Everyone dreams of owning his own house but to make this dream come true sometimes one’s entire life savings seem to be less. Moreover, before buying or building a house there are hundreds of factors that a person has to think about.
Home Loans provide help to such people who need financial help either to construct a home, renovate it or to buy a new one.
What does Home loan mean?
Home Loan is a Secured loan in nature which is given against the security of a house or property. The bank’s funds are utilized for this property and the property type could be a personal property or a commercial one.
The bank gets conditional ownership over the property i.e. if the borrower, in any case, fails to pay back the loan, the banker can get his amount by selling the property.
Features of Home Loan:
It is a secured loan i.e. a loan which requires collateral security.
The maximum loan tenure is 30years.
Can be issued or the following purposes – for building a house, renovation of an existing house, buying a new house.
Usually have lower interest rates than other secured loans like car loan and unsecured loans like a personal loan.
Types of Home Loan:
1. Home Purchase Loan: Is usually the basic type of a home loan.
2. Home Improvement Loan: This type of home loan is granted for the renovation or repair of the house which is already in the name of the borrower.
3. Home Extension Loan: This type of loan is extended to a borrower when he wishes to extend or expand an existing home.
4. Home Conversion Loan: It is a loan where the borrower has already taken a home loan to finance his current home, and now he wants to move to another home. This type of Home Loan helps the borrower to transfer the existing loan to a new home which requires more funds.
5. Bridge Loan: This type of loan helps to finance the new home of the borrower when he wants to sell an existing home, this is normally a short term loan. It helps during the interim period when the borrower wants to sell the old home & want to buy a new one and is given for the time until the person finds a buyer for the old home.
6. Home Construction Loan: This type of loan is taken when the borrower wants to construct a new home.
7. Land Purchase Loan: It is that loan which is taken to purchase land for construction & investment purposes.
Many times when a person files an application for a loan his application gets rejected, and the main reason behind this is the non-completion of documents needed at the time of approving a loan. Therefore, it is necessary for the applicant to keep his documents completed. Following is the list of necessary documents:
Basic Documents Required:
Last six months of Bank statement.
An Income proof certificate and passport size photograph of the applicant and co-applicant.
For Salaried employed:
Form 16 issued by employer Bank statement.
Copy of payslip of the last few months and a copy of TDS certificate.
In the case of Self-employed:
If a partnership firm then copies of partner ship deed or copy of the memorandum of association(MOA) and articles of association(AOA) if it is a company.
Copy of audited financial statement of the previous two years.
Income tax assessment order.
P&L account for last three years.