How to Start Planning for Buying a House (A complete Guide from beginning to End) It takes 1 hr to read!!!!!!!

You want to shift from your current cramped lifestyle to a spacious pad that at least gives you the choice to start yoga, have courtyard toilets, grow a terrace garden even. 

Get your own pad and you can drill holes in your walls (to hang up paintings, of course), design and paint it the way you like, pop some eardrums with loud music, not clean it if you don’t want to, and there’s no landlord breathing down your neck.

Moreover, getting a house on rent these days requires so much hunting! No non-vegetarians, no bachelors, no visitors, no noise and no coming late.  And let’s be honest, paying that rent is a big downer at the beginning of each month as well.

If you’ve been eyeing a house you want to purchase, you’re probably also scratching your head about when to go for it.

Maybe there’s a year-end bonus on its way, which you want to plump down for a property down payment.

Or got married recently? Then your date of purchase for a new home just moved up a few months.

Or maybe you’ve just moved to a new city, so the need for your own home is immediate.

Whenever you decide to buy a house, here are some cool home buying tips that can get you a spanking new home for free. (Just messing around, of course! Who gives you houses for free?):

Step 1: Fix an affordable budget:

The first step for a smooth home buying is fixing an affordable budget. Make a plan after reviewing your income, savings that can be used for down payment, how much home loan you are eligible for and how much EMI you can afford. While making the plan, don’t stretch it thinking that you can afford it, or by keeping in mind some possible salary hikes. You are likely to face some other expenses like spending on interiors, furniture, electrical fittings, miscellaneous purchases etc, which many buyers fail to count initially and drain out all their savings. You may even fall into unwanted debts which may take time to recover from.

Step 2: Check out your loan eligibility:

It is a good idea to visit your bank or check online to know your loan eligibility before starting your property hunt. Many people assume that they are eligible for some amount they have in mind by checking with their friends or some sales executives of banks. And at a later stage, when they submit an application, may be after paying the advance only they come to know that they are not eligible for the expected amount and there follows a mad rush and stress. Having an idea about the possible loan amount for you will help you to make your plans smoothly and zero down a project accordingly

Step 3: Smart hunting:

You may come across lots of builder advertisements in news papers, magazines etc. Making a visit or calling up every advertiser will only take your time out and make you feel exhausted. Zero down your preferred locations first. It can be near your office, or near to your children’s school. Then check out the property prices around there. If it is beyond what you can afford, think about the next option, or the next nearest location.

Once you short list the preferred and affordable locations, start your search. If you are the smartest, you will search online first. Because sitting at your own comforts you can check as many in the shortest time, and also read customers reviews and property price trends. Ask your friends who live around the place. And real estate agents can be the last option only.

Step 4: Look beyond the brochure:

Don’t get carried away by colourful brochures and 3D walkthroughs. Always keep in mind that those are not the real and the real may be far different from these. Visit the place, watch the ongoing construction work and if possible have a look at some of the builder’s previous projects. It helps a lot in going ahead with confidence and to keep away the disappointment and fights with the builder at a later stage. Also check the builder’s reputation and rating online.

Step 5: Check the legals and hidden charges:

Many buyers in recent times have been caught in an unpleasant situation where the flat they booked got embroiled in a legal battle between the builder and the farmers who sold the land to the builder. If you are looking to close a real estate deal relying on the word of mouth of the builder, it may come back to haunt you. Get a complete insight about the project and verify every document with the help of a lawyer, before singing on any agreement with the developer or finalizing any financial commitments. If the builder is not keen to share the documents or is delaying in showing any such legal documents, raise the red flag. A good way to check the background of the property is to see if financial institutions and NBFCs are backing the project.

Similarly there are several additional costs like floor rise charges, infrastructure development fee, charges for parking area, club membership charges, pre maintenance charges etc which come at a later stage. Know about all these beforehand to avoid surprises at a later stage.

Now, let’s say you are raring to buy that house and want it as of yesterday. Take a knee. What kind of home do you really want?

We’ve all dreamed of the kind of house Aamir Khan owns in Panchgani, or fantasised about Shahrukh Khan’s lavish house in Mumbai.

If not those extravagant pads, maybe you’ve at least wanted one by the beach or near the hills? Apenthouse on the 80^th floor or a cosy cottage on the outskirts of the city? Or a sprawling villa, perhaps, in a township, with equally sprawling lawns?

Remember, your dog (or your pet dinosaur) needs to have his day too! So, space (oodles of it, really) is what you’re looking for.

So, here’s the next question that hits you in the face.

There was a time when a piece of land in Goa cost just 500 Rupees. Yes, you read that right. Yes, Goa.

But that was a long time ago. If you plan to buy land, you need to plan for forever. And a day ahead. Some of the tips are given below:

Understanding Undivided Share of Land (UDS):  When you are buying an apartment, you are technically buying two things. The first is the constructed part of the building where the owners will actually reside while the second is a proportionate share of the land where the property is built. This share of land allotted to the flat buyer is known as undivided land share or UDS. Many buyers are unaware of such an important aspect of land deal while purchasing property.

Significance of UDS:  The building is essentially a dead asset in real estate, as the value of constructed area depreciates. The older the construction, the lower is its market value of the property. On the other hand the prices of land keep escalating over time and may offer substantial return on investment for the landowner. This appreciation in the overall value of any property is due to the increase in the land rate and not the constructed area. Essentially it is the undivided land share in accordance with the built up area of the apartment that determines the future monetary value of the property. In case the land owner has no undivided land share, he or she may not be able to sell the property leave alone enjoy a good return on investment.

Legal Implications of UDS: The legal implication of undivided land share makes it an intrinsic part of any real estate deal. Suppose the building where you reside is to be demolished for reconstruction ten years down the line or comes under government acquisition project and made available for demolition, the compensation administered to the flat owner depends on the percentage of the undivided land share in the property. The sum of all the undivided shares for each apartment owner must proportionate to the area of the land in which the apartments are constructed. In case of co-operative housing societies, the UDS must be legally be in the name of the society as the flat owners are the share holders of the society.

UDS Calculation: UDS calculation is determined by a simple formula by multiplying the total land area with the size of the individual apartment and dividing the result by sum of areas of all apartments combined in the project.

Illustration for UDS Calculation: For example let us suppose 5 equally sized apartments of 1000 sq ft are built on one ground of land which measures 3500 sq ft. The UDS would be calculated as multiplying the total land area with the size of the individual apartment (3500*1000) in this case and dividing the result by sum of areas of all apartments combined in the project which is 1000*5= 5000.

Hence UDS = 1000*3500/5000 = 700 square feet.

UDS and Ownership of Parking Space:  Some real estate builders and developers have been guilty in the past of selling open or stilt car parking area to the individual house owners. As per the legal laws biding for each real estate deal and UDS, any purchasers cannot claim partition of their UDS of land. An open car parking therefore can only be sold as part of common area and cannot be legally included as part of the floor area of individuals.

Checking Validity of UDS while Purchase Property: While paying advance for any property, make sure the builder or the seller shares with you the agreement copy. The agreement copy between the builder and the seller holds all important details of the property in question including the details of the undivided share of land. There is usually a dedicated section in the builder agreement catering to the UDS share which is mostly mentioned in either percentage terms for example 0.75% or in exact square feet terms. Make sure your builder agreement clearly mentions the undivided share of land and this same figure is mentioned in the title deed also when the registration gets over, to safeguard your purchase and to avoid any legal complication in the future.

We kid. Make sure you have enough money to start building before your land becomes an overgrown cricket field. Or a ripe candidate for farm land.

Land is easier to grab on the outskirts of the city, but the downside to that is the distance to everything you love doing in your city. Within the city, for the same price, you’d probably get just enough to build one room.

Phew! It’s much simpler to get a ready-made house, don’t you think?

It all depends on the length you’re ready to go to build your dream home just the way you want. Those who promised to get their lover the moon are buying up land on the moon way in advance (Hush! Don’t tell anyone!) so that they can settle there when the time comes.

The below tips help you to buy a piece of land:

Buying a piece of land and building their first home is the biggest dream harboured by many Indians. So, when Prabhat told his mother that he was buying a plot of land, she was proud of him, something she did not show when he invested in the flat.

Buying a plot of land has become a very tricky affair, especially when considering the blatant corruption surrounding the deals including creating fake documents, demand for half payment in cash and also issues of disputed land sales. So, if you are ready to buy a piece of land to build your first home, it is advisable to be very cautious and thorough.

Also, the steps and procedures are quite different from purchasing a flat and hence require a careful analysis before setting out on the path.

 Buying Land

Plots are scarce in big cities, though you can still get a good piece of land in smaller towns or even the peripheries of the cities. If you are planning a loan, then a land loan can be availed that are offered by banks for the purchase of residential plots. Some banks have a clause that requires the buyer to start construction within six months of land purchase. So, it would be advisable to plan your future course beforehand. You may procure a personal loan, but that might be a little more expensive.

Watch Out For…

In India, the real estate sector often pilfers with the law governing it. Therefore, it is advisable for land buyers to check for the following factors thoroughly and even get them examined by a legal expert before making the actual purchase:

The Deed Title: Check if the deed title is in the name of the seller and he has the full right to sell it. Insist upon looking at the original and not just a photocopy.

Encumbrance Certificate: This document can be procured from the sub-registrar’s office where the deed is registered. It declares that the land is free of any legal hassle and unpaid dues.

Property Tax Receipts and Bills: Ask for the originals again and ensure all the payments have been made as this could lead to legal complications and more expenditure in the future.

Apart from these, you must also check that the loans on the land are repaid with a release certificate issued by the bank and get the property valued for the exact land measure.

