What Is a Home Loan?
A home mortgage is a loan given by a bank,Mortgage Bank, or other financial Instition for the purchase of a residence—a primary residence, a secondary residence, or an investment residence—in contrast to a piece of commercial or industrial property. In a home mortgage, the owner of the property (the borrower) transfers the tittle to the Lender on the condition that the title will be transferred back to the owner once the final loan payment has been made and other terms of the mortgage have been met.
A home mortgage is one of the most common forms of debt, and it is also one of the most recommended. Because they are secured debt —an asset (the residence) acts as backing for the loan—mortgages come with lower interest rates than almost any other kind of loan that an individual consumer can find..
KEY TAKEAWAYS
- A home mortgage is a loan given by a bank, mortgage company, or other financial institution for the purchase of a residence.
- A home mortgage will have either a fixed or floating interest rate, and a life span of anywhere from three to 30 years.
- The lender who extends the home mortgage retains the title to the property, which it gives to the borrower when the mortgage is paid off.
A home mortgage will have either a fixed or floating interest rate, which is paid monthly along with a contribution to the principal loan amount. In a fixed rate mortgage, the interest rate and the periodic payment are generally the same each period. In an adjustable rate home mortgage, the interest rate and periodic payment vary. Interest rates on adjustable-rate home mortgages are generally lower than fixed-rate home mortgages because the borrower bears the risk of an increase in interest rates.
Either way, the mortgage works the same way: As the homeowner pays down the principal over time, the interest is calculated on a smaller base so that future mortgage payments apply more toward principal reduction than just paying the interest charges.
In a mortgage transaction, the lender is known as the mortgagee and the borrower is known as the mortgagor.
An individual can choose a home loan as per the need and affordability. Mentioned below are the different types of home loan products available in India.
Home Purchase Loans
This type of loan is taken to buy a residential property, including flats, row houses and bungalows. The maximum loan amount offered by banks is 90% of the present market value of the property. For Non-Banking Financial Companies (NBFCs), this value is 80%.
Eligibility Criteria for Home Purchase Loans
An individual, who wants to avail a home purchase loan, must fulfill the following general conditions to be eligible for the loan. These criteria may vary from lender to lender.
Particulars | Salaried Professionals | Self-Employed Individuals |
Age | 18 – 65 years | 18 – 65 years |
Employment | Min. 2 years of experience | Min. 5 years of experience |
Credit Score | 750 or above | 750 or above |
Documents Required for Home Purchase Loan
Mentioned below are some common required Documents for availing a home purchase loan. However, the requirements may vary from provider to provider.
- Age Proof (Birth certificate, Class 10 marks sheet, etc.)
- Address Proof (Copy of passport, Voter ID, Utility bills, etc.)
- Income Proof (Salary slips and ITR details)
- Identification Proof (PAN card, Passport, Voter ID, etc.)
- Existing Loan Documents (if any)
- Documents of Property to be Purchased
Home Construction Loans
This type of home loan can be availed by the owner of land to meet the costs of constructing a new house. The loan can also be taken to finish the construction of an unfinished house.
Eligibility Criteria for Home Construction Loan
Following are the conditions that an applicant must meet to be eligible for availing a home construction loan. These criteria may vary from lender to lender.
Documents Required for Home Construction Loan
Mentioned below is the list of documents required for availing a home construction loan. However, the requirements may vary from provider to provider.
- Age Proof (Birth certificate, Class 10 marks sheet, etc.)
- Address Proof (Copy of passport, Utility bills, Voter ID, etc.)
- Income Proof (Salary slips and ITR details)
- Identification Proof (Passport, PAN card, Voter ID, etc.)
- Existing Loan Documents (if any)
- Property Documents
Particulars | Salaried Professionals | Self-Employed Individuals |
Age | 18 – 65 years | 18 – 65 years |
Employment | Min. 1 year of experience with current employer | Available for professionals and non-professionals |
Credit Score | 700 or above | 700 or above |
Home Improvement Loans
This type of home loan can be availed to renovate, repair or refurnish your home. Home improvement Loan are very popular due to low interest rate.
Eligibility Criteria for Home Improvement Loan
Following are the conditions that an applicant must meet to be eligible for availing a home improvement loan. These criteria may vary from lender to lender.
Age | 18 – 65 years |
Employment | Salaried, Self-employed Professionals and Non-Professionals |
Documents Required for Home Improvement Loans
Mentioned below is the list of documents required for availing a home improvement loan. However, the requirements may vary a bit from provider to provider.
- Age Proof (Birth certificate, Class 10 marks sheet, etc.)
- Address Proof (Copy of passport, Utility bills, Voter ID, etc.)
- Income Proof (Salary slips and ITR details)
- Property Title Deeds (Original)
- Estimated Renovation Quotation