Knowing More About Home Loan Tax Benefits

Purchasing a house for yourself and your loved ones is one of the biggest investments that you will probably make in your entire lifetime. It is a very big decision to buy a house because not only you spend a lot of money, but also it becomes an asset to you. Everyone wants to own a house and in today’s world, buying a house is more of a necessity than a luxury.

Buying a home requires lots of funding. You may go ahead and shell out your savings on buying your dream home. However, if you do not wish to buy the house using your savings or don’t have enough saved up, you may choose to go for a home loan. A home loan offers you the lump sum money that you need to buy your house. You must understand that the loan will not cover the entire value of the property. Around 80-85% of the property value will be taken care of by the loan and the remaining 15-20% must be paid by you as down payment.

If you choose to opt for a home loan, you will have to ensure that you make the monthly payments on time towards the debt. Ensure that you have enough cash flow every month so that you can manage your finances well.

In order to avail a loan from a bank or an NBFC, you must meet the eligibility criteria set by them. You must have a steady source of income, a good credit score, etc. If you meet the criteria and all your documents are in place, you can easily avail the home loan.

A home loan not only helps you buy a house, but it also comes with several other perks.  One such perk is called Home Loan Income Tax Benefit. Let us talk about the tax benefits that can be availed under the prevailing Income Tax laws.

Tax Benefits On Housing Loans:

Tax Benefits for home loans can be availed under Section 80C, Section 80EE and Section 24 of the Income Tax Laws.

Tax Benefits For Home Loan Under Section 80c:

Under Section 80C of the Income Tax Act, the borrower of the housing loan is allowed to claim tax deduction on the principal amount. Rs.1.5 lakh is the maximum amount that can be claimed under this Section as tax deduction. You must understand that this deduction is the sum total of all the deductions under Section 80C and includes sums invested in fixed deposits, PPFs, Senior Citizens Savings Scheme, National Savings Certificate, etc.

Tax Benefits For Home Loan Under Section 24:

Section 24 of the IT Act allows the borrower of the home loan to claim tax deduction on the interest that is paid towards the housing loan. According to the clauses mentioned under this Section, income from the borrower’s property is reduced by the figure of the interest paid on the housing loan. However, there is a condition for claiming this tax deduction. The home loan must have been taken for the purpose of purchasing a property, construction of the house, repair of the house, reconstruction or remodelling, etc.

Tax Benefits For Home Loan Under Section 80ee:

This Section under the Income Tax Act was reintroduced in the 2016 Union Budget. It has a provision of claiming an additional amount of Rs.50,000 as tax benefit when you take a home loan. This claim can be made on the interest that is paid towards the loan amount. This additional claim is over and above the claim of Rs.1.5 lakh and Rs.2 lakh under Section 80C and Section 24 on the Income Tax Act, respectively.

When Is A Claim Under Section 80ee Valid?

 The claim under Section 80EE is allowed if the cost of the property purchased by you is less than Rs.50 lakh and the total value of the property does not exceed an amount of Rs.35 lakh. The deduction benefit can be availed till the time the home loan’s repayment is done.

How To Claim Home Loan Tax Benefits?

In order to claim tax benefits on home loans, you will need to submit the lender’s statement that states the payable amount towards the interest and principal. If the claim is valid, the borrower only has to pay tax on the remaining amount that does not fall under the tax deduction bracket.

Bottom Line:
Choosing a home loan for buying your home can prove to be a great option as it helps you buy the house easily and allows you to save more by claiming tax benefits. Ensure that you do thorough research before investing in a property.
 

 

 

 

What ‘NOT’ To Do When You Apply For A Home Loan

While there are a list of guidelines and rules that you might have followed before and during your home loan application process, it is also important to keep in mind the list of ‘don'ts’. It matters that you be very careful during this crucial period of your life when you are very close to making your home dream come true. It is necessary to keep these pointers in mind because you do not want to loose your chance of getting a home loan. Not only will being careless reduce your chances but will have an impact on the interest rates offered and other perks that you would have otherwise been eligible for. For example, it is better to avoid getting into more debt or abusing your credit card during this time period. Read on further to read more about the list of things that you should avoid during, before and after the home loan application process.

