Buying a home is a big decision. And when it comes to taking a home loan, it becomes all the more important to take the right steps. A home loan would stick with you usually for 20 years or more. Hence, you are bound to have many questions, and you must take steps to ensure that all your questions are answered. This post will help you with top five FAQs you must know.
When it comes to building your dream home, you should not spare any expenses. However, it is important to keep in mind that with a home loan and a ton of money spent on interiors and appliances, you should not plunge into buying a home before you can afford it. While home loans are here to make it easier, the rate of interest and the EMIs every month should be researched carefully before you sign.
While the process can seem long, there are a large number of banks and other financial institutions that are looking to make it easier for you. So even if you are confused about the processes, you can always check with the banker to understand what needs to be done. However, here are five basic home loan FAQs to help you understand what you are in for:
- Can I apply for a home loan before Buying a Home?
It is a common misconception that you cannot apply for a home loan until you have finalized on the property that you are planning to buy. This is not true. When you apply for your home loan, it is calculated on principle, so you know what your maximum eligibility and loan repayment capacity is. While you can apply for the loan beforehand, it is given to you only after the required documents are verified.
- What are the required documents?
The next commonly asked question is about the documents that you need to apply for a loan. This contains the KYC or Know Your Customer documents which have your name, age and address proof. Along with this your bank statements, salary slips, income tax returns, application form affixed with photographs and the property documents are required for a smooth process.
- Can I Repay loans ahead of their tenure?
Yes, you can opt for repaying your loan ahead of your tenure. This is a good option taken by people to lower their burden and save on interest on the loan. While earlier banks would usually charge a penalty of 2-3% on prepaying the loan, RBI abolished this penalty making it easier for people to pre-pay their home loan. However, not all types of home loan are free from prepayment penalty. Hence, it is important to check on this before signing on the dotted line.
- Selling the property
If you are planning to sell off your home before your EMIs are done, you will need to get the necessary documents from the banks and pay the foreclosure to the bank. This is usually applicable to all banks so you can do it but having a chat with your loan manager will help you better.
- Do you get tax benefits?
Yes, you do! According to the Income Tax Act of 1961, you are eligible to get a tax deduction on your principal amount as well as the interest you are paying for your home loans every month. However, there is a cap on the limit as well. Under the Income Tax Act, you are eligible to get only up to two lakh rupees on your interest component. When it comes to your principle component, you cannot get more than one lakh fifty thousand rupees under Section 80C.
These are some of the common questions that are asked about home loans. To know more, you can check out the different online bank and financial institution websites or talk to your loan manager about the same!