Quick Answers To Some Frequently Asked Questions About Home Loans

For an average Indian, it might not be possible to buy his home without any assistance from banks. This is especially true if you live in the capital cities, where property is highly expensive. However, before we knock the doors of financial institutions, we should understand certain things about the whole process. Here are answers to some frequently asked questions about home loan:

Which is the best bank to borrow?

In broad terms, the best bank to borrow a home loan is the one that offers you the cheapest interest rate-- you could get home loans at as less as 8 per cent interest currently. However, it is after doing rounds of calculations that you would be able to find out which bank is best-suited for your individual requirements. Some banks charge a substantial amount as processing fee and other such charges. Public lender SBI, for instance, charges no processing fee on home loans. Now, even if they offer you slightly cheaper loans, charges such as these may jack up the loan cost for you.

Can I repay my home loan in cash?

It is only through online channels or through cheques that scheduled banks allow you to repay your loan. However, there have been instances where banks have recovered outstanding dues in cash.

Also read: After SBI, HDFC Bank And ICICI Bank Slash Home Loan Interest Rates

Can I make my friend a co-borrower?

Banks do not allow co-borrowing among friends. It is only a family member who can be your co-applicant in your home loan application. Even between family and relatives, banks have reservations in granting loans. For instance, a married woman would find it difficult to avail of a home loan with her unmarried sibling a co-applicant. Banks generally prefer lending to spouses as co-borrowers.

How long can be the loan tenure?

Typically, your home-loan repayment tenure may last between five and 30 years. In most cases, loans are provided to borrowers for a 20-year tenure. Depending on your age and income, you can tweak the repayment tenure. Another way to cut the tenure short is pre-paying the loan.

Also read: Buying A Property Without A Home Loan? Mind These

Do my age and occupation matter?

Your age and your income are the primary criteria for the bank to decide your credit eligibility. For instance, a bank would be more willing to a younger person, earning a stable monthly salary. Such profiles have lower risk exposure.  

Can I transfer the loan multiple times?

You can change your lender multiple times, in case it helps you reduce your loan burden. However, too much shifting is not advisable as it sends across a wrong impression. Also, kept in mind must be the fact that banks charge a free on loan transfers.

Do I have to pay a penalty on pre-payment of loan?

A borrower does not have to pay a penalty on pre-payment after the Reserve Bank of India in 2013 directed financial institutions to waive charges for loans taken on floating rate of interest. However, banks still charge a penalty on transfer if you have taken a home loan on a fixed rate of interest.

Also read: 7 Key Features Of Home Loans

Do banks offer me what I ask for?

The answer is no. Banks generally offer only 80 per cent of the total worth of the property as loan. Further, the amount you could borrow from the bank is decided only after banks carry out a technical valuation of the property. If you are asking for a loan of Rs 30 lakh while it is worth only Rs 25 lakh according to the bank's estimates, it would offer you only Rs 20 lakh as loan. A lot would also depend on your income while deciding your eligibility.

Does taking a home loan mean I cannot take another loan?

You can simultaneously apply for other loans, including car loans and personal loans, while you are re-paying a home loan. However, banks will thoroughly examine you repayment capability before issuing you a loan. In the end, it all boils down to your income. 

What if I default?

Banks charge a late-payment fee upon each such occurrence. In case of an unfortunate event, owing to which you are not able to repay your loan, the bank will have the right to take possession of the property and auction it to recover losses. Due to the Coronavirus outbreak, however, banks are currently offering a three-month moratorium on home and other loans. For this period, a borrower does not have to pay the EMI. He would not incur any penalty over non-payment during the moratorium period. There would also not be any adverse impact on the borrower's credit history, because of the non-payment.