What is a Home Loan?
A home loan is a secured loan provided by banks and financial institutions to purchase or construct a residential property. The property serves as collateral for the loan.
What are the tax benefits of a Home Loan?
Under Section 80C, you can claim deduction up to ₹1.5 lakh on principal repayment. Under Section 24(b), you can claim deduction up to ₹2 lakh on interest payment for self-occupied property.
What is the maximum home loan tenure?
Most banks offer home loans for a maximum tenure of 30 years. However, the tenure depends on your age, income, and repayment capacity. The loan typically needs to be repaid before you reach retirement age.
How much down payment is required?
Banks typically finance up to 75-90% of the property value. You need to arrange the remaining 10-25% as down payment from your own sources. Higher down payment can help you get better interest rates.
Can I prepay my home loan?
Yes, you can prepay your home loan partially or fully. Most banks don't charge prepayment penalties for floating rate home loans. Prepayment reduces your principal and saves on interest.
What is the difference between fixed and floating rates?
Fixed rate remains constant throughout the loan tenure, while floating rate changes with market conditions. Floating rates are generally lower initially and are linked to the bank's base rate or MCLR.
What documents are required for a home loan?
Typically required documents include: Identity proof, address proof, income proof (salary slips/ITR), bank statements, property documents, and photographs. Self-employed individuals may need additional business documents.