Documentation

To purchase a piece of land, the following documents are required from the seller’s end:

Original Land Deed of the current owner, known as the 7/12 document and also the previous owners with the proper names on the title

An Encumbrance Certificate from the Sub-registrar’s office for the last 30 years at least

Release Certificate from the bank, stating that the loan on the land has been completely repaid

Original property tax receipt and other bills relating to the plot

For the buyer, the documents required include:

The Title Deed after it has been transferred to the buyer’s name written by a Government licensed Document writer

Receipt from payment of stamp duty charges

Now, you can get your land registered in the sub-registrar’s office or have your name added in the village office records, as may be the case.

 House Plan Approval

The State Municipality Act requires that a prior sanction be obtained by a person who wants to undertake construction activity for building a new house or modifying an existing one. The process has been made automated in most states and isn’t time consuming. Your contractor, engineer or architect needs to take care of this. The architect needs to submit the Building Plan along with a prescribed fee for getting the building plan approval done.

Factors for Construction Cost

The construction cost involved in the project includes:

Architect/ contractor’s fees

Building material costs

Labour cost

Interior fittings such as light fixtures, bathroom fittings, tiles, etc.

These will be the actual costs involved; however, the cost escalators will be the choices you make such as the construction plan itself, the material be required for building your house will vary according to your plan, the material quality and so on. Sometimes, it is better to pay extra at the time of building and save maintenance and repair expenses later.

Smart Ideas For Saving

Outstripping your budget plan is inevitable while constructing your own home and there are very rare unheard of cases where this hasn’t happened. You can apply the following tricks to cut corners though:

Keep your construction plan simple and don’t make too many changes once the construction work commences.

Get materials and fittings with long term savings in sight.

Pick the materials when prices are low even if you require them at a later stage.

Finally, get what you need and not what you want. Cost cutting is very important from your end as there will be many unforeseeable expenses that will crop up. Sticking to the original construction plan as much as possible is the best way to finish the project early or on time.

On the other land… err… hand, if you’d rather buy a house here on earth, you need to decide whether you want to go for a brand new home and feel like a king, or go for a used home and save yourself time and effort. Decisions, decisions, decisions!

Old houses bring that sense of nostalgia with them. You remember your grandmother’s kheer, your childhood with your cousins by the stream, or it makes you wonder about that locked up chest that no one seems to be able to open.

But, old houses also come with their leaks and creaks, and you never quite know what that chest is actually hiding. Spooky, huh?

A new house on the other hand, can be a more comfortable choice with all the attendant bells and whistles. Don’t you just love all the beautiful Jaquar or Cera bath-ware that makes life so much easier?  10 tips for a smooth home buying experience!:

Here are 10 Tips for you:

Don’t waste time thinking: Procrastinating is bad for property buying. It is true that the EMI percentage of your salary decreases as your pay goes up, so the outflows will be less painful as you go on.  But think, your working shelf life is more now, which means any hike during this time or a part time job will be an added advantage. And importantly, there is a considerable difference in property prices even if it’s just 6 months!

Go for the affordable: Don’t over-stretch your budget. Look for a property for which you can arrange the down payment, typically 15 per cent of the cost of the property. Figure out an EMI you can afford. It shouldn’t exceed 40 per cent of your take-home pay. Settle for the lower of the two property price figures arrived at by the down payment and EMI approaches. Remember to factor in costs such as stamp duty and brokerage.

Take advantage as an early bird: Many builders offer better prices for early birds. It is a good idea to invest in an upcoming project as of course the builder might be keen to get some initial buyers at attractive offers.

Check for builder’s reliability: Having said the above point, while investing in a prelaunch property, it is important to check the builder’s reliability. There are many people around you who got struck with their money gone and paying high Pre-EMI interest for delayed projects.

Stay away from middle men: They are smart to push sales for their benefit. Even if the property has some minuses, there can cover it up smartly by exaggerating the pluses. So it is good to do the research your own. Speak to the owner directly, talk to the neighbours and hear their opinion about the project and the location concerns like availability of water, waste management etc.

Go to the bank first: It is a good idea to consult a banker first to know your loan eligibility in advance. It helps in zeroing down a property within your loan eligibility and thereby helps avoiding the frantic run later when you like a property and money is a problem. Banks will also have a list of approved projects in different locations.

Avoid multiple loans: Many people depend on personal loans to raise money for down payment. But this will only going to increase your financial burden later when you start repayment. If you are in short of money for down payment, try out other options like borrowing from family, selling gold, disposing other properties ( if having ) etc.

Narrow down your search: Options are vast today. If you are planning to visit a builder expo and collect as many brochures to compare, I will tell that it’s a pure waste of time. Narrow down your searches based on proximity to office, office of your partner, kids’ school, etc. Now you have narrowed your search to few key locations. Again shortlist options based on price range. Now you are left with a quite few numbers, which will make your search easy

Don’t run behind offers: Book today and a car free…book now and get a tablet….Builders may lure with many options. But go for only sensible options. You already have 2 cars then getting a car free is not going to be a good offer for you. If they are offering free parking, grab the opportunity!

Consult a lawyer before you pay advance: Ensure that the documents are free of any encumbrances and legal entanglements including permits before you pay advance. Many buyers end up falling in traps without checking property documents with the help of an expert.

If you do decide to build your own home, you end up infusing a part of your personality into it. Like a walk in closet, a massive bathroom with potted plants or up-scaled junk to give your home that unique feel. You just need to find a whacky enough builder who loves your equally whacky ideas.

And that’s your next step, away from that boring cave, towards your exciting new home.

The search for finding the perfect builder starts where arguments begin and end – the Internet of course.

Just as you use the Internet to narrow down between a S4 and an i6 for the season, it’s important to compare builders and check reviews on them. You don’t want to get duped in any way, do you?

While you do this, it’s important to remember what Abraham Lincoln said – Don’t believe everything on the Internet.

Check the builder’s quality by physically visiting previous projects, if possible. We don’t want the big bad wolf to blow your house down in any way. After all, you would have invested quite a sum.

Depending on the locality, the size of your house, and the builder you pick, you will have to save up a quite a big amount to cover your expenses. And it’s not just the basic cost of the property. Remember to add the stamp duty and registration charges, which can be a quite obnoxious amount.

Most people buy a property at a certain stage of their lives. Apart from all hassles of searching for a property, applying for a Home Loan etc., there are other few things (like Stamp Duty and Registration charges) that are unclear to most of the buyers. It is important for the readers to know that while transferring ownership of property, a buyer needs to pay taxes in the form of Stamp Duty and Registration charges to their respective state government. These charges, however, vary from state to state. Some states collect different stamp duty from their rural and urban areas, whereas few other states provide discounts to female buyers of the property. Let us understand how the whole process of stamp duty and registration of property works.

Stamp Duty:  Stamp Duty is a tax levied for the transaction performed by way of a document like Sale Deed, Conveyance Deed etc. Technically, a Stamp Duty is paid for any Document or Instrument by which any right or liability is, or intends to be, created, transferred, limited, extended, extinguished or recorded. The stamp duty relating to immovable properties has to be paid on documents like Conveyance Deed, Sale Deed, Gift Deed, Partition Deed, Power of attorney etc.

The payment of proper Stamp duty on the above mentioned documents confers legality on them. Such instruments get evidentiary value and can be admitted as an evidence in Court of law. The instruments that are not properly stamped are not admitted as evidence. Without the payment of this stamp duty, your solicitor will not be able to officially register your new house in your name, even when the house is transferred within the family.

How a Stamp Duty is calculated?    In India, different states have their own criteria for calculating Stamp Duty. And most of the times, it depends on the document type that needs to be stamped. For example: In Maharashtra, documents are divided into three broad categories for the purpose of Stamp Duty Calculation:

Category (i) Documents wherein the Stamp Duty is “Fixed”

For Ex: Adoption deed, Affidavit, Divorce, Cancellation deed, Entry of Memorandum of Marriage, Indemnity Bond, Letter of license, Notarial Act, Power of attorney, etc.

Category (ii) Wherein Stamp Duty “Varies and depends upon the value mentioned in the document”

For Ex: Agreement relating to deposit of title deeds, pawn, pledge or hypothecation, Clearance List, Lease , Article of association, Mortgage deed, Security Bond, etc.

Category (iii) Wherein Stamp duty “varies and depends on the consideration mentioned in the document or True Market Value, whichever is higher”.

For Ex: Conveyance, Agreement for sale, Gift, Exchange, Partnership Deed, Partition, Development Agreement, Transfer, Trust, etc.

Note: The True Market Value is determined as per the provision of the state defined act prevailing in that particular state.

Appropriate time for paying the Stamp Duty:

Generally all the instruments should be stamped before or at the time of execution i.e. stamp duty is to be paid either before execution of the document or on the day of execution of the document.

Methods for paying Stamp Duty:

1. Purchase of Physical Stamp Paper

2. Franking

3. Purchasing E Stamp (through online payment – SCHIL-www.shcilestamp.com)

Details on the way stamp duty should be paid:

1. Purchasing Non-Judicial physical Stamp papers:  This is a conventional method of paying stamp duty wherein you purchase non-judicial stamp papers from any authorized vendor in your area. Once you purchase the stamp paper in the name of one or more of the parties involved in the transaction, after that you can write/ type the details of your agreement/ transaction on that paper. Earlier, stamp papers were easily available but after the “Telgi scam”, it has become slightly difficult to get a stamp paper especially for bigger denominations. However, there are other two convenient methods of paying stamp duty i.e. E-stamping and Franking.

