What is a Home Loan: Everyone desires to have their own home, to live in a house they can call their own. However, in today’s times of rising costs, it becomes very difficult for an average person to manage daily expenses, let alone afford a home. When income is limited, fulfilling the dream of owning a house seems like a big challenge. After covering daily expenses, there is hardly any money left for savings, making it hard to achieve the dream of building a home.
For an average person, getting a home loan can be a challenging task. This is because banks usually offer loans ranging from 10 lakh to 50 lakh rupees. To provide such a large amount, banks demand various securities. Moreover, most people lack sufficient knowledge about home loans, which forces them to visit banks multiple times for information.
If you want to take a home loan to build a house but don’t know how to apply for it, there’s no need to worry. In this article, we will guide you on how to apply for a home loan. If you’re planning to get a home loan to build your house, make sure to read this article till the end.
What is Home Loan?
If you want to build your own house but don’t have enough money for it, you can borrow the required amount from a bank. This is called a Home Loan. You can apply for a home loan at any bank. After building your house with the loan, you will need to repay the borrowed amount along with interest within the given time frame. The biggest advantage of a home loan is that, compared to other loans, it has a lower interest rate.
If you don’t have a house, you can take a home loan to buy one. You can apply for a home loan at any bank or financial institution. However, to qualify for a home loan, there are certain eligibility requirements, and you will need to submit some necessary documents. The details of these requirements are given below.
Purpose of Home Loan
There are several reasons why people take home loans, and the main purposes are listed below:
1. Buying a Home
The most common reason for taking a home loan is to buy a house. When a person doesn’t have enough money to buy a home, they take a loan to purchase their dream home and repay it over time.
2. Building a Home
If you want to build a new house on your land, you can apply for a self-construction loan. This loan is used when someone has land but lacks the funds to build a house.
3. Home Renovation/Repairs
Home loans can also be taken for repairing, renovating, or upgrading an old house, such as fixing the roof, painting the walls, or replacing old furniture. Special home renovation loans are offered for improving the look and structure of a house.
4. Tax Benefits on Home Loan
Another reason for taking a home loan is tax savings. In India, interest and principal payments on home loans come with tax benefits, which can reduce your annual tax rate and make it easier to repay the loan.
5. Investment in Property
Some people take home loans to buy a property and rent it out to earn regular income. The rental income can help in repaying the loan installments.
6. Alternative Housing
Sometimes, home loans are used for temporary housing, such as buying a house for business purposes or relocating to a different area for work. This is especially useful for businesspeople, employees, or anyone who needs to move for their job.
Types of Home Loans
Home loans are provided for different purposes and needs. Each type of home loan has its own purpose and terms. Here, we will look at the main types of home loans in detail:
1. Traditional Home Loan
This is the most common type of home loan, given to individuals for buying or building a house. The bank or financial institution lends a fixed portion of the total cost of the house, which must be repaid with interest over a specified period.
2. Self-Construction Home Loan
A home loan portfolio is for individuals who want to buy or own multiple properties. The loan is provided based on the value of multiple properties, allowing you to manage loans for more than one property at the same time.
3. Multi-Purpose Home Loan
This loan can be used for multiple purposes, such as buying, building, or renovating a house. It is a versatile loan that covers various housing-related expenses.
4. Home Loan Against Property
This loan is taken when you already own a property and use it as collateral to get a new loan. It is generally used for other purposes, such as education, health, or business.
5. Loan for Renovation
If your house is old and needs repairs or renovations, this special loan is available to help. It can be used for repairing, renovating, or improving your home.
6. Professional Home Loan
This loan is designed for professionals who work independently, such as doctors, lawyers, or chartered accountants. It is intended for professionals who do not have a regular salary but have a stable financial situation.
7. Government Employee Home Loan
Some banks and financial institutions offer special home loan schemes for government employees. These loans typically have lower interest rates and flexible repayment terms.
8. Home Equity Loan
This loan is based on the equity of your home, which is the difference between the market value of the house and the remaining loan amount. It can be used for any personal expense and is usually a long-term loan.
9. Home Equity Loan
This loan is based on the equity of your home, which is the difference between the market value of the house and the remaining loan amount. It can be used for any personal expense and is usually a long-term loan.
