Home Loans Explained

A sum of money borrowed from a bank or any other lender for the purpose of buying or constructing a residential property, is called home loan. Home loans come with fixed or floating interest rates and are characterized by longer repayment tenures ranging from 5-30 years.

Home loans are repaid in regular monthly installments that typically include principal and interest. The term of repayment can vary, but many home loans have repayment periods of up to 30 years. Interest rates charged on home loans depend on the credit profile of the customer and other factors. Home loans also provide certain tax benefits to borrowers and borrowers can lower monthly payments by choosing home loans with lower interest rates and longer repayment terms.

Banks and other lenders can provide up to 85% of the cost of a home, meaning that you can purchase a home with a down payment of as little as 15%. Home loans come in a variety of sizes and our lending partners can provide loans up to 20 Crs at interest rates starting as low as 8.0%.


Home Loans are granted based on the borrower’s age, occupation, income, repayment capability, credit score and property details. Both banking and non-banking financial institutions participate in lending money for home loans. FinMarket works with lenders that offer a variety of home loan options including standard home loans, home loan balance transfers and loans against property.


Apply for a home loan with FinMarket to receive multiple customized offers with competitive interest rates from a wide range of lenders. FinMarket saves you time and helps you find the best loan with the best rate!


For many, a home loan is the only way to make the dream of owning a house, come true. But the question is, if you have enough funds to pay in full, is it still a good idea to take a home loan? Yes, because funding the purchase of your property with a home loan, comes with tax benefits.


According to Section 24(b) of the Income Tax Act, you are entitled to a deduction of up to ₹ 2 lakhs towards total interest payable on the home loan in case of self-occupied property. If the property is let out for rent, 30% of the rental income, municipal taxes, and the interest paid on the loan are deductible, thus reducing your overall tax liability. Besides this, as per Section 80C of the Income Tax Act, you can claim up to ₹ 1.5 lakhs on principal repayment.


Interest rates for Home Loan

Interest rates on home loans may vary depending on several aspects such as the applicant’s occupation type (salaried or self-employed), gender, the type of home loan requested, whether the rate is fixed or floating, and other factors. However, interest rates broadly range between 8.45% to 14%.

Features of Home Loan

  • A home loan can be availed for purchase of new or previously owned properties, or new home construction
  • The property purchased using the home loan acts as collateral, making it a secured loan with interest rates much lower compared to other loans
  • Interest rates on a home loan may be floating or fixed
  • Home loans are characterized by longer repayment tenures usually in the range of 5 to 30 years
  • Equal Monthly Installments (EMIs) are determined based on the loan amount, interest rate and tenure chosen
  • Penalty/charges may be applicable for prepayments and partial payments

Benefits of Home Loan

  • A home loan provides the opportunity to realize the dream of owning a home
  • Low interest rates make home loans more affordable
  • Longer repayment tenure translates to lower EMIs, reducing the monthly payment burden
  • Brings tax benefits
  • Offers the ability to co-apply, thus improving the eligibility for a larger loan size

Choosing the right home loan

With a host of lenders offering home loans, choosing the right one is crucial. So before you pick a home loan, look for these features:

Quick Processing and Disbursal

The processing of loan applications can sometimes be time-consuming. So look for a home loan provider who can process the application and disburse funds quickly.

Online Accessibility

In a fast-paced, internet-driven world, physically visiting a bank multiple times can be exhausting. Choose a lender that offers the convenience of online accessibility so that you can not only apply online, but once your loan is approved, you can also check your loan status and even track your repayment online.

Hybrid Loan Availability

Home loans come with fixed or floating interest rates. However, several leading lenders also offer hybrid home loans that come with fixed rates of interest for the initial few years and then change to floating rate. This type of loan would enable you to pay a fixed EMI for a few years, after which the floating rate is charged for just the outstanding amount.

Moratorium

Otherwise known as the EMI holiday period, moratorium refers to the wait time given before the repayment period begins. This is mostly provided for home loans taken to purchase properties that are under construction. Many leading lenders provide a moratorium of up to 2 years. Opting for one such lender can be very helpful. This acts as a grace period, especially if you have cash flow issues, or want to improve your financial strength in the meantime.

Nil Prepayment Penalty

The repayment period on home loans is relatively longer. During this time period you may want to switch to another loan with a lower interest rate, or may want to pay off your loan. So, it may be wise to choose a lender that does not charge a penalty for paying your loan early.

Why apply for home loan through FinMarket.in?