2. E Stamping:  E-Stamping is a computer based application and a secured way of paying Non-Judicial stamp duty to the Government. Stock Holding Corporation of India Limited (SHCIL), a public ltd. company, is the official vendor of e-stamps and the only Central Record Keeping Agency (CRA) for all e-stamps used in the country. Payment of Stamp duty for e-Stamping can be made Online (www.shcilestamp.com ) through NEFT/RTGS or depositing Cash/DD/ Cheque at SHCIL branch office. Once you pay required amount of stamp duty, you will get the e-stamp certificate with a unique certificate number (UIN), stamp duty type, issue date and 6 character alphanumeric string mentioned on it. The benefit of e-stamping is that it is convenient and its authenticity can be verified online using its UID number. However, the drawback is duplicate copy of e-Stamp is not issued.

3. Franking:    It is a process wherein an authorized Bank/ franking agency puts a stamp on your document indicating that the stamp duty has been paid. Before executing the transaction (of buying a property) i.e. before signing on the document, one can approach an authorized Bank/ franking agency and deposit the required stamp duty at their counter. Once the stamp duty is paid, the authorized officer can Frank with special adhesive Stamp by Franking Machine that is intended for stamping such documents.

All the states in India have their own norms for the minimum amount for Franking. For Ex: Franking charges in Bangalore are minimum 0.1% of the agreement value i.e. If you are buying a house, and at the time of registering “Agreement of Sale”, you need to pay minimum 0.1% of the actual sale consideration of the property. If you are buying a property for Rs. 50 lacs, then at the time of “Agreement to Sale”, you need to pay 0.1% of Rs. 50 lacs (Rs.5,000) as a Franking charge. This fee is however, adjusted with the stamp duty at the time of execution of Sale Deed. Now, at the time of execution of sale deed, you can pay 5.5% as stamp duty instead of 5.6% (which is a prevailing stamp duty rate in Bangalore) to adjust the charges already paid during Franking.

Registration of Documents:   Once the stamp duty is paid, the document has to be registered under the Indian Registration Act with the sub-registrar, of the jurisdiction where the property is situated. The basic purpose of registration is to record execution of document i.e. it records the ownership of the property in case of Sale Deed/ any Title Deed execution and until the title deeds in your name are registered or recorded, you are not officially the legal owner of the house.

Registration Fee:    The registration fee is paid over and above the stamp duty and vary in different states. The registration fee in Karnataka is fixed at 1% of the value of transaction.

Property Registration Procedure

Following are the requirements/ documents required at the time of registration:

•For registration of a property, both the seller and purchaser need to be present along with their identification documents like Pass Port, Driving License and Pan Card etc.

•The original document printed on one side along with two photocopies of the original; have to be submitted to the registering officer.

•The registration procedure also requires the presence of two witnesses and the payment of the appropriate registration fees.

•Stamp Duty needs to be paid through Collector of Stamps/SDM or a proof of stamp duty needs to be submitted if the stamp duty is already paid

•Payment details for the payment made to the seller needs to be shown

•Khata certificate and tax paid receipt (if required by your state)

Notice of Intimation:  This is specific to the state of Maharashtra and is applicable for those who avail Home Loan for purchase of property and mortgage the “Title Deeds” to any Bank/ NBFC. The filing of notice of intimation came into force from 1st April, 2013. Under the Registration (Maharashtra Amendment) Act, 2010, which amends the Indian Registration Act, 1908, it is now mandatory to inform the state registration office, of mortgage details within 30 days of a mortgage being executed (where the “agreement relating to the Deposit of title deeds” is not executed and registered).

Following is the procedure:

a) In case of Mortgage by way of Deposit of title deed done on 1st April 2013 and thereafter, if an agreement is executed (signed) between the Mortgagor and the Mortgagee, it has to be compulsory registered. The usual time limit for registration is four months from the date of execution.

b) If such agreement is not executed, then the Mortgagor has to file a notice of intimation of such mortgage. This notice should be filed within 30 days from mortgage.

c) When an agreement is executed and registered, then no need of filing of notice of intimation.

d) The non-registration of agreement/non filing of notice of intimation may defeat the legality of the mortgage and cause injury to the interests of parties. Any person who fails to file such notice within the prescribed time limit shall be liable for punishment under section 89C of the Act.

In simple words, the notice of Intimation is a notice given to the Government, by the buyer of a property in case he/ she is mortgaging his/ her property with some Bank/ NBFC. This notice is required to be sent only when an agreement between the Bank and loan applicant has not been registered. The intimation notice should be sent within 30 days of purchasing the property.

The main objective of this amendment is to safeguard the interests of banks and the society. And also with an objective of preventing fraudulent practices like availing loans from multiple banks on same property or disposing of the property which is already mortgaged.

Procedure for filing of the Notices:

The Department of Registration & Stamps, has launched an online application called the “e-Registration Module” for online filing of the said notices. It is available on the Department’s website www.igrmaharashtra.gov.in, using which, the notice of intimation can be prepared and submitted online i.e. without coming to the Office of the Sub-Registrar . The Maharashtra e-Registration and e-Filing Rules 2013 are prescribed for this purposes under section 69 of the Act.

You can either take a home loan, or save up big amounts, or do both.

Here’s where your neighbour hood bank comes into the picture.

Eligibility checklist for a home loan!

While applying for a home loan one must bear in mind that there are several other factors besides the income which are taken into account while deciding the eligible amount for home loan to an individual. Thus while deciding on a property to buy the prospective customer must keep in mind the amount that he can obtain from the banks as a home loan depending upon his income and repayment capacity.

The Basic Calculation of Eligible Amount

The primary consideration in calculating the amount an individual is eligible for is the annual income. The monthly income and the expenses are compared and the remaining portion is considered as the repayment capacity which is the basis for EMI computation and then reverse calculations are used to arrive at the final figure one is eligible for.

For example if a person earns Rs. 20000 per month and his essential monthly expenses are Rs. 15000 then his monthly repayment ability is Rs. 5000 at an average interest a rate of 9% the monthly installment on a loan Rs. 100000 will be Rs. 900 for a tenure of 20 years. Now the Home loan eligibility in lakhs is approximately equal to the amount available for loan repayment divided by loan installment per lakh for the selected tenure. In this case this amount would be 5000/900 x 1 Lakh = Rs. 5.5 Lakhs.

Additional Factors

There are several additional factors which the banks must consider while determining the actual amount that the applicant is eligible for.

Suppose in the above example the house purchased gets Rs. 2000 per month as rental which increases the repayment capacity of the individual. Thus the eligibility will now be Rs. (5000+2000)/900 x 1 Lakh = Rs. 7.7 Lakhs.

The exact essential expenses of the borrower are difficult to estimate so a fixed percentage of income is considered as not available for loan payment. This percentage varies as per income bracket as the banks believe that those who are in higher brackets of income can spare a greater percentage towards repayment of the home loan. Thus the eligibility figure for them also increases accordingly. For high earning individuals the repayment capacity may even be taken as 60% of their salary thus increasing their eligibility substantially.

The Tenure Factor

Another factor that comes into play is the tenure of repayment, which affects the amount one is eligible for. For longer tenures the EMIs per Lakh of amount borrowed becomes lesser and thus the individual can pay for higher loans. Thus the eligibility for a 20 year loan tenure of an individual will be higher than a 10 year tenure for the same individual.

In certain cases additional factors such as income from other sources and expected increase in earnings are also factored into deciding the total amount eligible for. However if the applicant has other loan repayment liabilities at the time of applying for a home loan his net eligibility shall reduce as per the amount outstanding as other loans and the EMIs being paid towards those loans.

The best of both worlds, just like Hannah Montana, is actually possible if you plan right. Here are 8 ways to become home loan ready. But that bathtub better be big!

The process of becoming Home Loan ready starts 6 months prior for those who never bothered to be financially disciplined. Follow these simple steps as soon as possible to inculcate financial disciple in your life.

1. Clean up your Credit Report :  The first and the foremost point that all loan providers, refer to before lending, is your Credit Report. All the lenders expect you to have a clean credit history with a good credit score of 650+. Make sure to check your CIR (Credit Information Report) as well as your Credit Score online ATLEAST 6 months prior to applying for loan. This will provide you sufficient time to set your score right if there is a problem. And give you confidence if you have a good Credit Score. You can buy your CIBIL TransUnion credit report (including credit score) online for Rs.470 only.

Tip: Pay off all your delinquent accounts, late payments etc. and start making regular payments for your Credit Cards and loan EMIs at least 6 months before availing home loan.

2. Pay off existing debt:  If you are have availed multiple loans, then try to pay off these loans before you apply for home loan. As having several loans might affect your loan eligibility, few Banks however, along with your home loan, provide a scheme of debt consolidation also. But this is subject to your monthly income. As any other EMIs that you are paying right now, gets factored while calculating your loan eligibility. The lesser EMIs you pay each month, more is your loan eligibility based on your income.

3. Improve your Banking Habits:  Whenever you apply for any loan, the bank account statement is one of the most important documents that lender asks. Through your Bank Statement, the lenders verify the banking habits, lifestyle (easily noticeable if you use your debit card frequently) and your repayment behaviour. The lender expects you to have a good credit balance every month (at least equivalent to the EMI that you will repay for your Home Loan). Please ensure that there is no cheque bouncing especially due to “Insufficient Funds”. However, other cheque rejection reasons like “Signature Mismatch” are still acceptable as an exception. But such instances should not exceed twice in last 6 months to 1 year. The lenders generally ask for last 6 months Bank Statement, if you are salaried, and last 1 year statement, if you are self-employed.

