17. What is the amount I can borrow and what are the criteria?

A guarantor is insisted on by the HFC so as to ensure that the loan is paid back in full and in time. The guarantor is responsiblefor the repayment of the loan if the borrower is unable to do so.

18. What is the period in which I will have to repay the loan?

Usually in a period of between 5 to 15 years, but definitely before you retire. A few HFCs also offer a 20-year repayment rate.

19. How is the interest calculated on my loan?

Most HFCs follow the yearly reducing balance method, which accounts for your principal repayments only at the end of their financial year. Thus you pay interest on the principal that you have already returned to the HFC during the year. The effective interest rate is thus higher than the quoted interest rate by around 0.7 per cent. Banks and some HFCs, in contrast, follow the daily or monthly reducing balance method, which results in a lower interest burden.

20. How do I apply for a loan?

Approach an HFC with the latest salary slip and TDS Form 16 of the last two financial years for yourself and your co-applicant. The loan officer will informally tell you the amount of loan you are eligible for and the terms, in areas in which they finance homes.

Collect a loan application form and confirm the needed documents.

Visit more than one company since you are likely to get better terms / larger loan amount if you shop for the best deal.

At your chosen HFC, submit the duly filled loan application along with the required documents and an application fee (around 1 per cent). They will then interview you on the same. After conducting an appraisal of your application, the HFC will give an in-principle sanction of your loan.

You now have to submit your property documents, which should show a clear title. The HFC will check these and levy an administrative fee (around 1 per cent). It will then disburse the loan, either fully or in installments, directly to the builder / seller of the property.

21. Who can be co-applicants for the housing loan?

Usually a spouse can be a co-applicant. Other immediate family members are also acceptable to some companies, depending on merits. If both partners are working, it is better to have your spouse as a co-applicant since this will entitle you to a much larger loan.

22. What security do I have to provide?

A first mortgage of the property to be financed. The title should be clear & marketable. Some HFCs may also require collateral security like the assignment of life insurance policies, pledge of shares, NSCs, units or mutual funds, bank deposits or other investments.

23. How do I select my HFC?

A rate of interest that is constant throughout the duration of the loan is known as a fixed rate loan.

24. Does the Agreement for Sale have to be registered?

Yes. In many Indian states, the agreement between the builder and purchaser has to be registered. This can be done at the office of the sub-registrar appointed by the State government.

25. Does the property have to be insured?

The property should be insured against fire and other hazards and the HFC will have to be the beneficiary of the policy.

26. How long does it take to get my application processed and my loan sanctioned?

It will take around 15 days for the processing of your application if your documents are in order. Make an application only if you are eligible for the loan since the HFC will not return the application-processing fee. It will take another week for the company to check out your property papers and make the disbursement.

27. When do I have to make my share of the contribution to the purchase price of the property?

You will have to make your payments towards the property price up-front before the HFC disburses any installment of the loan.

28. What do I have to do when my housing loan is sanctioned?

You must submit the property papers and pay an administrative fee (approximately 1 percent). When the HFC clears these papers, you must take the first disbursement of the loan within a stipulated period (usually three months) and avail of the entire loan within about a year's time.

29. In how many installments can the loan be disbursed?

The loan can be either disbursed in full for outright-purchase / ready properties or in a few installments for under construction properties. The disbursement will be made taking into account the requirement of funds and the progress of construction.

30. Do I get tax benefits on the loan?

Yes. You are eligible for certain exemptions on both the principal and interest components of the loan as per the Income Tax Act, 1961. The principal repayment of the loan up to Rs 10,000 is eligible for a rebate @ 20 per cent U/s 88 of the IT Act. The income tax exemption limit for interest paid on housing loans is Rs 75,000 per annum on self-occupied houses. Therefore an interest payment of up to Rs 6,250 per month can be deducted from taxable income in arriving at the total income tax payment of an individual.

31. Can I get a loan for extension / upgradation / renovation of my house?

Yes, these loans are available from some HFCs. However the loan terms may be different from the usual housing loans.

32. Can I sell the property on which I have taken the loan?

Yes. But the loan will have to be repaid before the sale is effected. Some HFCs allow the transfer of loan to the buyer of the property, depending on his eligibility for loan.

33. Can I rent the property on which I have taken the loan?

Yes, this is allowed by HFCs.

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