Step 1: To apply for a housing loan, you will require yours and your co-applicant’s salary slip and TDS Form 16 of the last two financial years. On the basis of these documents, the Housing Finance Company will let you know the eligible loan amount and the terms for the same. Collect the application form and ensure all the required documents. It is highly recommended to compare interest rates of various banks before making a decision.
Step 2: Once you finalise Housing Finance Company, submit the duly filled loan application, along with the requested documents and an application fee of around 1%. The company will conduct an interview and will sanction the loan.
Step 3: Submit your property documents, which should show a clear title. The company will check these and levy an administrative fee (around 1%). It will then disburse the loan, either fully or in installments, directly to the builder/ seller of the flat.
Loan amount depends on your income and repaying capacity. You can add your spouse’s income to increase the amount of loan.
Tax benefits are available to consumers of house loans for the interest component as well as principal component of the housing loans. The current budget has left the upper limit of the interest payment deduction at Rs 150,000 per annum. The section 80C also allows tax benefits on principal repayments.
As per this mode of interest calculation, whatever you pay towards your monthly EMI gets reduced in that principal part. Apart from this, interest will be calculated on the rest of the amount and you shall be charged for that month. So it is understandable that the principal will not be constant in this method. It decreases gradually, on a monthly basis.
In a floating interest rate interest varies with market conditions. If interest rates rise your interest payments will rise and vice-versa. You bear the risk of interest fluctuations in the market. Floating rates are slightly cheaper than fixed interest rates.
As per this method the interest is calculated on the principal amount. This method is used to calculate the interest for the entire tenure of loan.