4. Keep your documents in place:  When you apply for Home Loan, following documents need to be submitted to the lender:

Salaried Customers	Self Employed Professionals	Self Employed Businessman
Application form with photograph	Application form with photograph	Application form with photograph
Identity and Residence Proof	Identity and Residence Proof	Identity and Residence Proof
Latest Salary-slip	Education Qualifications Certificate and Proof of business existence	Education Qualifications Certificate and Proof of business existence
Form 16	Last 3 years Income Tax returns (self and business)	Last 3 years Income Tax returns (self and business)
Last 6 months bank statements	Last 3 years Profit /Loss and Balance Sheet	Last 3 years Profit /Loss and Balance Sheet
		Business profile
-	Last 6 months to 1 year bank statements	Last 6 months to 1 year bank statements

On the basis of above documents, the lender can offer in-principal approval for your loan application.  That is, the loan is sanctioned subject to positive property verification.

In addition to the above documents, you need to submit the copy of all property papers that you desire to purchase. It is always recommended to verify the complete chain of property documents available with the seller for at least last 13 years, before entering into “Agreement to Buy”. The Banks, generally, do not process the loan application without the “Agreement to Buy/ Sell”. If you are not confident on the property chain, it is always advisable to consult a property lawyer well in advance. The lawyers, analyse the chain of the property and help you in making the decision to buy or reject the property. They also help in execution of the sales/ purchase transaction.

5. Office and Residential Stability:  The lenders, along with verifying your income, banking and property papers, they also verify your job and residential stability at current address. This is done to avoid the risk of a fraud or any desertions later during repayment of loan. Hopping the job frequently might get you into trouble while you apply for loan. Generally, a stability of at least 6 months is desired both at residence as well as work place.

6. Apply for Pre-Approved Loan:  If you intend to buy a property within a couple of months, then you can apply for pre-approved home loan with the Bank. As mentioned above, most of the Banks, these days, sanction a loan amount that can be extended to you, even before you have zeroed in the right property for you. As an extension to this service, many lenders like ICICI Bank and HDFC Ltd. help their customers to find their dream home. For instance, HDFC has started an online portal www.hdfcred.com wherein all the projects approved by HDFC have been listed. The borrowers can get their loan pre-approved and can then start looking for a home. This also enables you to be more precise with your budget for buying the property.

7. Understand the Loan Process of lenders:  Whenever you apply for a loan, be prepared for lot of queries, phone calls and different visitors walking in on behalf of the Bank/ lender. The loan providers follow a process wherein they outsource most of the verification process to third party vendors. After verifying their identity cards, you can address to their queries. Your loan application is processed and approved/ declined by the Credit department of your lender that generally takes 4 to 8 working days to make a decision on your loan application. Once the loan is approved, then your sales officer guides you on further process of completing rest of the formalities.

8. Do an online research:  As you get prepared for availing a Home Loan, do not forget to do an online research on the best rates and schemes offered by different lenders. There are different Home Loan products available in the market as per your requirements. For example: some lenders offer a product “Home Loan OverDraft” that is best for those who wish to make pre-payment of their loan. Although, RBI has mandated all the lenders to waive off the pre-payment penalty charges. But still, having a Home Loan OD (OverDraft) saves you from the hassles of approaching the lender for pre-payment, standing in a queue, filling up form and rest of the formalities. It is a unique product that gives you freedom to transfer surplus funds to your HL (Home Loan) account online to save on the interest repayment. At the same time, it also allows you to withdraw some funds from your HL OD account.

Similarly, there are different Home Loan products offered by different lenders at various rates. The key to grabbing the best deal is to do your homework in advance and become Home Loan ready.

To loan or not to loan, that is the question. Here are the given tips to take a loan or not:

Taking a home loan? Ask these 5 questions!

Here are 5 incredibly smart questions to ask your banker before taking a home loan.

1: Will you be considering statutory expenses?    One smart question you can ask your banker before finalizing the home loan deal is about the inclusion of any statutory expenses. Generally banks do not cover statutory expenses like stamp duty or registration charges, any VAT or service tax to be paid as well as any other miscellaneous or legal charges. Generally all home loans are approved by considering only the cost of the property. Banks and NBFCs may however consider funding of statutory expenses in certain cases either under a onetime scheme or under special cases where market value of the property may support offering such a facility. Irrespective of whether you are taking a home loan under any special scheme or not, it is always a good idea to ask your banker about the loan inclusion for statutory expenses.

2: Would you consider my insurance policies as additional collateral?    Don’t get disheartened if your bank says that you are not eligible for the applied amount. Even though they won’t tell you all possible ways to enhance your loan eligibility, a little knowledge about the possibilities and a smart suggestion after knowing their logic can help you. For example, banks consider your insurance policies as additional collateral to enhance your loan value. Or if you have an FD in the same bank, it will be helpful to enhance your eligibility. The banker may not tell you all these loopholes, but be smart to ask them, ‘can you consider additional amount by keeping my insurance policy?’

3: How will the changing interest rates affect my home loan?   You get a competitive interest rate as compared to the next bank, and you are happy with it. But have you thought of asking your bank how the changing interest rates will be affecting your home loan?

The fixed versus floating interest rate dilemma has been traditionally one of the most difficult decisions for home loan borrowers. Over the years with fixed home loans becoming way high compared to floating rate of interests, most home loans have been offered with floating interest rate. The interest rates offered by the banks depend on the RBI repo rate which is announced periodically. A decrease in repo rate usually results in lowering of interest rates. Before finalizing the home loan, it is essential to check with the banker about how the changing interest rates would affect the home loan.

Sometimes banks and NBFCs offer a reduced interest rate only for new home loans and not for existing home loans. Similarly in some fixed rate schemes, if the rates go up above 2% to 3% for deal rate, your rates may change.Ask and clarify all these with the bank.

4: Do you allow home loan refinance? : Sometimes home loans may get difficult to repay due to variety of reasons including a financial crisis. You may sometimes want to transfer your loan to another bank in the middle due to lesser rates offered by the other or due to a bad relation with the existing bank. And many realize it at the time of transfer only that pre closure charges are applicable for refinance or balance transfer, which makes no sense in transferring.

So be smart, ask your bank beforehand how it will be if you request for a balance transfer. In a market scenario where interest rates are falling refinancing can mean a substantial reduction in many cases.

5: Do you offer mortgage as an overdraft facility? :  The changing face of the home loan market has made banks and NBFCs introduce various new features. Overdraft on home loans is one such which allows the borrower to park surplus funds in the loan account. You are free to withdraw the deposit and use the funds in case you find an attractive investment opportunity while the interest rate is levied on the remaining balance. Instead of prepaying the home loan, you can look at using the mortgage as an overdraft. The facility is offered only a by a selected few banks under various flagship schemes.

Many people still buy home loan without checking and comparing the various aspects of it. Only the rate of interest is taken as the one factor before finalizing a home loan agreement. There are however many other factors that you must keep in mind and discuss proactively with the banker before choosing the home loan deal.

Seriously speaking, a home loan is a great way to leapfrog into the homebuyers’ market. It not only gives you a leg up in terms of financing your dream, but you also get tax benefits on that home loan. Who doesn’t love tax benefits?

3 Loans that Can Give You Great Tax Benefits: Some loans come with tax benefits. Which means that you can build an asset and at the same time earn some perks.

Home loans  :   Owning a home is a coveted dream. However, the ever-rising real estate prices make it difficult for many to buy a home, or even a piece of land, with just his/her savings. Home loans are meant for bridging this gap. Home loans come with a lot of fringe benefits in the form of tax breaks.

How do you benefit?   Anyone availing a home loan benefits in two ways. The amount paid towards the principal repayment qualifies for deduction from income under Section 80C of Income Tax Act. Another benefit comes in the form of deduction for the amount paid as interest on the home loan. The maximum amount you can claim as interest deduction from your income for a self occupied property is Rs 2 lakhs.

If you buy more than one property, only one house can be counted as a self-occupied property, and the others are deemed to be let out (even if they are not let out). In case the loan is jointly availed between you and your spouse, the deduction of Rs 2 lakhs can be claimed by both of you. In case of properties that are deemed to be let out or are actually let out, the entire amount (no ceiling of 2lakhs here) paid as interest is admissible as deduction under Section 24B of IT Act, while the rent received gets added to your income. In spite of that, it turns out to be a good bargain.

	Tax payable	Tax payable when availing home loan	Tax payable when availing two home loans
Total income	8,00,000	8,00,000	8,00,000
Rent income	Nil	Nil	80,000
Deduction under Section 80 C	50,000	50,000	50,000
Principal amt deductible under Section 80 C	Nil	15,000	15,000
Deduction under Sec 24B (Interest)	Nil	1,05,000	2,10,000
Total income on which tax  is payable	7,50,000	6,30,000	6,05,000
Tax paid	75,000	51,000	46,000

Education loans  :   Education loans pave the way to your future.  Education loans could be availed for studying in India or abroad. But to get tax benefits from an education loan, the loan should be availed from any scheduled bank or notified financial institution.  Education loans can also be availed for self, spouse or children.  The legal guardian of any student can also avail this loan. Hence parents or spouses can also claim deduction for payment of interest.

How do you benefit?  Section 80E of Income Tax Act offers tax benefit for those availing educational loans for higher education. However, as against home loan, only interest paid towards the repayment of loan earns deduction and not the principal. Also, there is no upper limit fixed for interest repayment.  Tax benefit can be availed for a maximum of 8 years or on the loan repayment term, whichever is applicable. For example, if the entire loan is repaid in 6 years, then the tax benefit is also limited to that term.

