Home Loan

• Home loans are secured loans that are obtained by an applicant to fund the purchase/construction of a new house. Home loan Interest rates start as low as 8.20%. The repayment tenures are flexible and are up to 30 years. High loan amounts of up to 10 crores can be obtained. Balance transfer facility and special interest rates for women applicants are available. Apply for home loans at GrowScore. We offer best interest rates and a pool of lenders to choose from. You can also do a free credit score check with us.

What are the various kinds of home loans?

In India, most banks provide the following types of home loan

• Home Purchase Loans
• Commonly known as a home loan or housing loan are provided for buying houses or apartments. Banks usually offer 80 to 85% of the market value of the property as a loan. They are available for various tenure periods and with fixed and floating interest rates. This can be used for purchasing new homes or old homes which have entered the real estate market as resale.
• Plot Loans
• This type of loan is provided for the purchase of land or an empty plot for residential activity, construction or investment purpose. This loan cannot be used for buying any agricultural plot of land. Unlike home loans where the loan amount provided is about 80 to 85% of the price of the property, land purchase loans are offered only up to 70% of the cost of the land.
• Home construction loans
• Home construction loans are provided for the sole purpose of constructing a home on an already available piece of land. The land can be an empty plot or demolishing an existing house and building a new one in its place. The loan amount provided for this is normally 85% to 90% of the construction cost.
• Home Improvement Loans
• These loans help the borrower with all home renovation or improvement work. They are extended towards all construction and renovation work. This could include paint job, new flooring work, plumbing or exterior elevation works are all covered under home improvement loans.
• Home expansion loans
• These are loans provided to the borrower for expanding their existing home. This includes expanding a single room, adding additional rooms to building a new floor above the existing house. These projects could vary from Rs. 20,000 to more than Rs.10 lakhs based on the project.

Key Home Loan Lenders and Their Key Features

HDFC Home Loans

• 1. Interest rates starting at 8.65% per annum
• 2. Loans available up to Rs. 10 crores
• 3. Longer repayment tenure of up to 30 years. Customization available
• 4. Quick loan sanction within 5 days
• 5. Available for both salaried and self-employed individuals
• 6. Facility to transfer outstanding home loan to HDFC
• 7. Online loans that can be used for buying, constructing, and renovating purposes. End-to-end digital process
• 8. Hassle-free documentation
• 9. Home loans available for purchasing row houses, flats, or a bungalow from a private developer in fully approved projects
• 10. Home loans are available for purchasing properties from MHADA, DDA, etc.
• 11. Home loans are available for people employed with the army under a special arrangement with AGIF.

Documents required for NRIs for the Application to a Home Loan

• 1. Proof of Identity and Residence –
• a) Mandatory Documents - Valid Passport/PAN card/Form 60
• b) Officially Valid Documents – Passport/Driving License/Voter ID Card/Aadhaar Card/Letter issued by Foreign Embassy/Work or social permit/Green card/Social security card, etc.
• 2. Proof of Income –
• a) Appointment letter/Offer letter/Employment contract
• b) Last 3 months’ salary slips specifying name, date of joining, passport number, designation, salary, etc.
• c) Last 6 months’ bank statement specifying salary
• d) Last 6 months’ bank statements of the NRE/NRO account in India
• e) Credit Bureau Report.

Types of Interest Rates on Home Loans

• 1. Fixed Interest Rate – A fixed interest rate remains the same throughout the tenure of the loan. This gives you the benefit of planning your outflows in advance and doesn’t change with increasing market interest rates.
• a) Advantages – No uncertain increase in EMIs. You can plan well your outflows for the next few years.
• b) Disadvantages – You might not be able to reap the benefits of changing market rates if it goes down.
• 2. Floating Interest Rate – This type of interest rate is linked to the market interest rate. It can go up and down during the tenure of the loan.
• a) Advantages – A decreased market rate will help you decrease your monthly outflow.
• b) Disadvantages – Your outflow keeps changing and there can be an unexpectedly increased outflow of money because of an increase in interest rates.

Home Loan EMI Calculator

The three things that you need to calculate Home Loan EMI are – Interest rate, Loan amount, and loan tenure.

You can easily calculate the EMI on your home loan by using GrowScore Home Loan EMI Calculator.

Will I Qualify for a Home Loan? What do Lenders Look for?

Lenders look at multiple factors before approving a loan. Below are the most important ones –

• 1. Credit Score – Lenders would like a credit score of 750+ for the loan to be approved quickly. They also look for a clean repayment history.
• 2. Credit Report – The lenders like to analyze the credit report to see patterns of repayment in the past, credit management discipline, loan defaults, debt obligations, etc. They consider your previous and current financial discipline as a benchmark for the future.
• 3. Employment Status and Salary – Lenders would like to approve a loan for someone with a stable job and a regular flow of income. Since home loans are usually long-term loans, lenders want to make sure there is consistent financial stability.
• Full Property Documentation and Clean Title Deed –s Lenders want to make sure that the house being held as collateral has all the legal papers in place. They want to avoid all complications in a worst-case situation.

Credit Scores and their Impact on Home Loans

A higher credit score can help to get an attractive rate of interest on your home loan. Generally, a credit score above 750 is considered good enough. A lower score does not give the lender enough confidence in the capability of the borrower to repay the loan.

Can I get a Home Loan with a Bad Credit Score?

• It can be a little difficult to get a home loan with a bad credit score. Lenders generally look for a score higher than 750 in the applicant’s profile. Most of the lenders will also reject the application.
• However, some lenders may be willing to approve a loan with a high rate of interest. They may also want to put forth additional terms and conditions.

Disadvantages of Applying for a Home Loan with a Bad Credit Score

• If your application gets rejected several times because of a bad credit score, it will keep bringing your already bad credit score further down. In case the application is approved, the lender will put forth conditions like a higher rate of interest, shorter repayment period, smaller loan amount, etc.

Offline Application Process for a Home Loan

• You can walk into the bank branches with the necessary documents. The staff will help you with the form filling, documentation, and the rest of the process.

Online Application Process for a Home Loan

• You can log in to the website of your preferred lender. Go to their “Home Loan” page and apply for the home loan of your choice.

Things to Know Before you Apply for a Home Loan

Finding the right home loan can be as time-consuming as finding the right home. A little bit of preparation can help make this task easier. Below are some points to keep in mind before you apply for a home loan –

• 1. Start saving for a down payment – Although most of the funds required to buy a home are funded by the bank, you will still need to pay at least 10% of the value of the house as a down payment. Make sure you have saved enough to pay for the down payment.
• 2. Check your credit score – Having a good credit score (750+) makes it easier to get a home loan. Check your credit score and make sure there are no discrepancies in your report. Getting the discrepancies sorted can bring your credit score up.
• 3. Calculate your expected EMI – Use an EMI calculator to estimate the monthly EMI payment. You will know whether you can afford the EMI. You can also adjust the loan tenure to make it more affordable.
• 4. Find the loan that suits your requirements – Whether the loan is for the purchase or renovation of a home, choose a loan that specifically caters to your requirements.
• 5. Choose the type of interest rate – Whether the interest rate should be fixed or floating, choose according to your comfort level and estimation.
• 6. Respond to the lender within time – Be very prompt in completing the home loan application. Sometimes the lender may ask for additional details which can delay the approval of the home loan.
• 7. Read the loan documents carefully – Make sure you have read all terms and conditions put forward by the lender. Look for any additional/hidden charges and account for those in your calculation.
• 8. Check if you have a pre-qualified loan – Pre-qualified loans generally offer a lower interest rate and are processed very quickly. They need minimum documentation and may offer special benefits.

How to Choose the Best Home Loan?

Choosing a home loan can be an overwhelming decision because of the number of home loan products available. However, keep in mind the following factors while choosing a home loan.

• 1. Rate of Interest
• 2. Loan Repayment Tenure.
• 3. Loan Amount
• 4. Use of loan
• 5. Additional Fees and Charges
• 6. Availability of Top-up Loan
• 7. Special Rates for Women
• 8. Prepayment Penalty

Key Features of a Home Loan

• 1. A home loan is a secured loan
• 2. It is used to finance the purchase/construction of a new house
• 3. It can also be used to make repairs, reconstruct, or renovate an existing house
• 4. It required an initial down payment
• 5. Lenders usually fund 75%-90% of the cost of the home
• 6. They offer economic interest rates
• 7. They have long repayment tenors with flexible payment options
• 8. They can have fixed or floating rates of interest
• 9. A home loan requires the property to be kept as a mortgage with the lender until the loan is fully repaid.
• 10. The lender holds the title to the property until the entire loan is paid off along with the interest.