• Do not accumulate debt: Remember, when you are preparing to file your home loan application, it is wise not to accumulate any type of new debt in the form of personal loans, car loans or other types of outstanding credit. This will definitely have a huge impact on your eligibility criteria. Not just this, this will also have an impact on your credit score and put you in the category of a ‘high risk borrower’. So, keep in mind that before, during and even after the home loan application process, do not take any other type of debt.
• Do not become a co-borrower or a offer guarantee: Though you may want to help someone in need of debt, remember, this is not the best time to become a co-borrower or offer a guarantee on another loan that your friend or relative might be applying for. It may be hard to say a no, but explain to them politely why you cannot help them at this point in your life. Do not be under the misconception that you can co-sign once the home loan application is approved. You need to be very careful till you finally settle the loan.
• Do not lose track of your credit score: Even, before you apply for a home loan, you have to make sure you build a good credit score, based on which the lender will be confident enough to give you a home loan. Start building your credit score well in advance and do not wait till the last minute. Also make sure that you do not do anything that will have your credit score drastically even after you have applied for a home loan. Make sure you are paying all bills on time and if it is not possible to keep all deadlines in mid, set up automatic payments or even payment reminders.
• Do not close a credit card account: Think that closing your credit card account is the best idea? No. It may probably be the worst idea because your credit card is one of the main factors that are used to access your eligibility criteria. And, if you suddenly close a credit card account, it may lead to unnecessary suspicion and may also have a negative impact on your overall credit score even if you have made all payments on time and do not have an undue credit on the card that you may be holding.
• Do not switch jobs or make other career moves: This is definitely not a good time to change a job. Ideally, you should have a stable and secure job to be able to take a home loan and also pay it back. Also, if you are planning to go for higher education, this may not be a great time. A home loan is a long-term commitment and thus you have to be fully prepared for this move. Do not change a job suddenly before you apply for a housing loan. Though it is okay to switch jobs, make sure you do not look like you are a job hopper to the lender.
• Do not make any expensive purchases: If you make a very expensive purchase just a few weeks before you apply for a home loan, it will send across a very wrong message to the lender. Also, it is important to save some money and have some liquid cash in hand during this process. Another thing to remember is that if you have made this purchase on your credit card, it is even more worrisome as it will hit your credit score in a big way and potentially cause irreversible damage.
• Do not go overboard with your expenses after taking a home loan: It's an occasion to celebrate once your home loan application has been approved but do not go overboard. Remember that you are being constantly watched and it not the right time for you to splurge on your expenses. Focus more on paying back the loan and less on other aspects.
• Keep your personal information safe: One of the other most important factors to keep in mind is to keep your personal information safe and secure. Do not reveal any personal financial information to anyone else at any point of time and be very cautious.
• Do not go overboard: Before you apply for a home loan check and see if you will be able to pay a monthly installment and can actually afford it. Do not choose an EMI that you will not be able to commit to pay just because you want get a home loan. Do not forget that even banks will not approve your home loan application if you make unrealistic commitments. 

Some Takeaways
Be cautious at very step when you are preparing to apply for a home loan. It is nearly impossible to buy a house without applying for a loan in today’s world, so be prepared to take the risk and at the same time also be able to commit to the same in a responsible manner.

Top Banks Home Loan Details

Buying a house in India is a matter of great joy and pride. When you buy a house you can live there with your loved ones and give them the luxury and peace of mind that they deserve. When you invest in buying a house, it is probably the biggest investment of your life. No ones stopping you if you plan to buy your new house using your savings. However, going for a home loan will not affect your savings to a great extent.

A home loan offers you the upfront money you require to buy a house. However, you must understand that a home loan will only cover 85% of the property value. The remaining 15% has to come from your savings. Before applying for a home loan, it is imperative that you read the details and understand the complete process of applying.

There are several home loans offered by different banks in India. The NBFCs also offer housing loans that are associated with attractive rates of interest.

Let us know about the details of home loans offered by some of the top banks in India.

DBS Home Loan Details

• Pre-closure Chargest: Varies with bank
• Partial pre-payment Charges: Varies with bank
• Loan tenure: 1 Year to 30 Years
• Processing fees: Varies with bank
• Interest Rate (Monthly reducing balance): 8.35% to 18%

SBI Home Loan Details

• Pre-closure Chargest: Nil
• Loan tenure: 30 Years
• Processing fees: 0.35% of Loan Amount, min of Rs.2,000 to max of Rs.10,000 (plus applicable tax)
• Interest Rate (Monthly reducing balance): For women - 8.30% to 8.6%, For General Customers - 8.35% to 8.65% 

ICICI Home Loan Details

• Pre-closure Chargest: Nil
• Partial pre-payment Charges: Nil
• Loan tenure: 3 Years to 30 Years
• Processing fees: 0.50% of Loan Amount (Maximum of Rs.11,800)
• Interest Rate (Monthly reducing balance): For women - 8.45% to 8.80%, For General Customers - 8.50% to 8.85%
• Guarantor requirement: Not require