Applying for a home loan through FinMarket brings multiple benefits:

  • Our real-time, paperless application process can save you a great deal of time and effort and give you access to leading lenders in the market
  • We bring personalized offers from top lenders for you to choose from
  • Our dedicated loan specialists assist through every stage of the process and help you find, compare and apply for the most suitable loan
  • Our service is free, quick and easy

Dos and Don’ts for Home Loans

Home loans are most helpful in realizing the dream of owning a home. But at the same time, if not handled well, it can soon turn into a nightmare, just like any other loan. So, once you’ve decided to avail a home loan, here are a few things to bear in mind.

Dos

  • Compare lenders and choose the most suitable home loan
  • Do everything in your capability to be financially stable
  • Keep all required documents such as ID, address and income proof ready for verification
  • Keep your credit score up at all times by paying your EMIs and making credit card payments on time
  • Check the property documents thoroughly and get a legal opinion before purchase

Don’ts

  • Do not over-borrow. Borrowing beyond your capability to repay will only land you in trouble
  • Do not opt for a very long tenure. Although a longer tenure means lower EMI, remember that it also means that you will be paying more interest
  • Never default payments. Missing and EMI spells serious trouble. It can negatively impact your credit score

Types of loan

A home loan refers to a broad category of loans offered by lenders, which not only includes funding the purchase of a new or used property, but also a variety of other purposes based on changing customer demands. Home loans can therefore be classified into subtypes:

Home Purchase Loan

This is the type of loan taken for the purchase of a home. With its growing popularity, this is the most common type of home loan that borrowers opt for.

Land/Plot Purchase Loan

This type of loan can be availed by borrowers who wish to purchase vacant land/plot for the purpose of constructing a home. This loan is very similar to a home purchase loan in terms of the application process, rate of interest, and tenure.

Top-Up Home Loan

As the name implies, this is the type of loan is given to borrowers over and above their outstanding home loan amount, to help them meet additional/unforeseen expenses related to the purchase/construction of a house.

Home Construction Loan

This loan is meant to fund the construction of a new house. This type of loan can be availed only by those borrowers who already own land/a plot and plan to start construction on it.

Home Improvement Loan

For those who wish to renovate their homes or undertake repairs, this type of loan is most suitable. It covers the expenditure related to home improvement. This loan is quickly gaining popularity because the rates of interest on this loan are very similar to those of home purchase loans.

Home Extension Loan

This is very similar to home improvement loan. It caters to borrowers who wish to extend their living space by adding another room, garage, kitchen, or bathroom.

Home Loan Balance Transfer

This loan option allows borrowers to transfer their existing home loan from one bank to another to take advantage of lower interest rates. Along with the home loan balance transfer, you can also get top-up loans to help achieve your other financial goals.

Get Financing for Home Loan

Documentation

What documents will I need in order to apply for a home loan from FinMarket.in?

Documentation required for applicants

  • Proof of Identity, which could be your PAN Card, Passport, Driving License, or Aadhaar Card
  • Residence Proof, which could be your Voter ID, Electricity Bill, Telephone Bill, or Property Tax Receipt
  • Bank Statements of the past 6 months
  • Cheque for processing fee
  • Identification signature from present banker

Besides these, applicants are also required to furnish the following documents supporting their income:

  • Latest salary slips
  • Certificate and proof of business
  • Income Tax returns of the past 3 years
  • Profit/Loss statement for the last 3 years, if self-employed

Frequently Asked Questions

Even though the process is online, the borrower will have to visit the lending bank branch at least once to meet the formal requirements.

Banks traditionally have provided 80% of the cost of the home. However, many of our lenders have special programs that require as little as 10% in down payment at the time of purchase.

Yes, you may repay the loan anytime. Some banks charge prepayment penalties that are outlined in the loan agreements. We help you sort all of this out while choosing a loan.

Once your application is submitted, approval normally takes between 10 and 30 days.

Yes, both principal and interest payments have tax benefits per section 24(1). Refer to your tax accountant for details.

Home loans normally require collateral including the papers (title) of the home and any fixed deposit schemes or insurance schemes that are listed in the borrower’s name.

You may change the interest rate characterization of your loan post issuance. Some banks charge fees for doing so. Consult your bank or lender regarding their policy.

  • Receive quick, customized and competitive quotes/rates in one place
  • Choose the right offer for you from a wide array of lenders
  • Go paperless and save time by applying online
  • No need to visit multiple banks to secure multiple offers
  • Fill your information just once and receive multiple offers from lenders
  • Receive offers for products and deals from top lenders that are targeted to your unique needs
  • Check if you meet the eligibility criteria of age, employment, income, etc.
  • Be ready to demonstrate your repayment capability with supporting documents.
  • Build a good credit history before applying. Poor credit score can minimize the chances of your loan being approved.
  • Talk to multiple lenders and choose one that best suits your requirements.
  • If your individual income is low, try co-applying with your spouse or family member.

