home-loan

Home Loan

Home Loan simplify means a sum of money borrowed from a financial company take a home loan for either buying a house/flat or a plot of land for construction of a house, or renovation, extension and repairs to your existing house. The interest rate for Home Loans are can be fixed or floating. That may be partly fixed or partly floating suiting the needs of the borrower.

While giving a Home Loan, the bank utilizes your home with a specific goal to secure the credit. Because of utilization of your home as security, home loans are secured loans that include a low level of hazard for a bank.

Types of Home Loan:

  • Home Purchase Loan: This is the loan that one takes for purchasing a home.
  • Home Improvement Loan: This loan covers expenditure related to repairs of your home or even renovation.
  • Home Construction Loan: This loan comes in handy when you are building a new house.
  • Land Purchase Loan: Someone wishing to buy a plot of land for constructing his/her own house can avail this loan.
  • Home Extension Loan: Suppose you plan to add another room, garage, bathroom or kitchen to your home. This is the loan that you should apply for and this also comes in handy if you are planning to have another floor.
  • Joint Home Loan: These are loans taken by two people or even more. For instance, spouses can apply for joint home loans.

Benefits of a Home loan:

Tax benefits: To encourage more and more people buy their own house, government of India provides tax deduction on the principal as well as interest paid on home loan. An individual is eligible to claim a deduction of up to Rs 1.5 lakh under Section 80C of Income Tax of India 1971 Act in a financial year. While a deduction of up to Rs 2 lakh is allowed on the interest portion under Section 24B of Income Tax of India Act. The deductions under income tax are only available after the construction of the house is complete. You can’t claim the income tax deductions while the property is under construction. Read: to know more about home loan deductions.

No prepayment charges: There are no prepayment penalties on floating rate home loans. Whenever you have surplus money, you can utilize it for making part payment towards your home loan and lower your burden. However, there will be prepayment charges in case of floating rate home loan.

Deduction on Principal repayment: The Principal portion of the EMI paid for the year is allowed as deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh. But to claim this deduction, the house property should not be sold within 5 years of possession. Otherwise, the deduction claimed earlier will be added back to your income in the year of sale.

Deduction For Stamp Duty and Registration Charges: Besides claiming the deduction for principal repayment, a deduction for stamp duty and registration charges can also be claimed u/s 80C but within the overall limit of INR 1.5 lakhs. However, it can be claimed only in the year in which these expenses are incurred.

Deduction for Joint Home Loan: If the loan is taken jointly, then each of the loan holders can claim a deduction for home loan interest up to Rs 2 lakh each and principal repayment u/s 80C up to Rs 1.5 lakh each in their individual tax returns. To claim this deduction, they should also be co-owners of the property taken on loan. So, loan taken jointly with your family can help you claim larger tax benefit.

Documents required for Home Loan:

  • Property Registration copy
  • Income proof Salary slip or ITR copy (Applicant and Co-Applicant)
  • Pan card (Applicant and Co-Applicant)
  • Aadhar card (Applicant and Co-Applicant)
  • Photo (Applicant and Co-Applicant)
  • Property legal paper

Eligibility:

  • Minimum – Salary Rs.15000/- Net take home and ITR Net profit Rs.2 lac
  • Cibil score 600 and above
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