Home loan faq's

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A. Some of the most popular banks offering home loans in India are HDFC Bank, PNB, ICICI Bank, Bank of Baroda, Axis Bank and Canara Bank. However, the best home loan for you would be the one that matches your needs. Therefore, to get the best bank for home loan first analyse your requirements. Also, when comparing home loan offers don’t jump for the offer that offers lowest interest rate, rather check on the entire deal. Besides the interest rate, pay attention to other parameters such as loan repayment and prepayment policies, processing fees, etc.

To simplify this whole process, Rupee Catalyst is here to help you select the best bank and get the best deal.

A. Yes. Both the loan principal amount and the interest paid towards loan repayments provide tax benefits under Section 80C, Section 24(b) and Section 80EE of the IT Act respectively.

A. No. Banks usually keep a 20% margin when providing individuals with a home loan. This means that the lender may agree to provide you with 80% of the property value as a home loan, while you will have to shell out the rest 20% by yourself. In some cases, the lender can agree to provide you with up to 90% of the property value as a home loan.

A. Your family members like father, mother, siblings, etc. can co-sign a home loan with you. Other than that your spouse or adult children can also be co-signatories in case you are applying for a home loan. In India, as per existing rules, your friend cannot co-sign a loan as he/she is not a blood relative or otherwise related to you.

A. At present, up to 7 people can co-sign a home with the primary applicant. However, all of them need to be blood- relatives of the family member.

A. Factors that can play a crucial role in home loan rejection are mentioned below:

• Bad or low credit score
• Incorrect personal details in credit report
• Rejection of loan by other banks
• Unstable income
• Age factor
• Location of the property
• Poor repayment capabilities

A. The below mentioned steps can prove to be beneficial to avoid home loan rejection:

1. Credit Score: It is advisable to maintain a credit score of 750 and above to have a good chance of your application being approved. Banks & Financial Institutions rely on credit score before approving your home loan to check your credibility and loan repayment history. So, you should always maintain your credit score to avoid home loan rejection.

2. Insufficient Income: Banks and financial institutions look into your monthly income to see if you will be able to repay your equated monthly instalments (EMIs) or not. It is always advisable to take a home loan with EMI not more than 40% of your monthly income. Lenders have certain minimum income and employment requirements which play an important role in the loan-approval process. Make sure that you meet all the requirements before you apply for a home loan.

3. Too many applications for home loan in a short span of time: If you apply for a home loan from different lenders, it indicates banks and financial institutions that you are short of credit and need to apply to several sources to fill the gap. Lenders think that you will not be able to repay your loan, which leads to rejection of your home loan application.

4. Existing loan portfolio: Currently, if you have a number of loans to repay, then your lender might think that you will not be able to take on another EMI on your existing income, which will lead to your home loan rejection. So, it is better to apply for a home loan once you have paid off a few of your other loans to reduce your EMI burden.

A. Potential home loan borrowers can enhance their home loan eligibility in the following ways:

1. Improve your credit score: A good credit score improves your chances of loan approval so that you can avail a home loan at lower interest rates and better terms. Paying your bills on time and maintaining credit utilisation ratio below 40% are some of the ways to improve and maintain your credit score.

2. Pay higher down payments: Financial institutions lend 75-90% of the property value. This implies that the remaining 10-25% of the property value has to be contributed as down-payment by borrowers. To increase your home loan eligibility, make higher contribution towards your home loan down payment. Doing so will lower your LTV ratio; thus, improving your home loan eligibility.

3. Add an earning co-applicant: Add an earning co-applicant with good credit history and satisfactory repayment capacity to increase your home loan eligibility. Joint home loan might even help you get higher loan amount and concession on your home loan interest rates (if the co-applicant is a woman).

A. Equated Monthly Instalment (EMI) is the amount that you repay each month against your home loan principal amount and its interest amount. So, while calculating the home loan EMI, both the principal amount and the accrued interest on the loan is taken into consideration.