HDFC Home Loan Details

• Pre-closure Chargest: Nil
• Partial pre-payment Charges: Nil
• Loan tenure: 1 Year to 30 Years
• Processing fees: 0.50% of Loan Amount (Maximum of Rs.11,800)
• Interest Rate (Monthly reducing balance): 8.35% to 8.85%
• Guarantor requirement: Not required 

Axis Bank Home Loan Details

• Pre-closure Chargest: Nil
• Partial pre-payment Charges: Nil
• Loan tenure: 1 Year to 30 Years, Super Saver Scheme - 1 year to 20 years
• Processing fees: 0.50% of Loan Amount (Minimum of Rs.10,000)
• Interest Rate (Monthly reducing balance): 8.35% to 11.75%, Super Saver Scheme – 9.25%
• Guarantor requirement: Not required 

PNB Housing Home Loan Details

• Pre-closure Chargest: Nil
• Partial pre-payment Charges: Nil
• Loan tenure: 1 Year to 30 Years
• Processing fees: 0.50% of Loan Amount (Minimum of Rs.5,900)
• Interest Rate (Monthly reducing balance): 8.35% to 10.25%
• Guarantor requirement: Not required 

Bank of Baroda Home Loan Details

• Pre-closure Chargest: Nil
• Loan tenure: 30 Years
• Processing fees: 0.50% to 0.25% of Loan Amount (Min of Rs.7500 to Max of Rs.20,000)
• Interest Rate (Monthly reducing balance): 8.30% to 9.35% 

IDBI Home Loan Details

• Pre-closure Chargest: Nil
• Loan tenure: 30 Years
• Interest Rate (Monthly reducing balance): 8.35% to 8.65%

Banks May Soon Increase Lending Rates

Interest rates on home loans and car loans may go up in the near future in order to safeguard their margins. This change can be expected to occur as soon as the coming month since the cost the bank incurs on borrowing has risen and they are constantly looking for deposits at a higher rate.

The Reserve Bank of India (RBI) had also demanded that banks to link base rates to MCLR from the 1st of April. This too has an impact on the rise in lending rates, experts believe.

Banking giant, HDFC bank had also increased their MCLR by 10 basis points recently, indicating that several other banks may follow this move. Other banks like IndusInd, Kotak Mahindra, Yes bank, and Axis bank have also spiked their MCLR by 5 – 10 basis points.

The hike in lending rates could have been speculated when banks began to increase the bulk deposit rates earlier. With the State Bank of India (SBI) being the first to do so, all other lenders followed their path not long after this move. The interest rates on one-year deposits that amounted to over Rs.1 crore rose to 6.25% by 200 basis points in a few months.

However, the country’s largest lender hasn’t yet increased their MCLR yet and now offers home loans on several different types of properties. From under-construction, fully built, pre-owned, renovation, repair, etc., the bank has all areas covered in terms of home loans. Furthermore, they also offer home loans as overdraft for customers to adequately use the funds provided by the bank.

Eligibility criteria for a SBI home loan

In order to avail a home loan from SBI, one must meet the following eligibility criteria:

• The individual must be an Indian resident 
• The applicant must be at least 18 years of age
• The applicant cannot be over the age of 70
• The maximum tenure of a SBI home loan is 30 years

Documents required

Account statement

• Bank account statement for the last 6 months 

Property documents

• No objection certificate (NOC) from society or builder 
• Maintenance bill, utility bill, electricity bill, property tax receipt
• Sale deed
• Certificate of occupancy

Identification documents

• ID card from employer 
• Duly filled loan application form
• Passport size photographs
• ID proof : PAN card, driver’s license, passport, Aadhaar card, voter ID (Any one)

For non-salaried individuals

• Qualification certificate in case of a self-employed borrower 
• Tax deducted at source certificate
• Business certificate, if applicable
• Balance sheet and profit and loss statement
• Income tax returns for the last 3 years
• Business address proof

For salaried individuals

• Last 2 year’s copy of form 16
• Income tax returns copy for the last 2 years 
• Pay slip for the last 3 months
• Address proof : Driver’s license, passport, Aadhaar card, electricity bill, telephone bill, gas bill, water bill (Any one)

Documents Required For Loan Against Property

A loan against property is a loan that is disbursed to a borrower with his property used as collateral by the lender. These types of loans are easier to obtain as these are secured loans, making it safer for a lender to approve them. The loan amount for these types of loans usually corresponds with the value of the property and lenders usually do not put that much of a weight-age on an applicant’s income.
The documents required in order to avail a loan against property are mentioned below:

