All you wanted to know about home loan
How end users and investors take benefits of the home loan while buying a property? What are the tax benefits available to a person who buys property on home loan?
At present Home loans are available at concessional Rates of interest with long repayment options, which not only gives opportunity to affordable housing at concessional rates of Interest with easy installment, but also provides multiple tax benefits to an individual.
These deductions reduce tax outgo, the tax benefits are mentioned as under:
- Deduction on interest: If a person is paying EMIs for a home loan he/she took to buy a house, the interest component in the EMI can be claimed as deduction. He / She must be an owner or a co-owner (in the loan) to claim tax benefits. This deduction can be claimed starting from the year in which the construction of the house is completed. So every year a maximum amount of Rs 2 lakh can be claimed for a house that he / she uses for their own residence. If their house is rented, the entire interest for the year can be claimed as deduction.
- Deduction on principal repayment: The component of EMI which goes towards principal is eligible to be claimed under Section 80C of the Income Tax Act. One can sum up that the outgo for the year towards principal and claim it. A maximum of Rs 1.5 lakh can be claimed as deduction under Section 80C.
- Deduction on stamp duty and registration charges: Besides the deduction allowed on principal repayment, payment made towards stamp duty and registration charges are also allowed to be claimed under Section 80C. However, these can only be claimed in the year in which these were paid.
- Mention 5 most important things that every home buyer must know while taking?
Step 1: Start Research Early
As soon as you can, start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas.
Step2: Possession of the Property
Now a day’s Real estate developers offer various options for availing housing property. One should opt for the property very cautiously on the various options available with them and decide accordingly which suits the purchaser depending upon the time of possession, Promptness of the builders, market reputation of the builder etc. By keeping track for some time and by making enquiries about the builder the promptness of the builder in handing over the property in time can also be ascertained.
Step3: Verification of the Property:
Before selection of the property one should check the credentials of the builder and the property documents. The property related documents should be verified to find out that the holder of the property has right title to that property and he can pass on right title to the purchaser. It should also be verified that all necessary approvals/permissions for construction of the building from the competent authorities are in place.
Step 4: Determine How Much EMI You Can Afford
Lenders generally recommend that people look for homes that cost no more than three to five times their annual household income if the home buyers plan to make a 20% down payment and have a moderate amount of other debt.
But one should make this determination based on their own financial situation. Use affordability calculator how much house one can afford.
Step 5: Discussion with the Bank
One can avail information on various offers from any bank office or download it from online website. Duly fill the form and attach copies of the loan related documents such as ID proof, Address proof, Age proof, Income proof, proof of educational details and employment, bank balance statement etc.
After submission of application form, the applicant will be called by the bank for a face to face discussion to evaluate the papers and decide on the repayment capacity and to decide on the loan amount etc. At this point, the applicant can also bring the original documents of all the proofs submitted earlier.
Once the loan is sanctioned, the bank will send an offer letter to the applicant with details regarding the home loan such as loan amount sanctioned, interest rate for the loan, type of interest selected: fixed or floating interest rates, loan tenure, mode of loan repayment, special scheme or offer if applicable and the general terms and conditions of the home loan approved.
If the customer is satisfied with all the norms, then he / she can provide an acceptance letter with their signature to the bank accepting the terms and conditions of sanction.
- What are the steps to take a home loan?
- Know your maximum loan eligibility: The loan amount to be sanctioned depends on income and previous track record when it comes to repaying your loans and credit card dues.
- Credit History/CIBIL score: The home loan eligibility depends on the credit worthiness of the individual. When lenders evaluate credit history, they look at stability — for example, how long you’ve lived at your current address, how long you’ve been in the service/business, how long your spouse has her/his current job, and whether you have a good record of paying your bills on time and in full. Credit Information Bureau (India) Limited (CIBIL) provides a credit score on a scale of 300 to 900 based on individuals previous credit card usage, how they maintained their bank accounts.
- Selection of Bank for Finance: Now a days Banks are uploading the details of Housing and other loan products on their website. One can visit the website of various banks to find a suitable bank. Also there are some websites and news papers, which give a comparative analyses of Housing loan schemes of various banks and find out a suitable bank as per their requirement.
- Selection of Interest rate & Repayment option: The type of interest rate you choose has an impact on the monthly EMIs you pay. It is important that one should know the difference between fixed rate home loan and floating rate home loan. Now a days Banks are providing flexible tenor for repayment of loans for a maximum period up to 30 years as per their requirement/eligibility.
