The Guide to Meaningful Investments
Step 1: Approach a Housing Finance Company with the latest salary slip and TDS Form 16 of the last two financial years of yourself and your co-applicant. The loan officer will informally tell you the amount of loan you are eligible for, the areas in which they finance flats and the terms of the same. Collect a loan application form and confirm the needed documents (mainly proof of income). Visit more than one company since you are likely to get better terms / larger loan amount if you shop for the best deal.
Step 2: At your chosen HFC, submit the duly filled loan application, along with the requested documents and an application fee (around 1%). They will then interview you on the same. After conducting an appraisal of your application, the HFC will give an in-principle sanction of your loan.
Step 3: You now have to submit your property documents, which should show a clear title. The HFC will check these and levy an administrative fee (around 1%). It will then disburse the loan, either fully or in installments, directly to the builder / seller of the flat.
How much housing loan can one get?
It depends on a person’s repaying capacity based on your income. You can add your spouse's income to increase the amount of loan.
What tax benefits are available in regards to the housing loans?
Tax benefits are available to consumers of house loans for the interest component as well as principal component of the housing loans. The current budget has left the upper limit of the interest payment deduction at Rs. 1,50,000 per annum. The section 80C also allows tax benefits on principal repayments.
What is the reducing balance method of interest payment?
In reducing balance you reduce the amount of principal payment already paid by you from the initial loan amount. You pay interest only on principal unpaid till that point of time and not the entire loan amount.
What is floating interest rate?
In a floating interest rate, you interest payment will vary according to the market lending rate. If interest rates rise your interest payments will rise and vice-versa. You bear the risk of interest fluctuations in the market. Floating rates are slightly cheaper than fixed interest rates.
What is fixed interest rate?
In a fixed interest rate, your interest rate is fixed over the entire tenure of loan.