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Home Loan
Can Home Loans be offered on the cost of property?
Buying a house is one of the most significant financial decisions you can make in your lifetime. For most people, purchasing a home requires taking out a loan, also known as a home loan or a mortgage. But how much money can you borrow to buy a home? Can a home loan be offered on the cost of the property?
When you apply for a home loan, the lender will take into consideration the cost of the property you intend to purchase, along with other factors such as your income, credit score and other financial obligations.
In India, the maximum amount of home loan you can get is generally up to 80% of the property's value. This means that if the cost of the property is ₹1 crore, you can get a home loan of up to ₹80 lakh, subject to your eligibility.
Down payment
While a home loan can be offered on the cost of the property, you are required to make a down payment or contribute a certain percentage of the property's cost from your own funds. As per the Reserve Bank of India's (RBI) guidelines, the down payment for a home loan cannot be less than 10% of the property's value.
However, most lenders require a down payment of at least 20% of the property's value. So, using the above example, for buying a house of ₹1 crore, you would have to pay ₹20 lakh as a down payment.
Interest rates on Home Loans
In India, home loan interest rates can be either fixed or floating. Fixed interest rates remain constant throughout the loan tenure, while floating interest rates may change depending on market conditions. Floating interest rates are generally linked to an external benchmark, such as the RBI's repo rate or the Marginal Cost of Funds based Lending Rate (MCLR).
As of February 2023, the RBI Repo Rate is 6.5%, making the home loan floating interest rates around 8.5% per annum. However, interest rates may vary based on the lender's policies, the loan amount and your creditworthiness.
Axis Bank's home loan products offer a great opportunity if you are planning to buy a new home or looking to finance your existing home. The Bank has competitive interest rates, flexible repayment tenures of up to 30 years and loan amounts of up to ₹5 crores. Additionally, the balance transfer facility and a Home Loan EMI calculator can help you manage your home loan effectively.
Also Read: [Can you get a home loan with a low CIBIL score]
Other charges
When you take out a home loan, you'll likely be responsible for paying extra charges to the lender. These include fees for loan processing, documentation, legal opinions, property valuation and more. It's important to keep these charges in mind when calculating the overall cost of your loan.
- The loan processing fee is usually a non-refundable amount that makes up a small percentage of the loan amount. Some lenders may combine documentation, legal opinion and valuation fees under the processing fee, while others may charge them separately.
- Some other charges may include Memorandum of Deposit of the Title Deed (MOTD) fees, stamp duty and registration charges.
- You may need to pay various other charges to the developer, such as electricity and water charges, municipal taxes, maintenance charges, etc.
- You also need to consider GST payments, house furnishing costs and movers' and packers' charges.
How much do these charges add up to?
Overall, the cost of a home loan in India can be significant, and you should carefully consider all the associated charges before deciding to take on a loan. Hence, from the example mentioned above, a home loan of ₹1 crore at an interest rate of 8.75% and for a tenure of 30 years, would cost upwards of ₹2.1 crore. This includes interest, processing fees, stamp duty, registration and other charges. It's important to note that the actual costs can vary depending on the lender, the loan amount and the loan tenure.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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