INTRODUCTION TO HOME LOAN

Home Loan is one of the fastest growing retail and mass banking area. It forms an important
part of the country’s priority in 5 year plans. Almost all public and private sector banks are offering
home loans at attractive rates for purchasing their dream home. Home loan usually cover a variety
of types. All Banks have come out with home loan products studded with features and value
additions that make the schemes not only attractive but also serve as a substantial source to the
borrowers for owning their dream home.

CHARACTERISTICS OF HOME LOAN

 Home Loans are the consumer loans.

 Home loans are long term loans provided by various banks.
 These are large amount loans which provide financial support to the people who want to
purchase their dream home.
 Home loans are secured loans.
 The borrowers get to own their dream home and pay for it in easy and affordable installments.
 Banks and Financial Institutions offers home loans at cost-effective rates.
 Tax concessions make home loans more attractive than other loan products.
 The borrowers can get tax deduction on repayment of the principal amount of a loan taken to
buy or construct a house.
 The interest paid on a loan is deductible from 'income from property', even if it has not been
paid during the year.
 Interest paid on a new loan taken to repay the original housing loan is also allowed as
deduction.
TYPES OF HOME LOANS

Home Purchase Loans

Home Improvement Loans

Home Construction Loans

Home Extension Loans

Land Purchase Loans

Bridge Loans

Balance Transfer

Refinance Loans

Home Conversion Loans

Stamp Duty Loans

Loans to NRIs

BENEFITS OF HOME LOANS TO BORROWERS

TAX BENEFITS

1) For Resident Indians

2) For Non- Resident Indians
STEPS IN PLANNING FOR A HOME LOAN

A) PURPOSE
B) SELECTION OF A PARTICULAR HOME LOAN
C) FINDING OUT COST OF THE HOUSE
 Home buying costs
 The Down Payment
 The Payment
 Checklist of Additional Expenses
 Maintenance costs
 Renovation and repairs costs
 Property taxes
 Property insurance
 Service charges
 Lawyer (notary) fees
 Moving costs
 Other Costs

D) SELECTION OF THE MOST SUITABLE BANK

 Rate of interest
 Total financing cost
 National presence
 Prepayment/Foreclosure benefits
 Calculation of the exact home loan amount
 Extent of funding
 Flexibility of repayment plans
 Property characteristics
 Collateral
 Service
 Other factors

E) FOLLOW UP WITH BANK’S PROCEEDS

POINTS TO REMEMBER ABOUT A HOME LOAN
1) The monthly installment or the EMI
2) The loan tenure
3) How is the net monthly income calculated
4) Monthly/Annual repayments
5) Fixed or floating rate of interest
6) Total financing costs
7) Co-applicant
8) Tax advantages
9) Identification of the property
10) Pre-payment dilemma

TIPS WHILE BUYING A HOME

1) While buying a flat from a promoter or builder
a) With respect to the location
b) With respect to approvals
c) With respect to the property
d) With respect to amenities

2) While buying a flat from a second owner

a) With respect to the location

b) With respect to approvals
c) With respect to the property
d) With respect to amenities

3 While buying an independent house from a promoter/ builder

a) With respect to the location

b) With respect to approvals
c) With respect to the property
d) With respect to amenities
FAIR PRACTICES CODE TO BE FOLLOWED BY BANKERS
WHILE GIVING HOME LOANS
A) Applications for loans and their processing

B) Loan appraisal and terms/conditions

C) Disbursement of loans including changes in terms and conditions

D) Post disbursement supervision

E) Other general guidelines

PROCEDURE OF HOME LOAN

A. Submission of application form
B. Personal Discussion with customer
C. Field Investigation by the bank/FI
D. Credit Appraisal and loan sanction
E. Issue of offer letter to the customer
F. Submission of property / legal documents by the customer to the bank/FI
G. Legal check on the property by the bank
H. Technical check on the property by the bank/financial institution:
I. Disbursement
J. Repayment
K. Interest tax certificate
L. Prepayment by the customer

PARAMETERS IN RELATION TO HOME LOANS

 ELIGIBILITY CRITERIA

1. For Resident Indians

a) Increasing the Home loan tenure

b) Repaying other outstanding loans
c) Clubbing of incomes
d) Step-Up loan
e) Perks
2) For Non- Resident Indians
 FEES & CHARGES

1. Processing Charge
2. Interest Tax
3. Documentation Fees
4. Commitment Fees
5. Prepayment Penalties

 AGE CONSIDERATION FOR HOME LOANS

 PENALTY FOR PRE-PAYMENT
 EMI (EQUATED MONTHLY INSTALMENT)
 INTEREST RATES FOR HOME LOANS & THEIR CALCULATION
 MARGIN AMOUNT FOR HOME LOANS
 SECURITY FOR HOME LOANS
 GUARANTOR FOR HOME LOANS

HOME LOAN WITH INSURANCE COVER

RECOMMENDATIONS FOR BANKERS
1) PROPER SCRUTINY IN SANCTIONS AND DISBURSEMENTS
2) PROPER STUDY OF FINANCIAL STATEMENTS
3) END USE OF THE MONEY LENT
4) MARKETABILITY OF THE MORTGAGED ASSETS
5) CONSTANT MONITORING
6) TAKE OVER OF BAD LOANS
7) FAIR ASSESSMENT OF PROPERTY
8) INCREASING EMPLOYEE MORALE