Car loans  :   Not many know that car loans come with tax advantages and miss out on this benefit. However, all car loans do not come with tax benefit. A car loan is a good tool for the self-employed to claim some tax deduction. If used right, offsets the interest paid over a depreciating asset.

How do you benefit? Deductions from payable tax through a car loan can be availed only if you are a business man and declare the profit or capital gains earned from your business. Another condition attached to this is that the vehicle has to be purchased in the name of your business. In that case, you get exemption on the interest as well as depreciation of the vehicle.

Under these conditions, you can include the interest paid for your car loan for tax exemption.

Besides this, businessmen can avail deductions on personal loans too under certain conditions, like the loan being taken as a business loan or for capital investment in business.

Loans taken wisely and within our limits would save us from a never ending debt spiral, which many fear. While loans affect your monthly as well as annual finances for other expenditures, the beneficial side of it in the form of tax saving, reduces their overall impact considerably.

Let’s just say that if you managed to get a certain Mr. Trump to bankroll your home loan someway, he wouldn’t miss the money much. But it’s take you just as long to convince him as it would to save up that loan amount!
Let’s say Mr. Trump’s not interested. The home loan it is.

As long as you’ve decided to shoot for a home loan from your local bank, here are 5 home loan truths you should know.

All fixed rates are not always fixed: So now that you have taken a home loan with a fixed rate of interest you may think that you would be paying a fixed EMI each month for your entire tenure of your loan; Right? But the fact is that almost all fixed rate home loans have a clause that allows the bank or NBFC to re-fix the interest rate after certain period of time. The interval period ranges from two to three years depending on the bank or the non banking financial company. Such a clause makes the fixed interest rate more a semi-fixed interest rate home loan.

So the next time you are requesting for a home loan, make sure to check that your fixed rate is fixed for the entire tenure and not for a limited period of time.

Pre EMIs can cost you dearly: In case you are buying a property which is under construction, you would have to pay the bank a pre EMI till the time the builder finishes construction of your property. In case the builder takes two years to finish construction of your property, you would be paying pre EMIs which is interest on partial payment released by the bank to the builder. This money does not reduce your principal loan amount and is in addition to your home loan EMIs which start once your property is completed. Suppose your builder delays the project for a few years, you would be paying pre EMIs as interest towards the payment you received from the bank without reducing a single rupee from your home loan obligation.

Banks offer loans for 30 years: If you are thinking of increasing your budget for the property purchase on the basis of increasing your loan tenure, stop right away. Most home loans are offered for 30 years tenure, but when you approach a bank for the first time, they might offer you only a 20 year tenure unless you specifically request for a longer tenure! Though it is wise to close out a loan early, (10 years is actually ideal with prepayments, 20 is the average tenure) for those who who cannot help it, up to 30 years is an option. It does not matter if you retire after 25 years, if you are likely to earn a good pension, you can still avail a loan for 30 years. Sigining up with a co-applicant also can help this cause.

Banks Seek Interim Security- In case you are planning to purchase a property, you may have to offer another property as collateral security for a limited period of time till the bank gets the new title deed in your name. Never heard of this one before right? This clause is applicable for some banks, especially the nationalized banks. Banks offer home loans only when their risk is secured by a security or collateral worth the total cost of the home loan. In case you are buying a property, and seeking loan for an outright purchase, it may take 10-20 days to get the new title deed in your name after registration.  To offset any risk during that short tenure, you would need to offer another property as an interim security to the bank till you get the new title deed. Do check on this upfront with your bank to avoid surprises later!

Banks fix the property price as per their index: You may think that you could get a home loan up to 80% of the market value of the property and reach a figure in your mind. The fact is that banks have their own in-house evaluation process where they work out the market cost of the property based on their own yardsticks and calculations. Banks may evaluate your property far lower than what you think at times. Also, in case of an outright purchase, if they have assessed a good value for the property, but you are showing a lesser value in your title deed, you will get only 80% of the value you have showed.

Nowadays, we are spoilt for choices. Be it ice-creams, gadgets or bridegrooms.  Choosing a home loan is just as easy as picking out an ice-cream (or bridegroom) as long as you know what you want. There’s added sprinkles, dry fruits, hot chocolate, chocolate chips, gems, jelly thingies, and… phew!

We’ll have to warn you here that the home loan experience may not be as straightforward as it so deceptively appears. Here are 6 options you may not think of while taking a home loan.

Ignorance is bliss, but not for loan buyers. Many home buyers are unaware of the several options available when it comes to a home loan. Call it “research fatigue” or the lets-get-this-out-of-the-way syndrome, majority of home loan borrowers look only for interest rates. Here are six options you are likely to ignore when finalizing a home loan deal.

Bridge loan: If you are looking to purchase a new property after selling off an existing one, bridge loans are for you. A bridge home loan provides funds for down payment to buy the new property until your current house doesn’t get sold. This is a better option than an expensive personal loan, and comes with a tenure of one to three years. You can dispose off your property within that period and pay it back.

If you are unable to sell off your property within the stipulated time period, you can get your bridge loan converted to a mortgage loan albeit with a slightly higher rate of interest.

Note: Approach the bank for a bridge loan only after you have shortlisted a buyer for your property as bridge loans in most cases are facilitated only after you enter into a formal agreement for sale with a prospective buyer.

Flexi Loan: Flexi loans, as the name suggests are smart payment options, where your loan account is linked to a current account which functions like an overdraft account. You can withdraw amount from a home loan account as per the sanctioned limit. And whenever you have excess money, it can be diligently parked in the account and the principal outstanding of the loan is adjusted for the balance kept in the account by taking a weighted average.

The biggest advantage of a flexi home loan is that you withdraw money only as per your requirement and save on interest outgo for the loan.

Note:It is important to note that the interest rate for flexi loan is usually higher than that of a traditional home loan. Opt for it if you are likely to get surplus money which can be parked in the loan account regularly. Borrowers who have taken loans against under-construction property can also benefit from it.

Teaser loan: With the uncertainty over interest rate fluctuations of loans during the past few years, banks have introduced teaser loans to offer some respite. Teaser loans are fixed loans for a pre-determined period of two to three years. After that it changes to floating rate loan as per the prevailing base rate at that time.

If banks offer teaser loans with fixed rates at a good rate or lower than the current rate, it is a good idea to consider it in a rising interest rate economic scenario.

Note: Teaser loans are also good if you feel that interest rates are likely to rise soon. But if teaser loans are offered at rates higher than floating rates, or if the economy is likely to improve soon, it may lock you up with a higher rate.

Second mortgage: Let’s assume you already have a home loan running and are now seeking additional funds to raise money for other expenses related to your home purchase like interior designing or be it for another cause like purchase of a plot. You cannot afford a personal loan because of its high interest rate and your bank is not offering a Top Up loan at this stage. There is a case to consider a second mortgage loan.

Under a second mortgage loan or pari passu mortgage, you can mortgage the same property with two different banks to borrow money depending on the value of your property. The lending banks will have claim upon the property, depending upon the proportion of money borrowed.

Note: Second mortgage loans are offered with a mutual agreement between both lenders. The second lender may offer you a loan at a higher interest rate than the first.

Tranche EMI Home Loan: Many loan takers fail to calculate the huge amount they are losing as Pre-EMI.Home loans taken against under construction properties often call for a good sum to be paid as Pre-EMI, as the loan disbursement is linked to the level of construction, and the actual EMI starts only after the full disbursement. And until the actual EMI doesn’t commence, borrowers end up paying interest for the disbursed amount. The situation worsens if the project gets delayed.

Opt for a Tranche based EMI payment option here. Under this, you can start making EMI payments soon as the first installment of the loan is disbursed. Here you are repaying for the undisbursed amount, but the total output remains the same, and it saves you from Pre-EMI.

Note: If you think that you are paying additional amount under Tranche EMI option, you are wrong. The only difference is thatunlike regular EMIs that start only after full disbursement, here you are starting it early.

Proportionate release: Imagine that you have shortlisted a flat that costs 70 lakhs, but your loan eligibility is only 50 lakhs. You may get the loan amount only after paying off the down payment, ie, Rs.20 lakhs, but you are finding it difficult to raise that amount now.

You can talk to your bank about a proportionate release option. Under this option you can make the down payment in installments and the loan amount will also gets disbursed proportionally to meet the builder’s payment due dates. This allows you to have more flexibility to manage your finances.

Note: Not all properties are available for proportionate release option. Usually banks offer this for projects of reputed builders only.

Options are many, but your banker may not offer all of them when you seek a loan. By being a smart buyer you can get your home loan tailor-made for you and thereby save a lot!

The hottest product in the market, of course, is the Subvention Scheme, otherwise known as the 20:80 loan scheme. Read all about subvention loans to know whether you like its chocolate-y nutty flavor.

What’s a Subvention Scheme?

Under a subvention scheme, you can buy an under construction property from the builders by paying 15% to 25% of the total cost of the property, or even lesser. The remaining cost of the property is paid by the bank directly to the concerned builder and the pre-EMI interest is paid by the builder to the bank, as per the agreement.

Here in our case, Suraj is buying the apartment for Rs.75 lakhs. He makes a down payment of Rs. 10 Lakhs to the builder. And he goes for a bank loan for Rs.65 lakhs. Assuming the project is scheduled to be completed within 48 months (4 years), he will owe the builder around Rs.135416 per month.

As the bank disburses each installment, they charge pre-EMI interest on it. So, in Suraj’s case, he will pay around Rs.88000 for the first year as Pre-EMI and for the second year, it will double. Suraj’s home loan EMIs begin after he gets possession of the apartment.

