Once you think of buying yourself a house and go
looking for that perfect dream house, only to find out that you are unable to
finance your new house at the moment. And you realize that you really want that
new house. You might at this point consider the option of taking a bridge loan.
A bridge loan is the scenario wherein if you have enough equity in your present
home, the bridge loan will allow you to avail of a loan so that you can make a
down payment and buy your new house. The only catch here is that the interest
rates on the bridge loan are much higher than those on the home loans. Another
thing to consider is that it is short-term loan, and there are also costs and
fees involved. Therefore you might do better for yourself, if you consider
applying for a home loan. The procedure is simple and of course you have to
meet a certain eligibility criteria.
Once you have identified the house that you want to purchase, you can go
ahead and approach any financial institution dealing or disbursing home loans.
Though applying for a home loan may seem like a
very difficult task, it definitely need not be that way. Given below is some
Home Loan Basic that you need to know before you go about applying. The first step to getting a home loan involves
filling up the application form of chosen financial institution along with the
required documents. Do remember that you will need to pay a one time processing
fee at this stage. You will also require
some important documents to get through with the loan processing stage. In case
you are an employed individual, you will require verification of your
employment form, your latest salary slip/salary certificate which outlines all
deductions for at least the last 6 months. Form 16 from your employer for the
last 3 years. In case you are a self employed individual, you will need a
Balance Sheet and profit and loss account of the business/profession along with
copies of individual income tax returns for the past 3 years as certified by a
CA.
You will also need a note, which gives the
information on the nature of the business, year of establishment, present
bankers, form of organization, clients, suppliers etc. And of course you will
need a statement proving your net worth as an applicant. Once you are past this
stage you will need to submit the property documents. After getting the
approval from the financial institution where you plan to borrow, the loan will
be disbursed to you.
Benefits of
Home Loans: You can easily avail
home loan from various companies which offer home improvement loans to finance
the cost of tiling, plumbing, electrical work, grills, woodwork, painting,
compound walls and almost all improvements for your house. In fact it must be a good idea to avail of
these home loans, because they offer a number of added advantages as well. One of the most important benefits of taking
a home loan is the interest rate that is allowed on the home loan. Fixed and variable interest rate options are
also available for home loans.
Many financiers also offer home improvement loans
at the same interest rate as they offer the home loans. Most of the prevailing interest rates fall in
the range of 7.75% to 8.75%.There is usually processing fee of 1.00% to 2.00%
also that is involved. The other benefit of taking a home loan is the security
that is to be currently being constructed as the security for the home
loans. Of course, most banks and finance
companies do not finance more than 85% of the cost of the property mortgaged.Perhaps the benefit that is most used is that
of the tax benefit. The interest that is paid on home loans are deductible from
the annual value resulting in a lower taxable income. For self occupied property, interest to the
extent of Rs.30,000/- is deductible from
taxable income. The maximum amount of
fund that can be received through the home loans varies between 50%-100% of the
total cost.
Of
course the loan amount is also subject to the repayment capacity of the
borrower. The usual rule states that the sum of all the monthly installments a
borrower has to pay should not exceed 40%-50% of his gross monthly income. Apart
from the income and margin criteria, the applicant needs to be a salaried or
self-employed individual. And it is important that the loan is repaid before
the retirement stage or before the person turns 65 years in case he/she is
self-employed. On an average the
repayment term of the home loans can be extended up to 15 years.
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