finds the fi­nan­cial means to pre­pay it in part of in to­tal­ity.

While all this may sound com­pli­cated to first-time bor­row­ers, get­ting home fi­nance is ac­tu­ally not very dif­fi­cult. As long as the bor­rower is el­i­gi­ble for it, such a loan is usu­ally made avail­able. Af­ter all, banks de­pend a lot on the in­ter­est gen­er­ated by home loans, and are will­ing to ex­tend home loans in most cases.

The chal­lenge for the bor-

rower lies in get­ting the best pos­si­ble re­pay­ment terms of such a loan. Th­ese may vary bank to bank, and it is wise to shop around for the most suit­able home loan be­fore set­tling on a fi­nal op­tion.

There is a lot of in­for­ma­tion on home loans and cur­rent lend­ing norms of var­i­ous banks float­ing around. How­ever,

those who are un­fa­mil­iar with bank­ing pro­cesses are ad­vised to con­sult an ex­pert. Fig­ures on the in­ter­net may of­ten be out­dated or mis­lead­ing, and there are var­i­ous le­gal as­pects to con­sider. Opt­ing for home fi­nance with­out a proper un­der­stand­ing of all re­lated as­pects could there­fore be a cause for re­gret later on.

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