Eligibility for Home Loan
Eligibility for a home loan depends on certain specific criteria. The main eligibility factors are as follows:
1. Age Limit
Your age plays an important role in home loan eligibility. Generally, the minimum age to apply for a home loan is 21 years, and the maximum age can be up to 60 years.
2. Required Income
Banks decide whether to give you a home loan based on your income. Your income should be stable and sufficient enough to ensure you can pay the EMI regularly.
3. Credit Score
Your credit score is crucial for loan approval. Typically, a credit score of 750 or above is considered ideal for a home loan.
4. Property Value
The value of the property you are purchasing is also important. Banks usually assess the validity and value of the property before approving the loan.
Home Loan Application Process
The process of applying for a home loan is completed in a few simple steps:
1. Filling the Application Form
You need to fill out the application form provided by the lender (bank/financial institution), which asks for your personal, financial, and property-related details.
2. Submitting Documents
You will need to submit the following documents:
- Aadhar Card of the applicant
- Residence Certificate
- Income Certificate
- Bank Statement of the last 6 months
- Salary Slip of the last 6 months
- Mobile Number
- Photo
- Bank Account Passbook
3. Property Evaluation
The lender evaluates the property to ensure it can serve as collateral for the loan amount.
4. Loan Approval and Disbursement
After property evaluation, the lender approves the loan and transfers the funds to your account.
Home Loan Interest Rates
1. Fixed Interest Rate
In this case, the interest rate remains the same for the entire loan term. The benefit of this is that you can easily plan your EMI payments.
2. Floating Interest Rate
Here, the interest rate changes periodically based on market conditions. If interest rates fall in the market, your EMI may also decrease.
Benefits of Home Loan
There are several benefits of taking a home loan:
1. Ownership of Property
A home loan allows you to become the owner of a property, which becomes an asset for your future.
2. Tax Benefits
You can get tax exemptions on the interest paid on the home loan. Under Section 80C and 24(b), both interest and principal payments qualify for tax benefits.
3. Long Repayment Term
Home loans typically have a repayment period of 15-30 years, which reduces the EMI amount and makes it easier to pay back the loan.
Documents Required for Home Loan
To apply for a home loan, you will need the following documents:
- Proof of Identity (such as Aadhaar card, PAN card)
- Proof of Income (salary slip, income tax return)
- Proof of Residence (utility bill, rent agreement)
- Property Documents (documents related to the sale or purchase of the property)
- Bank Statement (for the last 6 months)
Home Loan Repayment and EMI Calculator Formula
In a home loan, you have to pay a fixed amount every month, known as the EMI (Equated Monthly Installment). This amount includes both the principal and the interest. The EMI is calculated using the following formula:
EMI = [P × r × (1 + r)^n] / [(1 + r)^n – 1]
Where:
- P = Loan amount (Principal)
- r = Monthly interest rate
- n = Loan tenure (Loan duration)
Home Loan EMI Calculator
Home Loan EMI Calculator
Other information related to Home Loan
From which bank can I take a Home Loan?
In India, almost all banks offer home loans to their customers, each with its own set of rules. However, it’s important to find out which bank offers home loans at the lowest interest rates. Here, we will provide information about the major banks in India that offer home loans, where you can easily get a home loan at a low-interest rate. This information is based on surveys conducted by people who have shared their experiences after taking loans from these banks. Please note that these details may change over time.
10 Top Banks in India to Get Home Loan
Below, we are sharing information about 5 major banks in India where you can easily get a home loan at a low-interest rate. The top 10 banks in India offering home loans are as follows.
