Home Loan is a Secured loan offered against the security of a house/property which is funded by the bank’s loan, the property could be a personal property or a commercial one. The Home Loan is a loan taken by a borrower from the bank issued against the property/security intended to be bought on the part by the borrower giving the banker a conditional ownership over the property i.e. if the borrower is failed to pay back the loan, the banker can retrieve the lent money by selling the property.

Types of Home Loan:
There are different types of home loans available in the market to cater borrower’s different needs.

• Home Purchase Loan: This is the basic type of a home loan which has the purpose of purchasing a new house.
• Home Improvement Loan: This type of home loan is for the renovation or repair of the home.
• Home Extension Loan: This type of loan serves the purpose when the borrower wants to extend or expand an existing home, like adding an extra room etc.
• Home Conversion Loan: It is that loan wherein the borrower has already taken a home loan to finance his current home, but now wants to move to another home. The Conversion Home Loan helps the borrower to transfer the existing loan to the new home which requires extra funds, so the new loan pays the previous loan & fulfills the money required for new home.
• Bridge Loan: This type of loan helps finance the new home of the borrower when he wants to sell the existing home, this is normally a short term loan to the borrower & helps during the interim period when he wants to sell the old home & want to buy a new one, It is given till the time a buyer is found for the old home.
• Home Construction Loan: This type of loan taken when the borrower wants to construct a new home.
• Land Purchase Loan: It is that loan which is taken to purchase a land for construction & investment purposes.

'Equated Monthly Installment - EMI'?
An equated monthly installment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are used to pay off both interest and principal each month so that over a specified number of years, the loan is paid off in full. With most common types of loans, such as real estate mortgages, the borrower makes fixed periodic payments to the lender over the course of several years with the goal of retiring the loan.

Home Loan Eligibility Conditions:
Salaried individuals eligible for home loan : Individuals in permanent service in the Government or reputed companies. Applicants should be above 21 years of age at the time of loan commencement and up to the age of 60 or superannuation, whichever is earlier at the time of loan maturity.
Professionals eligible for home loan : Professionals (i.e., doctors, engineers, dentists, architects, chartered accountants, cost accountants, company secretary, management consultants only) can apply for home loans.
Applicants above 21 years of age at the time of loan commencement and up to 65 years or less at the time of loan maturity meet the housing loan criteria as stated by different banks.
Self-employed individuals eligible for home loan : Any individual filing income tax returns can apply for home loans. Applicants should be above 21 years of age at the time of loan commencement and up to 65 years or less at the time of loan maturity
 
Home Loan Interest Rates :
Interest rates are different from institution to institution and generally range from about 8.35% to around 12 %.
 
Other Costs :
 Home loans are usually accompanied by the following extra costs:

Processing Charge:
A fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required cannot be less than the processing fee.

Pre-payment Penalties:
When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually 2% of the amount being paid.

Miscellaneous Costs:
Some lenders may levy documentation or consultant charges. 

Loan Amount :
Usually, most companies give up to a maximum of 85% of the cost of the house. The 15%, sometimes called 'seed money', will have to be provided by the loan applicant. The amount, for which the applicant is eligible, is determined by the age, income, no. of dependents, monthly outgoing and repayment capacity. This varies from case to case.
 
Other Costs associated with Home Loans :
Home loans are usually accompanied by the following extra costs:

• Processing Charge: A fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required cannot be less than the processing fee.
• Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually 2% of the amount being paid.
• Miscellaneous Costs: Some lenders may levy documentation or consultant charges. 

Security :
In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates.
 
Tax benefits for home loans :
Both principal as well as interest of home loans attract tax benefits. With effect from 1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965:
Principal amount of repayment of loan along with other savings such as PF, PPF, Life Insurance premium etc up to a maximum of Rs 1, 00,000/- will be eligible for deduction from gross income.
Interest paid up to a maximum of Rs 1, 50,000/- will be eligible for deduction from gross income on loan after completion of construction will be deductible from income from property.

Tips for Home loan:

• Affordable Price: You need to do some homework before applying for a Home loan. You need to know how much you can afford. It depends on various aspects such as your monthly expense, current salary or income, credit rating, down payments and interest rate, dependents and so on.
• Compare Cost: There are a number of banks that compete to offer home loans at low-interest rates. You need to do some homework and compare the cost and the rate of interest offered by each lender.
• Choose right home or place: After scrutiny of your loan application, bank sanctions the loans and disburses it into your account. You need not make haste in choosing a home. Contact your realtor for appropriate home or place.Inspect the property you plan to buy and make an offer.
• Insurance: There are various insurance scheme for your property such as insurance from fire, disaster and so on. Lender requires that you have insurance for your property to safeguard their interest.
• Sign or close the deal: Following these tips, step by step, will help you close the deal smoothly and sign the final settlement. The property or dream home is yours now. If this is your first property transaction, realtor will help you in each and every step to help you own the property.

Documents Required for Home Loan:
Documents for Salaried, Self Employed Professional, Self Employed Non Professional:

• Application form with photograph duly signed
• Identity, residence and age proof
• Last 6 months bank statements
• Last 3 months Salary-slips
• Processing fee cheque
• Form 16 / Income Tax Returns
• Proof of business existence
• Business profile
• Education qualification certificate and proof of business existence
• Last 3 years Income Tax Returns with computation of Income
• Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account

Note: Original documents are required for verification purpose only