Every month a large number of Indians apply for home loans. However, not many people are aware of the basic terms associated with home loans. If you are planning to apply for home loan, you must be aware of the certain important terms that are discussed below:
1. EMI (Equated Monthly Installment)
EMI refers to the amount of money the home loan borrower needs to pay each month to the lender as part of the repayment process. EMI amount includes both the principal amount as well as the interest. The amount you pay as EMI remains constant during the entire duration of the loan. For instance if you have availed a home loan for 5 years with an EMI for about Rs. 4,500, you would have to pay this amount to the home loan lender for 60 months.
2. Down Payment
The housing finance companies usually lend only about 80 to 85% of the actual value of the property. The remaining or the balance amount has to be funded out of your own pocket. This amount you pay for the property is known as down payment. You need to pay the down payment upfront before applying for home loan.
3. Sanction Letter
It is a letter issued by the housing finance company to the home loan applicant stating that his/her application for loan is approved. The letter contains the terms and conditions of the loan including:
EMI refers to the amount of money the home loan borrower needs to pay each month to the lender as part of the repayment process. EMI amount includes both the principal amount as well as the interest. The amount you pay as EMI remains constant during the entire duration of the loan. For instance if you have availed a home loan for 5 years with an EMI for about Rs. 4,500, you would have to pay this amount to the home loan lender for 60 months.
2. Down Payment
The housing finance companies usually lend only about 80 to 85% of the actual value of the property. The remaining or the balance amount has to be funded out of your own pocket. This amount you pay for the property is known as down payment. You need to pay the down payment upfront before applying for home loan.
3. Sanction Letter
It is a letter issued by the housing finance company to the home loan applicant stating that his/her application for loan is approved. The letter contains the terms and conditions of the loan including:
- The total amount of loan sanctioned
- The rate of interest applicable
- Type of interest – variable or fixed interest
- Duration of the loan
- Monthly installment amount (EMI)
- Details of the loan scheme (if the loan is offered under any special scheme)
4. Processing Fees
This is a fee that you need to pay to the lender upfront while submitting your loan application form. As the name suggests, it is a fee taken to process your application.
5. Acceptance Letter
This is a letter sent by the loan applicant to the housing finance company. Usually, the applicants eagerly wait to fill this letter up. When you receive the sanction letter from the lender, you need to send them an acceptance letter stating you are willing to accept the loan offer. You need to send this letter within 1-3 months from date of receiving the sanction letter.
6. Administrative Fee
This is a mandatory fee that home loan applicants have to pay to the lender. Generally, this fee is non-refundable and the amount you pay would vary from lender to lender. Generally, it is about 1-2% of the loan amount you apply for.
When you apply for home loan with Indiabulls, we assist you to understand all the important terms relating to home loan and provide the right guidance to avail home loan.
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