What is Home Loan?

 

What is Home Loan? Everything You Need to Know About Home Loan

We all dream of buying the best home possible. But, with property prices sky high and soaring, turning the dream into a reality could be a step too far. Here, the good old home loan comes to the rescue.

Taking a home loan can be a huge step. From the sheer amount of financial planning to the lengthy process of getting approved for one, a home loan can often sound overwhelming to those giving it thought for the first time. But it doesn't have to be!

The first step to finding the definitive answers to everything from 'what is home loan' to 'what is a home loan process'. In this article, we will help you with the same and more:

• What is a housing loan or a home loan?
• What is the home loan process? 
• Factors related to home loans
• Housing loan eligibility and home loan eligibility calculator
• Improving home loan eligibility

Let's go through the basics of a home loan in India.

WHAT IS A HOUSING LOAN?

As the name suggests, a home loan is a sum of money an individual borrows from a bank or financial institution to purchase residential or commercial property. The individual then has to pay back the loan to the lender in Easy Monthly Installments (EMI) at a specific home loan interest rate.

HOME LOANS IN INDIA

Various kinds of home loans are available for you to choose from, depending on your needs.

Some popular choices are:

1. Home Purchase Loan – This lets you buy your dream home that fits your budget.
2. Construction Home Loan – If you want to build your own house, this is the right fit for you!
3. Land Purchase Loan – As the name suggests, this allows you to buy land.
4. Home Improvement Loan – Any renovations or reconstructions fall under this category.
5. Home Repair Loan – This is mainly for the much-needed repairs around the house.
6. Home Extension Loan – If you just decided to make your house more prominent and spacious, this would be a good choice!

5 ESSENTIAL FACTORS TO KEEP IN MIND

1. Principal

This is the total amount of money you borrow from the bank as part of the home loan. Any interest is charged upon the principal.

2. Duration/Tenure

The duration of your housing loan can be customized according to your comfort. You can adjust the time of paying back the loan according to your income. Lenders are known to provide tenure of up to 30 years. Remember, a longer tenor means less EMI but more interest outlay, whereas a shorter tenor means a higher EMI but lesser interest outlay. However, a customer always has an option to prepay their remaining home loan amount before their loan tenure ends without any prepayment charges.*

* Prepayment terms and conditions may vary for every financial institution.

3. Interest

Home loan Interest rates depend on the loan amount and the borrower's credit score. Additionally, it is also subject to your creditworthiness and loan eligibility. If you have a higher credit score and high income, this translates into lower home loan interest rates. You can either opt for a fixed interest rate or a floating interest rate. A fixed interest rate remains the same throughout the entire home loan tenure. However, a floating interest rate is based on a base rate and it keeps fluctuating throughout the loan tenure. Additionally, it's very rare to find lenders offering home loans at the fixed interest rates and they usually come with additional interest implications which end up being expensive for the borrowers.

4. EMI Amount

EMI is the monthly installment you pay to the bank during the entire home loan period. Your EMI depends upon the home loan interest rate you have settled for and your chosen home loan tenure. You can even choose your EMI amount for various stages of your home loan period. For example, some financial institutions offer a lower EMI at the initial loan stages but it increases as the loan tenure progresses. With each EMI payment, your total home loan liability decreases.

5. Down Payment

A lender only provides 75-90% of a property's cost as a home loan amount. The rest of the price has to be paid by you upfront. This is called a down payment. You are free to make as big a down payment as you are capable of.

WHAT IS THE HOME LOAN PROCESS IN INDIA?

The home loan process in India varies from lender to lender. Here is the step-by-step guide to getting a housing loan in India with PNB Housing:

1. Fill the PNB Housing loan application form & attach the required documents
2. Pay the processing fee
3. Discuss your needs with the bank
4. Submission of the documents (KYC, income & bank statements)
5. Sanction/approval process
6. Processing of the offer letter
7. Processing of the property papers followed by a mandatory legal check
8. Processing any technical check & the site estimation
9. Finalizing loan deal
10. Signing the agreement
11. The loan disbursal

You can also check the home loan interest rates before walking in. Using our services like the home loan eligibility calculator and home loan EMI calculator, you can get a better idea of your home loan plans and how you would like to customize them.

WHAT IS HOME LOAN ELIGIBILITY?

Eligibility to take up a home loan often depends on the person's income and repayment capacity.

Home loan eligibility is defined as a criterion based on which a financial institution or any bank assesses the creditworthiness of their customer to avail and repay any particular loan amount.

Home Loan eligibility is dependent on various factors like:

• your monthly income
• current age
• credit score
• fixed monthly financial obligations
• credit history
• property cost
• retirement age, etc. 

Rest carefree by figuring out your loan eligibility by contacting our experts today.

HOW TO USE PNB HOUSING HOME LOAN ELIGIBILITY CALCULATOR?

PNB Housing's home loan eligibility calculator lets you check your loan amount requirement and eligibility from the comfort of your home. Check it out here.

• Gross Income (Monthly) in ₹: Input gross monthly income. NRIs should input their net income.
• Loan Tenure (In Years): Enter the desired loan term for which you wish to avail of the loan. A longer tenure helps in enhancing home loan eligibility.
• Interest Rate (% P.A.): Input prevailing housing loan interest rate.
• Other EMIs (Monthly): Enter any other EMIs of the loans you may have.

HOW TO IMPROVE HOME LOAN ELIGIBILITY?

• You can increase your chances for a PNB Housing home loan by:
• Adding another earning family member as a co-applicant.
• Going for a structured repayment plan.
• Ensuring a steady income flow.
• Regular savings and investments count as well.
• Furnishing details of your stable additional income sources.
• Keep a detailed record of your variable salary components.
• Take actions to rectify any possible errors in your credit score.
• Repaying ongoing loans and short-term debts.

Conclusion

With that, we conclude our comprehensive home loan guide. Get up to 30 years loan tenure, no prepayment or foreclosure charges, and funding up to 90%* of the property with PNB Housing. We offer a dedicated relationship manager and customized home loan eligibility plans to assist you with the hassle-free purchase of your dream home.