Home Loan FAQs

1. What is a home loan and how does it work?

• A home loan is a credit facility offered by banks and NBFCs to individuals looking to purchase a house or land, or who want to construct a house on their plot, or for home renovation and repair needs. Applicants can get up to 85% of the project cost as a home loan which will be repaid in EMIs over repayment tenures of up to 30 years. Current interest rates are starting from 6.90% and can go up to 12% based on your eligibility.

2. Which bank is best for home loans?

• There are many factors that determine the best bank for you. At present, SBI seems like a good option given the low-interest rate and competitive processing charges and other fees related to your home loan application. You should assess a bank based on the interest rate, loan amount, repayment options and other benefits you get along with your home loan.

3. What is the maximum home loan that I can get?

• One can get up to 85% of the house cost for the purchase of new or pre-owned homes. For the construction of a house, you can get up to 75% of the project cost. For home renovations and home repairs, you can get up to 80% of the project cost as a loan. In the current market, you can get home loans of up to Rs.10 crores, based on your eligibility.

4. What are the different types of home loans available in India?

There are various kinds of home loans available depending on your specific housing needs. Some of the popular types of home loans include

• Standard home loan
• Plot loan/land loan
• Top-up home loan
• Home construction loan
• Home renovation loan
• Special home loans for
• Women
• Differently-abled individuals
• Employees of central and state government
• Home loan balance transfer
• Home loans under the Pradhan Mantri Awas Yojana

6. What are some parameters to decide home loan eligibility?

Here are some parameters that determine your home loan eligibility:

• Your credit score
• Your credit report
• Employment status and salary
• Existing loans and liabilities
• Clean title deed and complete documentation of the property

7. Does having a personal loan affect home loan eligibility?

• Existing loans and liabilities is a factor while determining your home loan eligibility. When you have an existing personal loan, the bank will calculate your repayment capacity based on your income to debt ratio. Therefore, if your personal loan EMI takes up a considerable portion of your monthly income, you may have difficulty in getting the desired home loan amount.

8. How to apply for a home loan?

• Applicants apply for a home loan at their nearest bank branch. They will be required to submit a detailed application form along with all the required documents. These days, home loan applications are done online too. Most banks allow you to submit a preliminary application form online on their official website. Once you submit this application, a representative from the bank will get in touch with you for further formalities. You can check your eligibility and apply for a home loan by signing up with GrowScore. It is quick, simple and above all, free. GrowScore matches your credit and demographic profile to the lender's lending criteria and presents you a shortlist of only those lenders willing to lend to you based on your unique credit profile. In effect, we pre-screen your application to make sure you are likely to qualify as per the lender’s credit criteria. Hence the chances of your loan application getting approved are higher.

9. What is the maximum home loan amount that a borrower can get in India?

• The maximum loan amount that a borrower can get depends on several factors like credit score, credit report, income profile, age of the applicant, other debts, etc. You can check the home loan amount that you’re eligible for using our home loan eligibility calculator.

10. Can I get 2 home loans at the same time?

• There is no restriction on the number of home loans that a borrower can get at the same time. However, the borrower has to be very careful and go for a second home loan only after assessing his/her repayment capacity. Multiple loans can pave the way to debt, if not handled correctly.

11. When is my home loan EMI due?

• The home loan EMI is fixed on a specific date each month. This date will be communicated to you by the lender at the time of loan disbursal.

12. What is the minimum period for a home loan?

• The minimum tenure for home loans in India is 5 years. The maximum tenure is 30 years. The shorter the tenure, the lower will be the total interests you pay to the lender.

13. Can I get a home loan up to 100% value of the property?

• No. Lenders do not sanction home loans up to 100% of the property’s value. The maximum loan amount you can get from the lender is up to 90% of the property’s value.

14. Which bank is best for a home loan?

• Again it depends on your credit profile and your relationship with the bank. At GrowScore, we make it easy to locate the best bank for your home loan. Use our home loan eligibility calculator to shortlist the best home loan offers matched to your credit profile.

15. Can I repay my home loan early?

• Yes. You can repay your home loan ahead of the repayment schedule and it’s highly recommended that you do so. You can opt to foreclose the outstanding amount in one shot or opt for smaller part-payments as and when possible.