I am planning to buy land. Can I apply for a home loan for this or do I have to apply only for personal loan or is there any bank that offers home loan for buying a plot?
—M K Vohra To buy a piece of land to construct a house, you can get a plot loan based on your income and the title of the property. Plot loans are more restrictive and available only to non-agricultural plots bought from statutory authorities or approved developers.
Normally, lenders will not finance more than 60% to 65% of the total cost of the plot and the remaining 35% to 40% has to come from your own sources. Also, plot loans are more expensive and available for shorter tenures (5 to 15 years) unlike a regular home loan.
If you are planning to self-construct a house on the same plot you can take a composite loan. The composite loan is given to cover the cost of land as well as cost of construction on such plot. By taking a composite loan brings more benefits in terms of financing as well as tax benefits. The loan financing in case of a composite loan goes up to 80-90% of the property value as compared to the plot loan’s 60-65%. Moreover, you can get tax benefits under section 80C for the principle repayment and Section 24 for the interest paid on the composite housing loan, including the cost of the plot. Pure plot loans are not eligible for any tax benefits.
Some lenders are not comfortable funding selfconstructed properties and hence, your choices will be limited. You can approach SBI, Axis Bank, HDFC Ltd, ICICI Bank, etc for availing the composite loan.
What is the procedure to repay the full amount of the home loan? Please tell me the needful action
—Mahesh Rath The bank will typically provide you the estimated amount, on payment of which the outstanding loan will be fully paid off. This amount includes the prepayment charge, if any, chargeable by your bank and will list the documents held by them which will be released on payment of the stated amount. This amount mentioned is typically calculated as on a future date, to enable time for you to arrange the payment.
After the payment of all dues, the bank will return your original documents and issuea loan closure letter indicating that there is no outstanding amount to be paid. Please make sure you get the no dues certificate to obviate any issues in the future when you pay the full outstanding amount on your home loan..
Can I get a home loan of ₹ 15 lakh with a net salary of ₹ 27,250 but without provident fund deduction?
—Raman Aulakh For a salaried person if you have Form no 16, that can be the proof of salary income sufficient for establishing your regular source of income. If the salary has been directly credited into a bank account regularly then even if you do not have Form 16 or have not filed income tax returns, the proof of salary statement for last three year can be sufficient for establishing your regular source of income. It will be difficult to get the loan if the salary is being paid in cash and you have no such proofs.
Of course the amount of loan will depend on the annual income. If you are less than 40 years of age, you should be eligible for 4 to 4.5 times of your gross annual income as loan.