HOME LOAN

A dream to have own home is everybody’s dream. With the help of home loan many persons are able to fulfil their dream. In a general term, home loan is a loan offered for purchase of home to the person capable of repaying it whether salaried or business class or self-employed.

Home loan benefits are like: lowering initial cost, tax deductions, flexible re-payment and low- interest rate. Home loan is a kind of property loan required to buy a residential property for personal use.

Home loan is a kind of secured loan required by home buyers for purchase of residential property, where the said property is being kept as a collateral. The home loan rate of interest is low and it is for long tenure. After the re-payment of loan & interest thereon, the property’s title is transferred back to the home buyer.

Type of rate of interest in case of Home Loan:

• Floating rate of interest

Floating interest rate changes with the changes in the market conditions / scenarios. The EMI amount fluctuates with the fluctuation in the rate of interest.

• Fixed rate of interest

Here the rate of interest remains same / static for the loan tenure irrespective of market scenario.

• Hybrid rate of interest

It is the combination of fixed and floating rate of interest i.e., interest rate remains fixed for a certain period and then floating for the rest of the period. It is usually opted by the those who wants stability of fixed rate for a certain period only.

Type of Home Loans:

• Home Loan for purchase of home
• Home Loan for construction of home
• Home Loan for renovation/ repair of home
• Top up home loan for borrowing funds over and above initial amount of home loan.
• Home Loan for purchase of land & construction of house thereon.

Applying for a home loan, following documents required:

1. Proof of Identity & Age -PAN Card, Passport, Aadhaar Card

2. Proof of Residence- Voter’s ID, Passport, Telephone Bill, Electricity Bill, Water Bill,

3. Proof of Income - Form 16, IT returns (ITR) of last 3 years, Balance Sheet and Profit & Loss Account etc.

4. Property-related Documents- copy of Registered sale deed of previous owner with supporting papers, allotment letter etc.

Tax Benefits on Home Loans

Income tax act provides following tax benefits to home loan borrowers on interest paid and principal amount paid: