– HDFC Home Loan –
HDFC Home Loan may be an option that you are looking forward to reading more on to get you started with getting a home loan. Read through this article to finalize and get started with HDFC home loan
If you have thought about the HDFC home loan, then I guess you might as well have thought of its interest rate and eligibility.
This article covers in detail everything you need to know about the HDFC home loan. What HDFC is about, How it works, its eligibility, its criteria and so much more. Let’s get right in and read along.
What is the HDFC Home Loan About
To enhance the residential housing stock in the country through the provision of Housing Finance in a systematic and professional manner, and to promote home ownership.
The HDFC home Loan aims at Increasing the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.
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How does the Loan Work?
The HDFC home loan works in different patterns, these patterns are out listed in the the subtopics below.
Home First or Loan First
It is advisable to get your home loan pre-approved before you select your home. Pre-approval helps you fix your exact budget and makes your home search focused.
Pre-approvals even help negotiate better and close deals faster. You can also check with the lender about the availability of good properties in your preferred location.
In fact, there are some projects that are approved by the lender, which not only relaxes the number of property documents. It is needed by the lender but also assures you of the quality of the projects.
The cost of your housing loan is also a factor to take into consideration while assessing its suitability. The cost will include the interest payments, processing fees, administrative charges, prepayment penalties, etc.
Ideally, your home loan should have zero prepayment charges for adjustable/floating rate loans. You should also be able to convert your loan to a lower rate by just paying a nominal fee.
When considering a home loan, ensure that there are no hidden charges. As per the regulator, lenders need to transparently disclose information about fees and charges on their websites.
You can apply for a loan for repaying a Home Loan availed by you from another Bank / Housing Finance Company or even your employer.
Home loans can be sanctioned for a maximum period of 30 years, subject to the customer’s eligibility. A longer tenure helps reduce the EMI burden.
For example, for a 20-year home loan of Rs 10 lakh at an interest rate of 10.40 percent, the EMI works out to be Rs. 9,917.
As defined by the regulator, most lenders provide a housing loan ranging from 75 to 90 percent of the cost of the property depending on your loan value.
Therefore, if the property is valued at Rs 50 lakh by the lender, you can avail a maximum loan of Rs 40 lakh (80% of the property cost for loan amount up to Rs. 75 lakh), depending on your home loan eligibility.
If you include a co-applicant, his/her income can be considered by the lender to increase the loan amount. The co-applicant may be your adult child, parent, or spouse.
The balance payment towards the purchase of the property is expected to be contributed by you. For instance, if the property is valued at Rs 50 lakh and you have been sanctioned a home loan of Rs 35 lakh, your contribution will be the balance of Rs 15 lakh.
EMI stands for Equated Monthly Instalment. This is the amount you need to pay to the lender each month. It includes repayment of the principal amount and payment of the interest on the outstanding amount of the loan.
Pre-EMI is a concept that is used for properties that are under construction. In this case, you get your loan disbursed in stages based on the instalment amount you need to pay the developer.
You are required to start paying only the interest on the loan amount disbursed (called the pre-EMI interest).
In case you wish to start principal repayment immediately, you may opt to tranche the loan and start paying EMIs on the cumulative amounts disbursed.
You must purchase a loan cover term assurance plan that will cover the loan amount. It’s important to do your research to find out the best home loan insurance available.
This will relieve your family from the liability of an outstanding loan as the loan is repaid by the insurance company in case something unfortunate happens to you.
In fact, several lenders will insist that you purchase insurance at the time of availing of the home loan.
It is best to be regular in paying your EMIs. If the customer misses more than 3 installments, lenders have the power to take action against default directly.
This can be done without the intervention of courts according to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
In case you are facing financial difficulties, it’s best to apprise your lender about your situation and check the possibility of an extension in the repayment tenure.
Types of HDFC Home Loan
The different types of home loans that are available are:
In this type of loan, the interest rate is linked to the lender’s benchmark rate. If there is a change in the benchmark rate, the interest rate also changes proportionately.
In a fixed-rate loan, the interest rate is fixed at the time of taking the loan. This rate of interest is applicable throughout the tenure of the loan.
These loans offer a part of the loan at a fixed rate of interest and part at an adjustable or floating rate of interest.
HDFC Interest Rate
The Latest HDFC home loan interest rate starts from 6.80%, as applicable based on the PLR, which is 16.10%, last announced on 24th Dec 20.
Any change in repo rate will change the PLR and will translate into a similar change in the bank’s home finance rate.
HDFC housing finance interest rate depends upon the loan amount, salary and occupation of the borrower, nature of property and type of home loan scheme.
Loan amount: HDFC home loan rate depends upon the loan amount you apply for.
Occupation: HDFC offers a lower rate for salaried borrowers as compared to self-employed borrowers.
Salary: Income helps in identifying the amount of loan that you can be eligible for.
Bank’s rate varies with your monthly income. The higher the income, the lesser will be the rate as higher will be the loan amount.
Gender: HDFC also offers discounted or special rates for women borrowers to ensure that women own a house and become financially independent.
If you are planning to take a loan, adding a women co-applicant can help you get the lowest rates from HDFC.
Existing Customers: HDFC offers lower home loan rates to its existing bank account customers as compared to new bank customers, as it understands the past banking history of the customer and hence, is comfortable in sanctioning loans.
HDFC Home Loan Eligibility
Home Loan eligibility is dependent on factors such as your monthly income, current age, credit score, fixed monthly financial obligations, credit history, retirement age, etc.
Present Age and Remaining Working Years: The age of the applicant plays a major role in determining home loan eligibility. The maximum loan term is generally capped at 30 years.
Age Limit for Salaried Individuals: 21 to 65 years.
Age Limit for Self-Employed Individuals: 21 to 65 years.
Minimum Salary: ₹10,000 p.m.
Minimum business income: ₹2 lac p.a.
Maximum Loan Term: 30 years.
Financial Position: The present and the future income of the applicant(s) has a significant impact on determining the loan amount.
Past and Present Credit History and Credit Score: A clean repayment record is considered positive.
Other Financial Obligations: Existing liabilities such as a car loan, credit card debt, etc.
How to enhance Loan eligibility?
The eligibility for home loans can be enhanced by
- Adding an earning family member as a co-applicant.
2. Availing a structured repayment plan.
3. Ensuring a steady income flow, regular savings and investments.
Furnishing details of your regular additional income sources.
Keep a record of your variable salary components.
Take action to rectify errors (if any) in your credit score.
Repaying ongoing loans and short terms debts
1. Low Property Prices: Now homebuyers have multiple options in the affordable home segment.
This has a two-pronged benefit for a home buyer – on one end, she can afford a larger home or purchase a home for a lower amount than she had budgeted.
2. Reduction in GST Rates on Home Purchase: GST (Goods and Services Tax) rates on home purchase have been reduced significantly.
Currently, the GST rate levied on the purchase of residential homes is 5 percent (1 percent for affordable homes) without the benefit of input tax credit (ITC). Purchasing a home today will give you the benefit of these low rates.
3. Low-Interest Rates: Home loans have become very affordable today with interest rates moving downward in the recent past. Lower interest rates result in lower EMI amounts which makes home loans more attractive and affordable.
The key benefit of a home loan is that you can become a homeowner today and you needn’t wait to accumulate sufficient capital to make your home purchase.
While you may be convinced about the need to consider becoming a homeowner today, you may wonder how to go about availing a home loan, which is one of the first steps to your home purchase.
One of the simplest ways to avail of a Home Loan, Apply Online. When you apply for Home Loan Online, you can make your application with a few simple steps.
For instance, HDFC’s online application for a home loan is quick and easy. All it requires you to do is visit www.hdfc.com, check your loan eligibility, fill in the property details (if you have made your selection), fill the loan application form with your personal details (name, age, income details, etc.), upload your documents (identity proof, address proof, income tax returns, etc.) and submit.
On receiving your loan application, HDFC instantly initiates the processing of your loan and reverts to the loan approval and other terms.
We believe you have gotten just enough detail to get you kick-started on getting a home loan. Its is really super easy to navigate and get started if you meet the criteria.
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