FAQs on Home Loans

Q.1 What are the types of home loans available?

Q.2 What are the minimum requirements to be fulfilled for granting a home loan ?

Q.3 What is EMI and how it is calculated?

Q.4 Is any security required for home loans ?

Q.5 How much amount can you get as housing loan?

Q.6 Define a fixed rate home loan?


Q.1 What are the types of home loans available?
Ans. A large number of home loans are offered by the banks and financial companies now-a-days.

• Home Purchase Loan: The most common loan for purchasing home.
  
  
• Home Improvement Loan: This loan is provided for repairing and renovations to your home.
  
  
• Home Construction Loan: This loan is given for constructing a new home.
  
  
• Home Extension Loan: This loan is provided to give an extension to your existing home.
  
  
• Home Conversion Loan: This loan is available for those people who have already financed their present home by a loan and willing to purchase or move to another home for which some extra funds are needed. Through this loan you can transfer the existing loan to the new home with the inclusion of extra amount. There is no need for pre-payment of the previous loan.
  
  
• Land Purchase Loan: This loan is sanctioned for the purchase of land, either for the purpose of construction or investment.
  
  
• Bridge Loan: This loan is sanctioned for the people who want to sell their current home and want to purchase another one. Until a buyer isn't found for the old home, the bridge loan helps finance the new home.
  
  
• Balance Transfer Loan: This loan help you pay an old loan with a higher interest rate and provide you new loan with lower interest rate.
  
  
• Refinance Loan: This loan is provided to pay off the debt that you have taken for the purchase of your present home, from private sources such as relatives and friends.
  
  
• Stamp Duty Loan: This loan helps you to pay off the stamp duty amount that needs to be paid on the purchase of a property.
  
  
• Loans to NRIs: This loan is designed for the requirements of those NRIs who are willing to build or buy a home in India.

Q.2 What are the minimum requirements to be fulfilled for granting a home loan ?
Ans. Most of the lending companies of India seek certain conditions to be fulfilled before granting a home loan. These are:

• You should be an Indian resident or NRI.
• Your age should be above 21 years at the commencement of the loan.
• You age should not be more than 65 years at the time when the loan matures.
• You should be either salaried or self employed.

Q.3 What is EMI and how it is calculated?
Ans. EMI (Equated Monthly Installment) is the minimum amount payable per month to the loan providing institution till the loan is fully paid. This amount consists of principal along with the interest.

EMI is calculated as per this formula: l x r [(1+r)n /(1+r)n-1 ] x 1/12 Where,
l = loan amount
r = rate of interest
n = term of the loan

Q.4 Is any security required for home loans ?
Ans. Usually the property to be bought itself becomes the security and no additional security is needed. This property is mortgaged to the loan providing company till entire loan is not paid. Few companies may ask for extra security such as life insurance policies, FD receipts and share or savings certificates.

Q.5 How much amount can you get as housing loan?
Ans. Housing loan is sanctioned depending upon your income and repayment capacity. In case you want to increase the amount of loan then you can include your spouse's income. Different finance institutions have fixed different maximum loan amount.

Q.6 Define a fixed rate home loan?
Ans. A fixed rate home loan is that in which the interest rate is fixed over the entire period of the loan tenure.