Home Loan: Interest Rate, Tax Profit

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Home Loan: Interest Rate, Tax Profit

Dear Friends, You can take a home loan to buy, build, repair and expand a residential property. In this, the property is mortgaged with the bank/lending institution till the loan is repaid. Home loan interest rates start from 6.50% p.a. Banks usually allow 75% to 90% of the value of the property being pledged as the loan amount, which can be easily repaid over a repayment tenure of up to 30 years.

You also get many benefits on taking a home loan like, tax benefits, Rs. 2.67 lakh. Up to PMAY home loan subsidy, balance transfer facility and top-up loan. Apart from home loan schemes, this article also provides information on home loan terms and conditions along with home loan interest rates.

Like other loans, it has become difficult to find the best home loan offer in today’s time. At Paisabazaar.com, we help you compare, select and apply for the best home loan offers from the best Banks and Housing Finance Companies (HFCs) in India. You can apply for the best home loan offers on Paisabazaar.com and get approval soon.


Top 10 Banks & NBFCs Offering Lowest Interest Rates Home Loans:-
Home loans usually have higher amounts and longer repayment tenures, so even a small variation in interest rates can make a huge difference in the total cost of the loan. Therefore, always choose the home loan offer that has the lowest interest rates. Given below is a list of banks offering the lowest interest rates on home loans in India:

Bank/NBFC Min. Interest rate EMI/Lakhs
Kotak Mahindra bank 6.55% ₹ 641
Panjab and sindh bank 6.50% ₹ 641
SBI 6.70% ₹ 646
HDFC Bank 6.70% ₹ 649
ICICI Bank 6.70% ₹ 649
Bajaj finserve 6.65% ₹ 649
Bank Of Baroda 6.50% ₹ 649
PNB 6.55% ₹ 649
Union bank of India 6.60% ₹ 652
Central Bank of India 6.85% ₹ 655

Fees and charges:-      Home loan applicants consider only the interest rates while taking the loan and ignore other fees and charges, while these charges can significantly affect the cost of the loan. Apart from the interest amount, there are many other fees and charges that banks and loan institutions may charge you at the time of applying for a home loan. The details of home loan fees and charges are given below:

Application Fee: This is charged by banks or other lending institutions to cover all the initial expenses that are incurred for completing the verification.

Processing fee: This is for the cost incurred on credit appraisal, and depends on the credit profile, income and home loan plan of the borrower. However, not all banks and other financial institutions charge processing fees.

Administrative Fee: This is charged by loan institutions that split the processing fee into two parts. The portion levied after the approval of the loan is known as the administrative fee.

Foreclosure fee: This fee is to be paid when one pays the home loan offer before its stipulated period. Earlier banks or NBFCs used to charge pre-payment penalty and foreclosure fees on home loans, but RBI has barred banks or NBFCs from levying pre-payment penalty on floating rate home loans. As far as fixed rate home loans are concerned, some banks charge these fees.

Change of payment mode fee: This fee is levied when the borrower requests to change his existing payment mode during the loan tenure. This fee is usually Rs.500. Happens till. It varies from bank to bank and other lending institutions.

Fee for reducing or changing the interest rate: This fee is levied on the borrower when he requests his bank to change or reduce his existing interest rates for various reasons. This fee varies from bank to bank and is usually up to 2% of the outstanding principal amount.

CERSAI Fee: Central Registry of Securities Asset Reconstruction and Security Interest is India’s central online security interest registry. Banks and NBFCs check the mortgaged property by visiting the CERSAI website to see if the property has been claimed by any other bank. For this process, banks pay a nominal fee, which they later collect from the borrower.

Additional Charges on EMI: When the borrower is unable to pay the EMI or pays the EMI late, additional charges are levied on the outstanding EMI. Therefore, EMI should be paid on time.

EMI Bounce Fee: EMI Bounce Fee is levied when you fail to make the loan payments on time due to insufficient funds in your bank account. In case of bounce, the bank usually charges Rs 500. Takes fees. This fee varies from bank to bank.

Legal Fee: This fee is usually included in the processing fee, but some banks charge it separately when they take the help of a legal firm to verify the legal documents of the borrowers.

Franking Fee: It is commonly defined as the stamp fee charged by the state government on the sale value whenever a property is bought or sold. This amount varies from state to state, and depends on state laws.


Tax Benefits of Home Loan:-

The Government of India provides tax benefits on taking a home loan, under the Income Tax Act 1961. With this benefit, home loan borrowers can save a lot every year. Below are the tax benefits that you can avail on payment of Home Loan EMI:

                                      Home Loan Tax Benefits 2022
income tax act section Who Gets Home Loan Tax Benefit Maximum tax exemption amount.
Section 24(b) on payment of interest ₹ 2 lakh
Section 80C On the principal loan amount (stamp duty and registration fees also) ₹1.5 lakh
Section 80EE Additional interest (for first time home buyers) ₹ 50,000
Section 80EEA Additional interest (for affordable housing) ₹1.5 lakh

Eligibility conditions:-      Home loan eligibility terms vary among lending institutions and loan schemes. However, following are some common home loan eligibility conditions:

Nationality: Applicant must be resident of Indian, Non-resident Indian (NRI) and Person of Indian Origin (PIO)
Credit score: 750 or above
Age Limit: 18 – 70 Years
Work Experience: At least 2 years (for job profession)
How old is the business: At least 3 years (for self-employed)
Minimum Salary: At least Rs 25,000 per month (the limit varies among loan institutions)
Loan Amount: Up to 90% of the value of the property
Apart from these, the home loan eligibility criteria also depend on the type of property you are buying and where.


Documents Required for Applying Home Loan:-

  • Loan application form.
  • 3 photographs passport sized.
  • Identify proof
  • Residence proof
  • Bank Account Statement/Passbook for last 6 months.
  • Signature verification by bankers of the applicant.
  • Liabilities statement and Personal Assets.
  • Property detailed documents
  • Salary Certificate (original) from employer. (salaried individuals)
  • Form 16/IT Returns for the past 2 financial years. (salaried individuals)
  • IT Returns/Assessment Orders copies of the last 3 years. (self – employed professionals)
  • Challans as proof of Advance Income Tax payment. (self – employed professionals)
  • Proof of business address for non-salaried individuals. (self – employed professionals)
  • IT returns/Assessment Orders copies of the last 3 years. (Self – Employed Businessmen)
  • Challans as proof of Advance Income Tax payment. (Self – Employed Businessmen)

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