If they take a subvention scheme, this pre-EMI amount will be paid by the builder to the bank, and the bank will disburse the remaining amount directly to the builder.

The way it works  Usually banks offer subvention scheme only for the builders that are listed as Category A with them. Those builders who have their project finance with the same bank and those with a clean financial record will be considered for this scheme.

There will be a three-way agreement between the developer, the buyer and the bank. Often there will be a specific period till which the builder agrees to pay the amount.

Banks pay the amount to the builder upfront or as installments under a deferred payment scheme.

Which banks offer Subvention schemes?

Subvention schemes are available with most leading private and public sector banks and NBFCs. But it is completely up to the discretion of the credit manager to offer this scheme with a builder. The scheme is also limited to a few developers. So, if you would like to opt for the scheme, you may need to check with the bank as well as the builder about the tie ups or possibilities.

Why say ‘Yes’ to Subvention loans?

Taking a home loan with a subvention option comes with a number of advantages for both the buyer and the builder. Some of the major benefits are:

Subvention loan schemes allow customers to own homes with a minimum upfront payment and it thereby reduces their financial burden.

The buyer needs to pay no interest till a fixed period or till the time the possession of the property.

Due to the interest burden, the builder is likely to complete the project well in time, making it a win -win situation.

Why say ‘No’ to Subvention loans?

This scheme is however not completely free from risks.

The buyer remains as a ‘borrower’ in the bank’s record. If the builder delays the interest payment, it is the buyer’s credit profile that gets negatively impacted.

Builders usually agree to payment of interest for a specific period only. As soon as the subvention period ends, the borrower has to pay the remaining interest, plus dues, if any. And if the construction is delayed further, they become helpless.

Builders are likely to increase the price of the property if it is known that the buyer is planning to go for a Subvention scheme. This is to make up their loss of interest payment.

Most subvention schemes come with a lock-in period which makes it difficult for you to dispose the property in case of any emergency.

A Subvention scheme was the rope that pulled Nikita and Suraj out of their quagmire, and it could help you too. Now they can go for as many Salman Khan movies as they like, without the worry of budgeting and spending less.

Now, all those added toppings will be just as easy to pick out according to your needs and what the bank offers.

Choosing the right bank is like shopping for a pair of blue jeans. You need the right shade, the right fit, and of course, you don’t wanna pay exorbitant amounts, do you?

Though financial insight proves to be helpful, it is not required so often. Consumers search for the most reputable home loan providers and often end up getting trapped in the wordy circles of the best salesperson. It, thus, becomes important to do your homework and take every factor into consideration before opting for a particular lender.

Importance of Taking a Home Loan from a Reliable Lender  :  Stringent terms and conditions and absurd policies are a trademark of a financier that every potential borrower must avoid. It is only a reliable lender who would offer the needed flexibility when it comes to the terms and conditions of the loan. Apart from that, only a reliable bank would provide superior customer service and be willing to go down that extra mile for keeping its customers satisfied. Thus, it is wise to check the reputation of the lender if one doesn’t hold any relation with the bank.

Factors to Consider :  Considering every possible, decision-affecting factor, planning out everything and following it systematically is the key to a smooth, hassle-free journey to owning your dream abode. There are numerous factors that help make a better decision when selecting a home loan provider.

Processing and Disbursal Speed – Dealing with a lender that rules out the possibility of any delays and is quick in processing the home loan application always proves beneficial in the long run. Normally, it takes 10-15 working days for banks to process an application, if everything is in order. Once approved, the lenders take additional 3-5 days for disbursing the amount of sanctioned loan.

Loan Qualification – The internal lending criteria varies from one bank to another and it is on the basis of these criteria that a particular amount of home loan is approved for the borrower. The criteria might cover the borrower’s age, job profile (preferably salaried, because of easily understandable salary slips and ITRs), employment stability, credit history and others. There are several calculators and eligibility charts, for instance the one offered by ICICI bank, which help the borrowers in apprehending their eligibility well in advance.

Repayment Terms – There are certain terms and conditions pertaining to the repayment of home loan imposed by banks on customers. Potential borrowers must clarify the terms related to settlement/foreclosing the outstanding amount, transferring the balance to another lender’s account, prepaying a part or full amount of home loan, and other things, before finalizing a lender.

 How much should you pay?

The cost of taking a home loan would certainly vary from one bank to another. It depends upon the decision making abilities of the borrowers whether securing a home loan would prove to be an economical affair or a cost laden one. However, there are certain things that one must weigh carefully at the cost front.

Fixed Vs. Floating Rates – The rates vary from time to time; and as in the case of a well-planned investment portfolio, one must analyse the liability portfolio and plan on getting the maximum out of it. As a rule of thumb, if the loan period ranges between 2-5 years, going with fixed interest is considered an ideal move. Otherwise, floating rates are considered ideal for long tenure loans.

Hidden Charges – Hidden charges are something that tend to prick the pocket of borrowers the most. Thus, while narrowing down the options, it is advisable to compare the processing fees, down payment, valuation fees, prepayment costs and other charges levied by different lenders.

Bank	Processing Fees/Charges
ICICI Bank	0.50% – 1% of the amount of loan or Rs.1500 (Rs.2000 for Delhi, Mumbai and Bangalore), whichever is higher, plus service tax and surcharge, as applicable.
HDFC Bank	0.50% of the loan amount plus service tax and cess, as applicable.
State Bank of India	Loan up to Rs.25 Lakhs – 0.25% of the loan amount, minimum charge of Rs.1000 Above Rs.25 Lakhs and up to Rs.75 lakhs – Rs.6500 Above Rs.75 Lakhs – Rs.10000
Punjab National Bank	Loans up to Rs.300 Lakhs – 0.50% of the loan amount, maximum of Rs.20000 plus taxes and surcharge Above Rs.300 Lakhs – Rs.50000 plus taxes and cess
Axis Bank	Up to 1% of the loan amount, subject to minimum of Rs.10000

As on April 7, 2014

Making the Choice :  Different lenders use different yardsticks for measuring the eligibility of the borrowers. Why shouldn’t borrowers consider doing research and compare several competitive features of home loans offered by different lenders? It is better to have the policies, facts, terms and conditions clarified well in advance before locking in a seemingly ideal home loan with any lender.

Researching the best lending partner for your home loan needs is one of the most crucial steps in your home purchase experience and is usually worth the time you spend on it. Now, put the jeans on and take a walk on the home loan lane.

The idea of applying for a home loan might be giving you a minor migraine right now, but it’ll be all gone in a few moments.

Getting a home loan is not as tough as you might have thought, as long as you have all your affairs (*wink*) and your documents in order.

First, know how your eligibility for a home loan will be calculated. Check eligibility checklist that can help you determine that.

While applying for a home loan one must bear in mind that there are several other factors besides the income which are taken into account while deciding the eligible amount for home loan to an individual. Thus while deciding on a property to buy the prospective customer must keep in mind the amount that he can obtain from the banks as a home loan depending upon his income and repayment capacity.

The Basic Calculation of Eligible Amount

The primary consideration in calculating the amount an individual is eligible for is the annual income. The monthly income and the expenses are compared and the remaining portion is considered as the repayment capacity which is the basis for EMI computation and then reverse calculations are used to arrive at the final figure one is eligible for.

For example if a person earns Rs. 20000 per month and his essential monthly expenses are Rs. 15000 then his monthly repayment ability is Rs. 5000 at an average interest a rate of 9% the monthly installment on a loan Rs. 100000 will be Rs. 900 for a tenure of 20 years. Now the Home loan eligibility in lakhs is approximately equal to the amount available for loan repayment divided by loan installment per lakh for the selected tenure. In this case this amount would be 5000/900 x 1 Lakh = Rs. 5.5 Lakhs.

Additional Factors

There are several additional factors which the banks must consider while determining the actual amount that the applicant is eligible for.

Suppose in the above example the house purchased gets Rs. 2000 per month as rental which increases the repayment capacity of the individual. Thus the eligibility will now be Rs. (5000+2000)/900 x 1 Lakh = Rs. 7.7 Lakhs.

The exact essential expenses of the borrower are difficult to estimate so a fixed percentage of income is considered as not available for loan payment. This percentage varies as per income bracket as the banks believe that those who are in higher brackets of income can spare a greater percentage towards repayment of the home loan. Thus the eligibility figure for them also increases accordingly. For high earning individuals the repayment capacity may even be taken as 60% of their salary thus increasing their eligibility substantially.

The Tenure Factor

Another factor that comes into play is the tenure of repayment, which affects the amount one is eligible for. For longer tenures the EMIs per Lakh of amount borrowed becomes lesser and thus the individual can pay for higher loans. Thus the eligibility for a 20 year loan tenure of an individual will be higher than a 10 year tenure for the same individual.

In certain cases additional factors such as income from other sources and expected increase in earnings are also factored into deciding the total amount eligible for. However if the applicant has other loan repayment liabilities at the time of applying for a home loan his net eligibility shall reduce as per the amount outstanding as other loans and the EMIs being paid towards those loans.

Next, know what customer profiles bank woo or shun. Find out where you stand as a loan seeker. Here’s a simple way to do that.

When it comes to loans, it sometimes feels like banks are playing the Godfather. There are some that easily become a part of the family, while others get rejected.

Here are top 3 customer profiles that banks prefer, or don’t prefer.

The Hit List

1. Doctors:  A privileged lot, to say the least! Banks believe that the doctors are disciplined professionals and would not falter. They are seen as good real estate buyers, car buyers and big-ticket-loan-takers;  home loans for tax benefits and car loans for their premium cars.

