Housing finance is crucial for modern home seekers facing financial limitations. It provides the means to purchase a home, making it essential for many individuals and families. This guide aims to clarify misconceptions about home loans and provide essential facts and insights for prospective home buyers.
1. How Much Home Loan Can I Get on the Property?
Loan-to-Value Ratio (LTV) The Loan-to-Value ratio defines how much loan you can get relative to the property’s value. Typically, banks offer LTV ratios of up to 90%.
Factors Influencing Loan Amount
- Borrower’s Creditworthiness: Higher credit scores can lead to better loan terms.
- Income and Employment Stability: Steady income and job stability increase loan eligibility.
- Property Valuation and Type: The value and type of property (e.g., residential, commercial) affect the loan amount.
Example: If you are purchasing a property valued at ₹50 lakhs, with an LTV ratio of 80%, you can get a loan of up to ₹40 lakhs. The remaining ₹10 lakhs must be funded by you.
2. Can I Claim Tax Benefits for Loans from Family Members?
Tax Deductions for Home Loans Sections 24(b) and 80C of the Income Tax Act provide deductions for interest and principal repayments, respectively.
Loans from Family Members
- Interest Deductions: You can claim deductions under Section 24(b) for interest paid on loans from family members.
- Principal Repayment: Deductions under Section 80C are not available for principal repayments on loans from family members.
Example: If you borrow ₹10 lakhs from a family member at an interest rate of 8%, you can claim the interest paid as a deduction under Section 24(b).
3. Can I Claim Tax Benefits on Stamp Duty and Registration?
Section 80C Deductions Stamp duty and registration charges are claimable expenses with an annual limit of ₹1.5 lakhs, impacting overall tax liability.
Example: If you pay ₹1 lakh for stamp duty and ₹50,000 for registration, you can claim the entire ₹1.5 lakhs under Section 80C.
4. Can I Repay a Housing Loan in Cash?
Regulations on Cash Payment Cash payments are regulated, with limits set at ₹2 lakhs per installment, raising legal and practical concerns.
Example: If your monthly EMI is ₹50,000, you can repay in cash but ensure it does not exceed ₹2 lakhs in a single installment.
5. Is it Mandatory to Have a Co-borrower for a Home Loan?
Benefits of a Co-borrower A co-borrower can enhance eligibility and the loan amount, but they are not mandatory.
Example: If your income alone qualifies you for a loan of ₹30 lakhs, adding a co-borrower with a similar income can increase your eligibility to ₹60 lakhs.
6. How Will My Credit Score Affect My Loan Eligibility?
Importance of Credit Score Your credit score plays a critical role in loan approval and interest rates. Improving it can lead to better loan terms.
Example: A credit score above 750 can help you secure a loan at an interest rate of 7%, while a lower score might result in a higher rate of 9%.
Read more – Home Loans: The Complete Guide to Financing Dream Home
7. Do All Borrowers Get the Same Interest Rates?
Interest Rates Interest rates can vary based on the borrower’s credit score, loan amount, and tenure. Banks often offer lower rates to borrowers with higher credit scores.
Example: Two borrowers applying for the same loan amount might receive different interest rates based on their credit scores and financial profiles.