| Bank Name | Interest Rate (%) | Features |
|---|
| SBI (State Bank of India) | Starting from 8.30% | India’s largest public sector bank, competitive interest rates, long loan tenure, simple loan process |
| HDFC Bank | Starting from 8.55% | Fixed and floating interest rates, excellent customer service, simple processing |
| ICICI Bank | Starting from 8.50% | Easy loan approval, long loan repayment options, affordable interest rates |
| Axis Bank | Starting from 8.55% | Low interest rates, low processing fees, minimum loan tenure |
| PNB (Punjab National Bank) | Starting from 8.45% | Government bank, low interest rates, tax benefits, affordable processing fees |
| Bank of Baroda | Starting from 8.55% | Long loan tenure, minimum interest rates, easy and quick loan approval process |
| Kotak Mahindra Bank | Starting from 8.49% | Low interest rates, flexibility in loan repayment, attractive features |
| IDFC First Bank | Starting from 8.50% | Affordable interest rates, low processing fees, long loan tenure |
| RBL Bank | Starting from 8.55% | Flexible options, low interest rates, quick loan approval |
| IDBI Bank | Starting from 8.60% | Low interest rates, attractive features, low processing fees, quick loan approval process |
What to do before applying for a Home Loan?
Before applying for a home loan at a bank, it’s important to gather some key information about the bank. Here’s what you should check before applying for a loan:
- What documents are required for the home loan?
- What will be the interest rate?
- What will be the EMI amount?
- What is the processing fee? Is it fixed or floating?
- How much loan can you get?
- What will be the penalty if the EMI is delayed?
- What are the terms and conditions in the loan agreement?
- How long will the loan processing take?
- Are there any hidden terms?
- Will you get tax benefits?
- Can you transfer the loan to another bank?
Make sure to gather all this information from the bank before applying for a loan.
Home Loan Interest Rate
| Bank Name | Interest Rate (%) |
|---|---|
| Allahabad Bank | 8.70% to 8.75% |
| Andhra Bank | 8.80% to 8.95% |
| Axis Bank | 8.90% to 9.10% |
| Bajaj Finserv | 9.05% |
| Bandhan Bank | 12.41% to 13.52% |
| Bank of Baroda | 8.75% to 9.75% |
| Bank of India | 8.85% to 8.90% |
| Bank of Maharashtra | 8.75% to 8.85% |
| Canara Bank | 8.75% to 9.95% |
| Central Bank of India | 8.65% |
| City Bank | 8.75% |
| Corporation Bank | 9.05% to 9.30% |
| Dena Bank | 8.85% to 8.95% |
| DHFL Bank | 9.75% |
| Federal Bank | 8.75% to 9.20% |
| HDFC Bank | 8.80% to 9.15% |
| ICICI Bank | 9.10% to 9.30% |
| IDBI Bank | 8.85% to 10.00% |
| Indusind Bank | 8.70% to 9.40% |
| IndiaBulls | 8.80% to 9.85% |
| Jammu & Kashmir Bank | 8.80% to 9.10% |
| Karnataka Bank | 8.80% to 9.20% |
| Kotak Mahindra Bank | 8.90% to 8.25% |
| Laxmi Vilas Bank | 10.00% |
| LIC Housing Finance | 8.80% to 9.05% |
| Oriental Bank of Commerce | 8.75% to 8.85% |
| Punjab & Sindh Bank | 8.85% to 9.10% |
| PNB Bank | 9.10% to 10.85% |
| RBL Bank | 10.35% to 11.65% |
| SBI Bank | 8.60% to 9.15% |
| Standard Chartered Bank | 9.41% |
| Syndicate Bank | 8.75% |
| Tata Capital Bank | 9.25% |
| UCO Bank | 8.70% to 8.95% |
| United Bank of India | 8.65% |
| Vijaya Bank | 8.75% |
| Yes Bank | 9.85% to 12.00% |
What is a Home Loan? FAQ’s
What is a Home Loan?
A home loan is a type of loan that you take from a bank or financial institution to buy or build a house. It needs to be repaid with interest over time.
What are the eligibility criteria for a home loan?
Eligibility for a home loan includes factors like income, age (usually between 21 to 65 years), credit score, and job stability.
What documents are required for a home loan?
Typically, you’ll need identification proof, address proof, income proof, bank statements, and property documents.
Can I repay my home loan early?
Yes, most banks allow you to make early repayment or foreclosure of your home loan, but some may charge a fee for it.
Conclusion
I hope that after reading this article, you have gained a detailed understanding of Home Loan. If there’s any information missing, I will make sure to update it in the article. I hope you liked this post. If you did, please share it as much as possible. If you have any complaints or need more information related to this post, feel free to ask in the comments section.