10 things you should know about home loans

Dec 23 2013, 15:43 IST
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The first step before embarking on a home-loan application is to decide on your budget. The first step before embarking on a home-loan application is to decide on your budget.
SummaryA standard home loan will cover up to 85% of your requirement (overall cost of the property).

terminology as ‘fixed rate’, ‘floating rate’ and ‘reducing balance’.

Discuss these factors thoroughly before deciding on an option that suits you best. Also, banks charge separate charges such as processing fee, commitment fee and admin fee. These must be ascertained by you and used as a factor when deciding upon a bank/financial company for the loan.

What are the documents I will have to furnish?

You will be asked for documents such as:

* Photo Identity Proof,

* Passport Size Photographs,

* Copy of your PAN Card,

* Address Proof,

* Proof of your Age,

* Last 6 months bank statements,

* Copy of the Property Title Deed,

* Form 16 for the last 3 years (for salaried persons),

* Last 6 months salary slips (for salaried persons),

* Copy of IT Returns of last 3 years (for businesspeople/self employed people),

* Copy of audited Balance Sheet & P&L statements of last 3 years (for businesspeople / self employed people)

What is a ‘pre-payment’ option?

Pre-payment is an option afforded by your loan provider wherein, after a specific number of EMI payments, you can clear the entire pending amount thereby enforcing an early closure of the loan. Through this method you can save a lot of money towards the interest payments. Always keep this option as an important prerequisite when choosing a bank for your home loan.

What are the tax benefits that I can avail of for repaying a home loan?

This is actually one of the best things about taking a home loan – the tax benefits. You will be eligible to claim both the interest and principal components of your repayment during the year.

Roundup: Important points to remember

* Try keeping the repayment period as low as possible. More EMIs equals to more interest paid.

* Judge the quality of service and reputation of the home loan provider. Bad service quality could also mean that the loan may cost you more and you might not get the proper customer support that you require.

* Always remember to avail of the applicable income tax benefits.

* Ask as many questions as possible. Your inquisitive nature will make you certain about the opportunity you are getting into. Question and seek advice from friends who have taken similar home loans.

* Some banks/financial institutions offer incentives or other freebies with their loan package. Do enquire about them.

Simple Checklist

* What’s the interest rate?

* Basis of EMI calculation- daily, monthly or annual

* Reputation and quality of service

* Other applicable fees- what are they?

* Is

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