Own house is the dream of every person. For a middle class person, it is considered as a life time achievement as it requires quite a huge amount of money. Banks play a pivotal role in fulfilling this basic need. The products they offer and the services they provide are of immense use to people who intend to have their own house. For a safe and beneficial home loan, proper awareness over the products, policies, terms and conditions of the bank is most important as ignorance may result in more payments to the bank in terms of principal and interest components.
With proper planning and a right approach you can avail an easy and beneficial home loan to fulfill your dream of possessing a house. The following ten-step plan will certainly help you in accomplishing the task:
Know about the products: Prior to going for a home loan learn about the products that various banks offer; also know about their terms and conditions. After careful study select a product that suits best to your financial status.
Know about the rate of Interest: This is the most important factor about which you have to think more than once prior to going for a home loan. Plan carefully whether you want to go for a fixed or a floating interest rate plan. Have a good clarity from the bank so as to avoid disappointment in the future. Also if you go for a fixed interest rate plan, make yourself clear if it is fixed for the whole tenure or subjected to changes as per changes in money market conditions.
Know about the repayment Period: Choose an apt repayment schedule as per your financial status and possible future growth. Usually banks offer a tenure ranging from 1 to 25 years for home loans, and 1 to 15 years for mortgage loans. So keeping in mind of your income levels and liabilities choose your own plan for flexible repayments to avoid future disappointments.
Know about the eligibility criteria: Banks usually take fixed and variable income sources into consideration to approve a home loan. They reserve the right to sanction or reject the application if they find any information misleading. So it is advisable to provide useful applicable information only. Once you receive the sanction letter please read it carefully for Interest rate revisions, Sanction conditions, Pre-closure charges and terms and conditions of the bank before signing it.
Legal documents and scrutiny: You must submit all the legal documents pertaining to the property you intend to buy to the bank. So you must collect all the link documents, lay out and plan, and ownership documents from the vendor. It is to be taken care that if there is any legal dispute on the property then the proceeding and judgment copies are also required.
You must verify the legality of the property with a legal advisor prior to buying it. Banks will not hold any responsibility if any legal issue that may arise in future, and the customer has to continue to repay the loan. Remember that bank will not take any responsibility about the legality of the property.
Technical evaluation: Banks evaluate the value of the property based on the standards set by their panel members. You should take all security measures against the deviations both horizontal and vertical which will affect loan processing as well as future transactions. If the property has deviations, you should ask the vendor for the copies of regularization. The property should have the necessary permissions or documents to regularize the deviations according to Building regularization scheme (BRS). Also, check all the details like plot area, sanction area, plot number and the government approved plan valid dates before going for a processing.
Home Loan Agreement: Please read the document carefully before signing it as it is a long term contract between the customer and the bank. Once you sign the document it can't be altered or modified until you repay the loan in all respects.
Registration: Home Loan processing ends with the registration of your dream property. Take care that the sale deed clearly states about your complete ownership of the property. Remember that even a small mistake can lead to bigger problems. So read the sale deed documents carefully prior to submitting for the registration process.
The vendee should collect all the link documents, Plan copies and tax Paid receipts from the vendor at the time of registration only.
Processing, pre-payment and foreclosure charges: The customers have to pay the processing charges to the bank for the loan availed. The customer should know about the additional charges which bank will make in cases of pre payments and foreclosures. A customer needs to pay a max of 4 % of the outstanding principle along with service tax towards the foreclosure charges of the loan.
Tax exemption: In addition to giving the joy of possessing a house, home loan provides the facility of Tax exemption on the principal and interest paid over a financial period.
A customer can claim tax exemption for the amount paid as stamp duty during the registration process. The Bank will provide you with the provisional certificates to claim the tax exemption from the income Tax department.