Following are the common terminologies used in Home Loans:
1. Principal:It is the amount borrowed from the bank to buy/construct the house.
2. Down payment:It is the amount which you have to arrange yourself. The bank doesn’t give you this money. It ranges from 10% to 25% of the cost of house/property.
3. Eligible Loan Amount:You are eligible to get this amount from the bank as a loan. This is calculated based on income, credit score and other factors. Calculation of the eligible amount varies from bank to bank.
4. Co-applicant:A person who applies for a Home Loan along with the borrower. It can be parents, spouse, brother or children.
5. Fixed rate of interest:This interest rate remains fixed for the entire loan tenure.
6. Floating interest rate::This interest rate fluctuates throughout the loan tenure depending on the markets.
7. Equated Monthly Installment (EMI):It is the amount that has to be paid to the bank every month during the loan tenure.
8. Processing fees:These are bank charges to process the home Loan.
9. NOC:NOC stands for No Objection Certificate. It is a legal document issued by a lender to the borrower, saying that they have no objection in transferring the ownership of the property.
10. Occupancy Certificate:Occupancy Certificate is a legal document issued by the local planning authority to certify that a building is fit for occupation.
11. Reset Clause:Reset clause in Home Loan agreement states the period after which the fixed rate Home Loan will get converted to a floating rate Home Loan.
12. Basis Point::Also known as bps, it is a common unit of measurement for interest rates. It is one hundredth of one percentage point (1/100th of 1%). It is used to denote the percentage change in interest rates.
13. Tripartite agreement:It is a legal document involving the buyer, bank and the seller. As the property is still not in the borrower’s name until possession or total repayment of the Home Loan, the buyer is included in the agreement with the lender.