Most banks offer special rates for doctors. For example, while personal loans for others start at 16%, banks offer loans at 13.75% onwards for doctors. Banks also have special schemes on various loans for them. Many of these professionals are HNIs of their bank. Banks love to cross-sell other products to them, like a premium credit card, because of their high credit scores. And, of course, they get referrals too.

2. IT Professionals:    The IT professionals have virtually rewritten the rules of loan disbursal. Their changing lifestyle and spending patterns have made them good loan takers; whether they are home loans, car loans, personal loans or even credit card loans.

They too avail multiple home loans for tax saving purposes.

And having settled down in metros, their loan size is high. As they want to get things done easily, most of their real estate buys are from the bank approved projects. This way, banks are free of the legal verification and get things done easily as well.

Once the loan is quickly disbursed, the colleagues are referred and the banks have a chain of customers. Most of them might even have their salary accounts in the same bank, and the bank is more than happy to give them special rates.

3. Government employees:  A banker’s banker! If you are a government employee, your loan application would be processed in a jiffy, as it is a ‘safe and secure’ profile for the banks. The credit manager is free from checking company credentials, worrying about job loss, changing jobs and recession. Government servants are quite disciplined about repaying loans too.

Their loan tickets may not be as attractive as the other two categories, but government employees are all-time favourites of the banks. Most of these employees rely a lot on the banks; be it the purchase of a new house, car, or availing education loans for their children, personal loans, top-up loans and more.

 The Miss List

1. Businessmen:  Banks are always wary of bizmen. Especially if you are a young entrepreneur with a startup, the reception could be cold. If you are a ‘serial’ entrepreneur, they have doubts about your stability. And in case you’re an entrepreneur in the virtual world, it’s a big ‘no’ from the banks. The reason? Banks don’t see stability in cloud data and yet another e-commerce venture.

But if you have a well-known enterprise or a family-owned business, they are happy to give a lending hand. But, there would be no compromise on interest rates. For home loans, some banks charges 1-2% more for businessmen, and the rates are around 22% for personal loans. And of course, the paperwork would be humongous.

2. Advocates:  Advocates are known to be a sharp lot and everybody knows that it’s hard to argue with a lawyer. It seems like a daunting prospect to end up on the other side of the table, when and if anything goes wrong.

They work from client to client and they generally may not be associated with any firm. Banks could have blacklisted advocates, we couldn’t be sure.

3. Film professionals:  We all know that the film world is just as fickle as it is glamorous. There are those who get their 15 minutes of fame and disappear for good.

We don’t mean just actors here, but all those who belong to the filmdom- whether you are an ad man, a model, a photographer, a sound engineer, a theatre artist, a musician or any play any other part.  Movies come and movies go. There are so many movies that we’ve never heard of before (except while playing dumb-charades) and there are just as many actors/models that we never saw again. Not everyone is able to make it big. What if the vanishing act happens for real, you know?

We weren’t referring to actual shooting with the Hit and Miss lists. As far as we know, the banks and the Mafia don’t have that much in common. But nobody wants to be in the bad books of either, do you agree?

You know that aunty, who won’t stop talking about getting you married? Or the old man down the street who frowns at you every time you pass his house? How about that young lad who always has his headphones on and doesn’t seem to notice anything going on around him? Or the whiny guy at your work-place? Maybe the girl who always seems to have the latest car, gadgets and fashion?

We all know such characters around us. And their attitude towards loans differs just as much as their outlook on life does.

Find out which category you belong to.

The Conservatives :  Their principle is: “If you can’t afford it, don’t buy it.” They never opt for a loan. They consider taking a loan as the second worst thing in their life. Of course, the first worst thing for anyone is your pizza arriving stone cold.

They are very good at managing their income and expenses. Even though their principle will keep them out of financial trouble, they never take risks. Their financial graph is always a straight line with a rare dip or rise.

They normally buy their first home in their late 40’s. Ironically, that’s the age when people start worrying about a lot of other financial outflows. It all gets clubbed together and that’s the reason why the old man on your street is so grumpy.

The Smart ‘uns

These people look at loans as boons. They know how to utilize the loans effectively. They get business loans to start a new one or enrich their existing business. They make use of home loans to buy their dream home at a young age, get tax benefits out of it and sell it when the real estate booms. They keep multiple credit cards to avail the right offers.

They know precisely how much to borrow from banks and when exactly to repay it. They always do their math and are good at getting the best interest rates. They treat money well and vice-versa, which is why the fashionista girl doesn’t seem to run out of money.

The Jugglers

They get loans for everything — education, bike, car, house, business, vacation without considering exactly how they’d manage all of them. They probably get a loan for their wedding as well, visiting bank websites way more than matrimonial ones.

Eventually all the loans pile up and become too much to handle and the Jugglers spontaneously combust! We’re kidding. But the debt they fall into just as easily takes everything away from them. The young lad is surely on his way to becoming a Juggler, what with the newer generations wanting everything in their hands right away.

The Worriers

These are the people who get loans, start feeling very antsy about their debts, and want to close all their loans as quickly as possible. And they worry about every aspect of their loans.

“Do I convert from a floating to fixed interest rate now? How would I repay my debts if I lose my job? What if the property I bought depreciates in value?”

When they hurry the repayment, they end up having less or no cash in hand, having forgotten to worry about saving. There’s nothing left to invest in something new or upgrade their existing business. So they end up applying for another loan and the cycle begins all over again.

You might have heard the whiner in your office wondering aloud about his loans as well.

The Analyzers

They are the Rahul Dravids of finance management. They spend too much time analyzing the loan cover to cover before acting on it, just like Dravid takes his time at the crease reading the pitch before working his magic.

They might waste a lot of time, but end up saving money as well.

They always keep an eye on the interest rates offered by all banks and keep comparing them to find the best one. They usually have all the data at their finger-tips. They probably know more than the bank employees about offers. In-depth analysis is their zing!

Your annoying aunty might know about loans just as much as she knows about every detail of your life.

So which category did you find yourself under? We really hope you aren’t stressing out about any of your loans.

Say buh-bye to that migraine and hello to your brand new home.

But, treat that home loan like you’d treat your lady out at dinner. You don’t want to say goodbye to your home before you get to know it. , do you? Here are 5 unexpected reasons for home loan rejection that can help you avoid the blushes (some are downright silly!)

Aplying for a home loan may seem to be a good idea if you are looking forward to buy the home of your dreams. You have all the qualities that make you a favourable home loan applicant such as good credit history and strong professional background, still to your utter surprise, your application gets rejected. Don’t get flummoxed. It is good to avoid the following unexpected pitfalls that may lead to the rejection of your home loan application:

Being a new job entrant  You may feel on top of the world when you bag a new job offering at high pay package. If you are in the process of applying for a home loan, lenders not only look for stability but also the fact that the applicant would be able to pay back the loan. Home finance companies generally prefer an applicant who is employed with a particular concern for a minimum period of one year.  This is more crucial for private company employees as well as freshers.  This also holds true for frequent job changes. There is nothing wrong with switching jobs but it should not happen in a quick succession.

Not available on landline  You have provided the right information and completed the formalities even then your home loan gets rejected. The reason is that at the time of filling the form you had entered your landline number. The investigation team would have probably called up in the morning when you were away at work and since you did not pick up the phone they wrote off the report as ‘not responding’. This may become one of the grounds for your home loan to be rejected. So, make sure that apart from the landline number you also give your mobile number so that when the investigation team calls you are there to answer their queries.

Unpaid telephone bill   You would be surprised to know that an unpaid telephone bill can really hamper your chances of buying your dream home. An unpaid bill or even late payments can adversely affect your credit ratings which would not go down well with the lenders, providing them with a reason to reject your application.   So, in case you are planning to go in for a home loan make sure that all you bills have been paid.

Buying property with minor rights  If you are planning to buy property where a minor has rights in the property then you will have to face some problems. Though the person who is selling you the property may not provide you the information but the fact is that if you apply for a loan on a property where a minor has rights in the property then your application is bound to be rejected. The hard fact is that no bank gives loans for buying property with minor rights. So, when buying, make sure about minor rights in the property.

Hurdles faced by entrepreneurs  Banks can be a bit sceptical when giving loans to young and first time entrepreneurs. Banks want their money back and that too on time. Here established businesses fare much better as they have already created a reputation for themselves and banks can easily place their trust in them. The story is different for people who have just started out. With very less capital and a future not very stable from the banks point of view getting loans can be a tough affair. So, try to give the lender some testimony of your credibility so that they can place trust in you enabling you to get your loan.

Always get an NOC   If you fail to get an NOC or No Objection Certificate on an already closed loan, your home loan application may be rejected. Banks are very particular about this fact and would ask you to produce an NOC on a loan that you previously took and has been closed. In case you never asked for the NOC your application would be rejected despite the fact that all other papers are in order.

Signature mismatch  Be very particular about your signatures. Applying for a home loan is no child’s play. Here you would have to fill out lengthy forms which would require a lot of signatures. You should sign in the same manner and also attach the documents which carry your identical signature. The signature on the form and copies of documents should also match with your signature registered with your banks. So, make sure that you sign in the same manner or else you would have to again go through the entire process.

If you adopt the above-mentioned golden safeguards, your application is likely to be accepted paving the way for you to buy your dream house.

P.S: Sometimes, a particular kind of income, debt profile and geographic area is not found to be appropriate for lending as per the internal policy guidelines of a bank. Also, we are living in the age of e-governance where data is stored in the electronic database; this includes your accepted as well as rejected loan applications.

So, when you apply for a loan, make sure not to choose a bank which in the past has rejected your application. Your past records will be checked and there is a possibility that your application may be rejected again. However, if you still want to go ahead with the same bank, then try to explain to them the changes that have occurred over the years in your income, profile etc. If the  lender is convinced, your application might see the light of the day. You can provide additional security which may include a guarantor, insurance policies, fixed deposits, collateral securities etc. to secure the loan.

Finally, the nuts and bolts of a home loan is that it’s a legal agreement at the end of the day. Now, your bank has the greenbacks to hire top drawer legal counsel and tighten the screws all they want on the home loan agreement so that their bases are covered.

But, what do you do before signing on the dotted line?

Simple, you use oodles of common sense. And put on your reading glasses to know more about handling tricky clauses in a home loan agreement.

The home loan agreement is usually a 50 page document that most borrowers do not have the patience to study in detail. However all such agreements have a few tricky clauses that protect the lending institution and may compromise the interest of the borrower! Thus one needs to be aware of these clauses and the means to deal with them. Some of such tricky clauses are listed below with a few suggestions to deal with them.

Assignment to third parties: Most of the HFC mention in the home loan agreement that they can without the permission of the borrower assign their rights to any third party for the purpose of collection and recovery of outstanding dues. The typical statement in the clause will read somewhat like “the bank may assign any of its rights or obligations herein without any approval or consent of the borrower.” However this an unfair clause that the borrower must discuss with the banker at the time of signing and get the required amendment made.

Notification Clause: In the majority of the agreement formats there is a clause that the borrower shall notify the lending institution of any changes in his personal status such as employment or marriage well in advance. The clause “well in advance” is quite ambiguous and can be used by the bank to its advantage while declaring a default. Thus the borrower must insist on getting this amended to a more tangible figure that is acceptable to both the parties at the time of signing the agreement.

Cross Default: this is another gray area where the borrower is deemed to have defaulted in the home loan repayment in case he defaults in servicing any other loan elsewhere. Since the two payments are independent they should not be cross considered for the purpose of default definition. The clause can be eliminated by bargaining hard with the HFC at the time of taking the loan.

Amendment Clause: The HFCs often include this clause to retain rights of amending the terms and conditions of the agreement unilaterally without the permission of the borrower who is the second party to the agreement. A typical amendment clause line to watch out for is “he bank shall at its sole discretion alter the terms of this agreement by written intimation sent to the borrower by courier. Any amendment proposed by the borrower shall be valid only if made by a written agreement signed by both the parties.” This clause is completely unacceptable by any legal standards and hence must be out rightly rejected while signing the agreement. The implications of the amendment clause are completely against the interest of the borrower who is an equal party in the home loan agreement.

Great care should be taken at the time of signing the agreement to scrutinize the document for such ambiguous and tricky clauses that may compromise the interest of the borrower later. In case the borrower finds any of these clauses unacceptable he may reject the agreement or renegotiate for an appropriate one with the HFC.   

And, oh! One more thing. Adding a co-applicant to your home loan agreement can be a great idea - it can give you additional tax benefits and increase your eligibility if your co-applicant is a working spouse. And banks love the idea as well! Know the terms for adding co-applicants for a home loan.

You can apply for a home loan either as a single applicant or along with another borrower as a co-applicant. A co-applicant for a home loan indicates a person who applies along with the main borrower of the loan. There are a few terms which banks specify when co-applicants are added to the loan application.

Here are such points to ponder when a co-applicant is in the picture:

Enhancing eligibility: Adding a co-applicant can be advantageous if you wish to enhance the eligibility of your home loan. In the case of a joint loan, the income of both the co-applicants will be considered while determining the eligibility of the loan. The income will be considered for loan eligibility only if it is a regular income. However, not all relationships are acceptable by the bank. Friends or relatives who are not blood relatives are generally excluded. Banks specify that co-applicants can either be a spouse, parent or any other specified relative. It is important to check with the bank on the possible combinations of relationships, which are eligible in this context.

Co-owners and co-applicants: Banks require that all co-owners of a property should necessarily be co-applicants of the loan. However, the converse is not true. That is, co-applicants in a home loan need not necessarily be co-owners of the property. The owner of the property should always be the main applicant of the loan.

Spouses: Husband and wife can be co-applicants of the loan even though they are not co-owners of the property. The maximum tenure of the loan is determined based on the retirement age of the older partner. The incomes of both the spouses will be considered for determining the eligibility of the loan.

Siblings: Two brothers can be co-applicants in the home loan if they stay together on the same property. Both the brothers should also continue to stay together in the new property as well. Some banks also insist that the two brothers should be the co-owners of the property. However, a brother and sister cannot be co-applicants for the loan. Similarly, two sisters cannot be co-applicants for the loan.

Parent and Minor child: A parent cannot co-apply along with his/her minor child for a home loan. Co-applying with son or daughter is possible, subject to the conditions given below.

Son and Father: The rules pertaining to a son and father being co-applicants are quite clear. If there is only one son, then either the son or the father can be the main owner. However, both should be the joint owners of the property. Both the incomes of the son and the father can be considered. The tenure is generally restricted to the retirement age of the father in this case. In case the father has more than one son, the terms are very clear that the father cannot be the main owner of the property. This is because all the sons are legal heirs of the property after the father’s demise. However, the father can be the co-applicant along with the consideration of his income for increased eligibility of the home loan.

Daughter and Father: An unmarried daughter can apply for a home loan jointly with her father. However, the condition is that the father’s income should not be considered while determining the eligibility amount of the loan. Further, the property should be in the name of the daughter only. The intention of this law is to avoid disputes at a later date when the daughter is married.

Documentation terms: Co-applicants are two applicants for the same loan. Therefore, this does not mean that documentation is needed only for 1 applicant. The documentation will be required for all the co-applicants of the loan. This includes Know Your Customer details such as address proof, identity proof and photographs. Proof of co-ownership in the property should be submitted. In addition to this, income proof of all co-applicants whose income is considered should be provided.

Taxation terms: Co-applicants in a home loan can claim taxation benefits on principal and interest repayment to the extent of their share in the property. However, if the total interest or principal paid is more than the permissible limits, then each co-applicant can claim the maximum benefit. For example if total interest paid in a year is Rs. 5 lakhs and total principal paid is Rs. 5 lakhs and there are two co-applicants, then each of them can claim Rs. 1.5 lakh each on interest repayment (Rs. 2 lakhs for self-occupied property) and Rs. 1 lakh each on principal repayment.

Terms for property under dispute: If the property under a joint loan is under dispute, each of the co-applicants is joint and several. This means in case of a default, the bank can proceed with the recovery process against all the co-applicants.

As long as you treat your loan like a lady, as we told you, you should be safe from its wrath.

As with everything else, there are some dos and don’ts you should keep in mind, forever and always.

Prepay the home loan now or invest that amount? It’s a question been asked by many.

Repayment of home loan depends on many factors and there’s no set of one fit rules for all. So ask few questions yourself before we go deep into it.

How old is my home loan?

How much tax I am saving with your home loan?

What’s the rate of interest I am getting?

Am I finding it difficult to manage my EMI?

What’s the return I may get if I invest the surplus cash in a good instrument?

Note down your answers and then go on reading:

Few Don’ts if in case you have decided to repay:

Don’t prepay without calculating the benefits: Prepaying the home loan may not always be beneficial. It is recommended that you calculate the returns that can be made from the same amount if invested and compare it with the interest amount of the home loan.

For example, if Hemant had taken a loan of 18 lakhs in June 2010 for a period of 20 years and the interest rate offered for him is 10.5%. His EMI is Rs.17,971/-.

He is repaying Rs.43,13,040/- at the end of the tenure if he is not pre-closing the loan, which means Rs.25,13,040/- is paid in excess.  

If he is invested the surplus amount each year in a good savings instrument that offers 12% and above, he would get handsome returns to counterfeit the loss.

Don’t overlook the tax benefits of the loan: Home loans offer great tax benefits with rebates on principal and the interest component.

 Considering the above scenario, Hemant is paying Rs. 174254/- this FY and Rs.41397/- to the principal.   The tax rebate for principal payment (under Section 80C) is 1.5 lakhs and for interest payment is 2 lakhs (under section 24).

If his income is 12 lakhs per annum, his payable tax is Rs.3 lakhs, which could easily waived off with his home loan and few other tax savers. But if his income is 6 lakhs per annum, his payable tax is only Rs.120000/- which means he can pre-pay part of his home loan, and still he enjoys tax benefit.

Don’t look at prepaying of the entire loan: Many home loan seekers look to prepay the full loan amount. Instead of prepaying the full loan you can look at partial prepayment till the amount that interest being paid for the loan is less than what the funds would fetch if invested in other financial instruments with assured returns.

 Few Dos if you decided to prepay

In case you are thinking of prepaying your home loan, it is a good idea to set a checklist and click on the below three mentioned parameters to make sure home loan prepayment works in your advantage.

Keep the EMI steady: The first step in making sure that home loan prepayment works as an advantage for you is to keep the EMI unchanged.  If you are prepaying the loan, there are two options to choose from: either you can reduce the EMIs or reduce the tenure of the loan, keeping EMI the same. So if you are comfortable with your current EMI, keep it steady and reduce the tenure.

Suppose you have an excess fund of Rs. 1 Lakh that you are willing to prepay for the home loan. In case you opt for a reduction in EMI, you can reduce the monthly EMI by Rs. 1000. On the other hand opting for a same EMI option, you can pay off the entire loan in 18 years reducing the overall interest paid on the loan, which is a good decision.

The earlier you repay the better:  The earlier you prepay the loan, the better it is for saving interest, as home loans are designed in such a way that the initial EMIs go mostly to the interest component.

As long as you follow them, you should be fine.