For salaried individuals

• Photo ID proof (Applicant must produce any one of the following)

1.  Applicant’s driving license
2.  Applicant’s PAN card
3.  Applicant’s passport
4.  Applicant’s voter ID

• Address proof of residence (Applicant must produce any one of the following) 

1. Applicant’s ration card
2. Applicant’ electricity bill
3. Applicant’s phone bill
4. Any utility bill of applicant
5. Applicant’s passport

• Ownership of residence proof (Applicant must produce any one of the following) 

1. Applicant’s maintenance bill
2. Applicant’s electricity bill
3. Applicant’s property documents

• Income proof 

1. Pay slip from current employer for the last three months
2. Form 16

• Continuity of job proof (Applicant must produce any one of the following) 

1. Certificate of employment from current employer
2. Job appointment letter from current employer
3. All relevant experience certificates

• Salary proof 

1. One year’s bank statement of the account in which your salary is credited

• Property documentation 

1. Sale deed of the property
2. Maintenance bill of the latest month
3. Share certificate
4. Sanction letter that is provided by the existing banker

• Processing cheque that is required to process the loan 
• Any proof of investment, if any (Assets, fixed deposits, mutual funds, etc.)
• Passport size photograph

For self-employed individuals 

• Photo ID proof (Applicant must produce any one of the following)

1. Applicant’s driving license
2. Applicant’s PAN card
3. Applicant’s passport
4. Applicant’s voter ID 

• Address proof of residence (Applicant must produce any one of the following) 

1. Applicant’s ration card
2. Applicant’ electricity bill
3. Applicant’s phone bill
4. Any utility bill of applicant
5. Applicant’s passport

•  Ownership of residence proof (Applicant must produce any one of the following)

1. Applicant’s maintenance bill
2. Applicant’s electricity bill
3. Applicant’s property documents

• Proof of business 

1. Saral copy of the last 3 years
2. Copy of tax registration, if any
3. License of company registration
4. Shop establishment act

• Income proof

1. Income tax returns for the last three years
2. Copy of audit report, profit and loss statement, balance sheet, etc.

• Copy of bank statement for the last year of both current and savings account
• Property documentation

1. Sale deed of the property
2. Maintenance bill of the latest month
3. Share certificate
4. Sanction letter that is provided by the existing banker

• Processing cheque that is required to process the loan
• Any proof of investment, if any (Assets, fixed deposits, mutual funds, etc.)
• Passport size photograph

 

Things to Remember When You Buy a Second Home

It is a great feeling to own a home when you already have one. This means you have earned and saved substantially to afford two houses, which is indeed a matter of great pride and joy. However, when you are buying a second home, your reason or purpose of making that huge investment should be clear to you. You must pick a location for buying the property as per your need of the property.

If you already have a house and are buying another property as your weekend home, it suggests that the avenue will be treated as a recreational place. So, when you have a house in the city, you will most likely want to buy your weekend home away from the hustle and bustle of your everyday life. This is the place where you would go to take a break and pursue your habits like playing, reading, or doing something for which you do not find time in your daily schedule.

There are 2 reasons for which you can invest in buying a second house:

• To rent out the property or use it for your own requirements.
• As an add-on investment for the long run.

Why do you need a second house?

Many people think that you must only buy a second property if you can make use of it properly by staying in there for a substantial amount of time. Some think that a second house can be treated as a vacation spot where you can stay with your family and enjoy in peace, away from the noisy city-life. However, another group of buyers think a second house can be purchased for generation of income.

Return of Investment prospects of the second house:

The Return of Investment prospects of a second house depends on certain factors mentioned here:

• The location where the second house is situated.
• Rental demand in that particular area.
• Overhead costs like car parking charges, maintenance costs, etc.
• Physical and social infrastructure of the area.
• Frequency of public transport availability.

How to pick a second home that meets your requirements:

When you plan to purchase a second house, one of the key factors that must be remembered is the location of the property. The second home should not be extremely far from your primary home as it might be difficult for you to commute from one house to another. Another thing that plays a major role when you buy the second property is the cost of the second house.

As a buyer, you must understand the supply and demand in the neighbourhood where you intend to buy the property. If rental income is your primary objective after buying the second house, you should purchase the property in an area where a lot of people choose to stay on rent like close to technology parks, office areas, schools, etc.

Bottom line:

It is a great feeling to buy a house once, but to buy another one is a matter of sheer pride and honour. Do a good amount of research before you choose your second home and buy the property that meets your needs and requirements of investing in another house.

Know home loan process.