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8 things you should know before taking a home loan

# Little Savings

Due to recent urbanization, there is no one without having a home loan. To make a dream house possible, home loan is one of the simplest option.
The following guide will help to glance on some terms that everyone should know before taking a home loan.

Eligible Loan Amount:

Usually banks rely on your Net Take home pay/income to calculate this. You are eligible to 50-75 times of your net take home salary. But the net of all deductions including EMI of proposed loan, should not less than 40% of gross monthly salary/income. That means after all the deductions, one should have at least 40% of the salary in liquid should remain for their expenses.

Loan to Value Ratio(LTV):

The property should be valued by bank approved valuer. Newspapers and Journals have a data bank that carries price data on properties in different areas of most cities.

In order to prevent excessive leveraging the LTV ratio in respect of housing loans should not exceed 80%.  However for small value housing loans that is housing loans upto 30 lakhs, the LTV ratio should not exceed 90%.
That means, you cannot get the whole cost of property as loan amount and maximum you can avail is 90% and remaining 10% should be borne by borrower.

And also the loan amount will "Not include stamp duty and registration fee costs".

Moratorium/holiday period:

Moratorium period or EMI holiday period refers to a particular duration(till the final home loan disbursement happens) in the loan tenure, when the borrower is not required to pay EMIs.
Usually this should not exceed - 18 months (for under construction properties)
   - 3 months(in case of purchase of home/flat)

Repayment period:

Normally the repayment, is limited to a period of 15 to 20 years. Some banks offer maximum of 30 years(including Moratorium or repayment holiday at the option of the beneficiary till completion of construction or 18 months from the disbursement of the first installment of the loan whichever is earlier.  The repayment should not extend beyond the period of retirement of the borrower or on his reaching 65 years of age whichever is earlier.

Tranche EMI:

 Borrowers do have the option to tranche EMI where one can start repayment of the home loan right after the first dispersal by the bank.  The interest outflow in this tranche EMI route is lower than the pre-EMI route.

Pre-EMI:

EMI payment usually commences 1 month after full disbursement.  Until final disbursement and repayment commences,  the borrower pays interest on the portion of the loan disbursed.  This is known as Pre-EMI interest.  This is payable every month from the date of disbursement upto the date of commencement of EMI.

Pre-payment/principal payment: 

The borrower can pay any amount value as a pre-payment and banks should not to levy foreclosure or prepayment penalties on home loans on floating interest rate basis.

Tax Rebate:

Under section 24, Max of  Rs.2 lakh (for self-occupied house), No limit (for let-out property) for interest.
Under section 80C, Max of 1.5 lakh for Principal (including stamp duty and registration fee)
Under section 80EE, Max of 50,000 for Additional interest (for first-time buyers).

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