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The home loan market has grown phenomenally in the last few years in India. The primary reason for its popularity has been the rising real estate prices which have made residential accommodation unaffordable for the masses. The target group for home loans has been the Great Indian Middle Class which has been the worst hit by the realty boom.
Purpose of Home Loans
You can take a home loan not just for purchase of residential accommodation or land but also to renovate your existing home or even to purchase consumer durables or furnishings for your home.
Eligibility Criteria
The minimum age for taking a home loan is 21 years. The loan must be repaid before you turn 65 years of age or before retirement, whichever is earlier. In order to apply for a home loan you must have a sufficient, regular and continuous source of income.
Amount of Loan
It depends on various criteria like your age, income, educational qualification, number of people dependent on you, total assets, current liabilities and your credit and savings history. In general, if you are between 21 to 45 years of age you can get a loan up to 60 times your net monthly income (NMI) or 5 times your net annual income (NAI). And if you are above 45 years of age the loan amount can be 48 times your NMI or 4 times your NAI.
Repayment Options
Repayment can be made via equated monthly installments (EMI) which start from the month following the month in which full loan has been disbursed. You can make EMIs either through Post-dated Cheques or through Electronic Clearing System.
Interest Rate
Interest rates can be fixed or adjustable. In case of former the rate of interest remains fixed for the entire duration of the loan and for latter the interest rate varies with the floating rate reference.
Security
Property to be financed acts as the security for the loan and if the property is under construction then life insurance policy, guarantee, shares and such other investments may be used as security.
Tenure
The tenure for home loans is fixed by RBI and in most cases it is up to a term of 15 years. Some institutions may extend it for 20, 25 or 30 years if the applicants fulfill certain criteria.
Home loans have certain tax benefits attached for the applicants as well.
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