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What is the rate of interest that will be charged on my loan?
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The rate of interest applicable will vary from 11.5% to 13% depending on the HFI, the amount of the loan and the term of the loan. |
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Other charges such as administration, processing etc., are applicable and will vary between 1% to 2% of the loan amount sanctioned depending on the HFI. |
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How is the interest calculated?
The interest calculation, of course holds the key to your cost . The uniformly followed system is to apply the interest rate at what is known as reducing balance. That is everytime interest is calculated afresh, you are assumed to have paid up a part of the principal. So interest is calculated on the unpaid part.
Therefore you must check whether the interest is being calculated on a monthly, quarterly or annual reducing balance .The difference? Consider a Rs. 20 lakh loan repayable over 20 years at an EMI of Rs. 31,137. Calculated monthly, the interest component of your loan turns out to be 30,000 for the first month. So your EMI actually pays off the entire interest for the month, and Rs.1,137 from the principal. Since the same calculations are made every month, the principal becomes lower at monthly intervals.
However if the EMI calculations was on an annual basis, the principal portion of your loan of Rs. 20 lakh would be reduced by Rs. 13,644. But the interest calculation is done only once a year that means the interest payment is a little higher . "The More often reducing balance is calculated the better you will be." So remember opt for the Monthly calculation whenever possible.
The shorter the period of the loan the higher the amount you pay each month. So pick your repayment capacity, and then work backwards to
finalize your payback period . To calculate your payment plan your vendor will calculate your total liability, principal+ interest -- and then divide the figure into EMI's (Equated Monthly Installment's). One off processing and administrative fees which will add about 2 percentage points to the cost of your loan will also have to be paid . |
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What are the supporting documents to be submitted along with an application?
For all Applicants 
Allotment letter of the co-operative society/association of apartment owners.
Copy of approved drawings of proposed construction/purchase/extension.
Agreement for sale/sale deed/detailed cost estimate from architect/engineer for the property to be purchased/constructed/extended/renovated.
If you have been in your present employment/business or profession for less than a year, mention details of occupation for previous 5 years, giving
position held, reasons for change and period of the same.
Applicable Processing Fees.
Any other information regarding your repayment capacity that is necessary.
Additionally if you are
employed
Verification of Employment Form with only Part I filled in.
Latest salary slip/salary certificate showing all deductions.
If your job is transferable, permanent address where correspondence relating to the application can be mailed.
A letter from your employer agreeing to deduct the monthly installment towards repayment of the loan from your salary. This will expedite the
processing of your loan application. |
If you are
self-employed
Balance Sheets and Profit & Loss Accounts of the business/profession along with copies of Individual Income Tax Returns for the last three years
certified by a Chartered Accountant.
A note giving information on the nature of your business/profession, form of organisation, clients, suppliers, etc. |
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Who can be co-applicants?
Proposed owners of the property, in respect of which you are seeking financial assistance will have to be co-applicants. However, all co-applicants need not be co-owners. |
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What is the maximum period in which I can repay the loan?
You can repay the loan over a maximum period of 20 years. (ICICI Provides a housing loan, which can be repaid over 30 years) Repayment will not ordinarily extend beyond your age of retirement (if you are employed) or on your reaching 65 years of age, whichever is earlier. |
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How do I repay the loan?
You repay the loan in Equated Monthly Installments (EMIs) comprising principal and interest. Repayment by way of EMI commences from the month following the month in which you take full disbursement. Pending final disbursement, you pay interest on the portion of the loan disbursed. This interest is called Pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement upto the date of commencement of EMI. |
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What is the size of the EMI?
The EMI is 1/12th the Equated Annual Installment. The size of the monthly
installment comprising principal and interest depends on the quantum of the loan, the interest rate applicable and the term of the loan. |
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What security will I have to provide?
Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary. |
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When can I take disbursement of the loan?
You can take disbursement of the loan after the property has been technically appraised, all legal documentation has been completed and you have invested your own contribution in full. Own contribution is the total cost of the property less the loan amount availed. |
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How many installments can the loan be disbursed?
You can take disbursement of the loan after the property has been technically appraised, all legal documentation has been completed and you have invested your own contribution in full. Own contribution is the total cost of the property less the loan amount.
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In how many installments can the loan be disbursed?
The loan will be disbursed in full or in suitable installments taking into account the requirement of funds and progress of construction. |
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What are the Tax benefits available?
There are tax benefits on the principal as well as the interest payments that you make. There is a tax rebate of 20% (under Section 88 of the Income-Tax Act) on the principal repaid, subject to a principal ceiling of Rs. 20,000 per year. This means a maximum tax rebate of Rs.20,000 x 20% i.e. Rs. 4,000. There is a deduction available on the interest payment with a ceiling of Rs.1,50,000, hiked from the earlier limit of Rs.30,000. However, this enhanced limit is applicable only for properties bought and self-occupied after April 1, 2001 and before April 1, 2003. If you are in the middle of an existing loan, the old limits remains applicable. |
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