Yes. Even non-salaried, self-employed individuals are eligible for home loans. To qualify easily, you should be able to provide adequate proof of income, and documentation supporting your financial strength and ability to repay the amount.

EMI stands for equated monthly installment. It refers to the monthly payment that has to be made to the lender to fully repay the loan within a predetermined time period. EMI includes contributions towards both the interest and principal portions of the loan. Typically, a major portion of the EMI goes towards the interest component during the initial stages. However, in the course of the repayment tenure, contribution towards interest repayment gradually reduces and the contribution towards the principal component increases.

EMI calculators are now a common online feature on the websites of most lenders. However, to manually derive the EMI, you need to apply the principal amount, tenure, and rate of interest in the traditional mathematical formula used for calculating EMI, which is as follows:

EMI = [P x R x (1+R) ^N] / [(1+R) ^N-1]

Here, P stands for the Principal Amount, R for the Rate of Interest per month (which is, Interest rate per annum/ (12x100), and N refers to the number of monthly installments.

According to RBI guidelines, the Marginal Cost of Lending Rate (MCLR) is the method that should be used by banks to determine the interest rate on home loans. For floating rates, banks adjust the rate annually or bi-annually according to prevailing interest rates.

Besides this, economic conditions such as demand for credit, inflation, etc., and at the individual level, the applicant’s risk profile and credit score are some other factors that affect the interest rate on home loans.

A prepayment penalty refers to the fee that a lender charges if you want to repay the loan amount before the completion of the term. This is done because when borrowers choose to repay the amount before the end of the actual term, the lenders lose out on a large amount of interest they would have otherwise earned. To compensate for this loss, prepayment penalties are charged by some lenders.

Not every application for a home loan gets approved. Here are some of the common reasons for rejection

  • You do not have stable employment or your income is not sufficient to sustain monthly payments
  • You have a poor credit score or there are serious issues such as defaulted payments or debt settlements in your credit history
  • You provided incomplete documentation or declared false information at the time of applying
  • The builder of the property is not approved
  • The property itself is unapproved
  • You do not meet the age requirement for the loan

To avoid rejection of your home loan application, and to improve the chances of approval, here are a few measures you can take:

  • Maintain a healthy credit (CIBIL) score
  • If you are the guarantor of any loans, make sure the repayments are being made on time
  • Avoid frequent job changes
  • Keep the required documents ready for verification
  • Understand the loan eligibility criteria and check if you meet them.
  • Reduce other obligations. In other words, do not take too many loans
  • Identify a property that is pre-approved by the lender
  • Maintain a clean banking record showing good balance, free of cheque bounces

Typically, the repayment period begins as soon as the entire home loan amount is disbursed. However, for properties that are under construction, most lenders provide the option to go for a moratorium period. This refers to the time period when the borrower need not pay the EMI, but is required to pay the pre-EMI interest alone. This period may range between 36-60 months.

Yes, you can decide the tenure of your loan based on your requirements. However, before deciding the tenure, you should carefully consider factors such as your age and income because they significantly influence your capacity to repay the loan.

This would depend on whether your income can take the weight of another EMI. Typically, if you have a smaller loan for which the monthly payment is not very high, and in addition to it you can afford the EMI of a home loan, lenders may still approve your loan. However, if your liabilities are high, and if your income cannot support another loan, chances are that your application will be rejected.

Yes, if you are already paying a high rate of interest on your home loan, your prepayment penalty may be waived by the lender.

Yes, you can jointly apply for a loan, and in such a case both your incomes will be taken into account thereby increasing the quantum of your loan. Besides this, another advantage of co-borrowing home loan is that both spouses can claim tax deductions under Section 24 of the Income Tax Act against interest repaid, and under Section 80C against principal repaid.

Yes, NRIs are eligible for home loan in India. A number of leading lenders offer tailor-made home loan schemes for NRIs with exclusive interest rates and certain special terms and conditions.

An NRI applicant should have a valid Indian passport and should be a person of Indian origin. Besides this, they should be employed, with a minimum job experience of 2 years.

A maximum of 6 borrowers can apply for a home loan jointly. However, these co-applicants have to be immediate family members such as parents, siblings, or spouse.

Comparing home loans from different lenders is crucial before you decide which lender to borrow from. By applying for a home loan through FinMarket.in, you can not only compare home loans from lenders both in the private and public sector, but also get the best home loan offers from multiple lenders.

Some expenses related to the purchase of a home, such as the initial down payment, transfer or registration charges, stamp duty etc. are not covered by a home loan.

This refers to a service offered by lenders, that allows prospective applicants to find out particulars about their eligibility for a home loan even before they decide to purchase a home. Loan pre-approvals may be used by borrowers to demonstrate eligibility to home sellers.

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