"Be Grateful For The Home You Have Knowing That At This Moment, All You Have Is All You Need". This is a famous saying explaining the importance a home plays in our family lives. Each of us wants to have that elusive roof over our head. Which of us would like to leave the fate of our families to chance? We all have heard the saying …Home Is Where The Heart Belongs. However the price of real estate is skyrocketing these days..How do we afford it.? A Home Loan is the obvious answer. For your Home Loan needs and to learn more about this topic please look up the website IndianMoney.com.
Here for a salaried employee we require the Application form with photograph, Proof of Age, Identity and Residence proof, Latest Salary Slip, Form 16, Last 6 month’s bank statements, Loan processing fee cheque. For a self employed person he would require to show his Educational qualifications, Business profile and the last 3 years profit and loss account and the balance sheet.
Steps Involved in taking a Home loan:
Application: Submit a completely filled in application with all the necessary documents.
Sanction: You get approved for a specific loan amount based on value of the property and repayment capacity.
Disbursement: Transfer of loan amount.
see Also: Home Loan Interest Rate
Here I would like to explain how banks calculate your net income when loans are sanctioned for your homes. Mr Verma wants a home loan sanctioned by the bank for an amount of INR 35 Lakhs. He doesn’t have any other car or personal loans. Bank rules generally have eligibility criteria to get home loan which ranges to about 60 times monthly net income. Here Mr. Verma had a word with the bank executive over the phone and stated that his monthly income was around INR 60000.Since the rule of thumb is about 60 times the monthly net income the bank agent stated that his 35 Lakh would be sanctioned. An elated Mr Verma was filled with relief. Here things changed drastically once he submitted the necessary documents, salary slips and paid loan processing fees. The salary slips still showed a net monthly income of INR 60000.
So What Had Changed ?Why Had It All Not Gone According To Plan? Normally a salary consists of the following components: Basic Salary, HRA, LTA, Medical Allowance, Performance Bonus, Conveyance Allowance, Special Allowance, Food Coupons, PF and other allowances. Here banks do not consider medical allowance and LTA amounts in the net income. Here the total amount of LTA and Medical Allowance of Mr Verma was INR 7500 per month Here according to the rule of thumb this amount multiplied 60 times gives a value of INR 4,50,000. This amount will not be considered in the sanctioned loan amounts and he gets around 30 Lakhs. The remaining amount of INR 4.5 lakhs would not be sanctioned .and he has to arrange this from other sources. Here this was told to him after paying the non refundable loan processing fees. . On a lighter note A Boy Becomes A Man When He Stop Asking His Dad For Money and Requests A Loan. I would like to remind all of you that the team of Financial Planners at IndianMoney.com are always there for you to plan your Home Loan needs in a most efficient manner. You can explore this unique Free Advisory Service just by giving a missed call at 02261816111.
See Also: Tips For Home Loan EMI Repayment
Security for the loan is the exclusive charge of the property to be financed by way of the deposit of the title deeds which should be marketable, clear and free from any encumbrances.
Co-Applicants For the Loan:
Co-Applicant of a loan is the second signer of the loan. The Co-Applicant has as much responsibility to pay back the loan amounts as the primary applicant. Here the spouse can be a Co-Applicant of the Loan. Here we have blood relations to be Co-Applicants but not the sister of the primary applicant.
Frequently Asked Questions Regarding Taxation Of Home Loans:
Benefits For First Time Home Buyers Under Budget 2013:
Tax Implications On A Joint Loan: Here let us consider the scenario where Mr. Ramesh and his wife pay 2.5 Lakh as interest portion of their EMI and 1.5 Lakhs as the principal portion of their home Loan in their EMI. Here this is their first home. Here both are co-owners of the house. Here the interest deductions is available on 2.5 Lakhs under taxation limits under Section 24 and 80EE.Here both pay 1.25 Lakhs each towards interest deductions and INR 75,000 each towards Principal deductions.
Tax Implications On An Under Construction House: Pre-EMI is the interest paid for taking an under construction house. Here you can use the home loan for tax saving purposes only once the house is constructed. There is no tax benefit during the period in which the house is being constructed. Once the house has been constructed the total pre EMI is tax deductible within a period of 5 years. This may be divided into five equal installments and paid out in five years. Here for the time the house is under construction only the interest portion is charged hence it is called pre –EMI. The real EMI begins (Principal and Interest Portion) only once the house is constructed.
Home Loan Taken and Possession Received But I Stay Out Of Town: Here a person is eligible to purchase a home on loan take possession and stay out of town on work. Here you can leave the house vacant or give it on rent. The rent is an earning and must be added to taxable income.
Can I take Advantage of tax benefits from a home loan as well as claim House Rent Allowance: Here a person can take a loan for a house and take possession of the ready house. He can then rent it out. He stays on rent and pays rental amounts. He gets HRA Benefits as well as deductions under section 80C and section 24.
What happens If I sell my house and buy a new house: Here if the house is held for more than 3 years it is applicable for Long Term Capital Gains. Here a person can buy a residential property and there is no tax liability from such a sale under section 54EC.He can also invest the proceeds in REC or NHAI Bonds as stated under section 54EC.
After reading this article we are all enlightened on why we need to take a home Loan. A Roof Over Our Head is a basic necessity these days in times of soaring real estate prices. Do you think we should wait any longer for this? Shouldn’t we leave something behind which is indestructible for our future generations.
The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.
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