Home Loan FAQs

Please click on a question to view the answer

1. What are the types of home loans available ?

    This is the common loan for purchasing a home.


    This loan is given for implementing repair works and renovations to your home


    This loan is available for the construction of a new home.


    Given for expanding or extending an existing home. For example, addition of an extra room, etc.


    Available for those who have financed the present home with a Home Loan and wish to purchase and move to another home for which some additional funds are required. Through a Home Conversion Loan, the existing loan is transferred to the new home, including the additional amount required, eliminating the need for pre-payment of the previous loan.


    Sanctioned for purchase of land, for both home construction or investment purposes.


    The Bridge Loan is designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home.


    Balance Transfer loans help you pay off an existing home loan with a higher interest rate, and avail of a loan with a lower rate of interest.


    This loan helps you pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present home.


    This loan is sanctioned to pay the stamp duty amount that needs to be paid on the purchase of a property.

  • 11. LOANS TO NRIs

    This loan is tailored for the requirements of NRIs wishing to build or buy a home in India

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What is an EMI ?

EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal. Back to top ↑

How is an EMI calculated ?

EMI Formula : l x r [(1+r)n /(1+r)n-1 ] x 1/12
l = loan amount
r = rate of interest
n = term of the loan
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What are the incentives offered by lending institutions ?
  • 1. Some of the lending institutions sanction the loan without requiring you to identify property as a prerequisite for eligibility.
  • 2. Free accident insurance
  • 3. Discounts
  • 4. Waiving of pre payment penalty
  • 5. Waiving of processing fee
  • 6. Free property insurance
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What are the eligibility conditions for a home loan ?

To qualify for a home loan, most of the lending institutions in India require you to be:

  • 1. An Indian resident or NRI
  • 2. Above 21 years of age at the commencement of the loan
  • 3. Below 65 when the loan matures
  • 4. Either salaried or self employed
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What are the interest rates offered for home loans? What are Daily Reducing, Monthly Reducing and Yearly Reducing ?

Interest rates are different from institution to institution and generally range from about 9.25% to around 12%. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing basis is also adopted.

Annual reducing:
In this system, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. This means the EMI for the monthly reducing system is effectively less than the annual reducing system.

Monthly reducing:
In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.

Daily Reducing:
In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system. Back to top ↑

What is the best way to select the cheapest home loan ?

Keep the loan period constant and calculate the total amount paid for the home through the different loan options available.
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What is a fixed rate of interest ?

Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.Back to top ↑

What is a floating rate ?

This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up.Back to top ↑

What are the other costs that usually accompany a home loan ?

Home loans are usually accompanied by the following extra costs:

  • 1. Processing Charge: It’s a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required by you cannot be less than the processing fee.
  • 2. Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre-paid.
  • 3. Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.
  • 4. Miscellaneous Costs: It is quite possible that some lenders may levy a documentation or consultant charges.
  • 5. Registration of mortgage deed.
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