Stipulations To Be Satisfied For Housing Loans

Housing loan market is a highly competitive field. Each Bank/ Financial institution stipulate their rules based on the targeted group and also based on the past records of defaults. Normally conditions stipulated vary from Bank to Bank. Similarly, the conditions may be different for different segment of customers. The stipulations for salaried class may be different from that for the business community. Similarly, there can be difference in the stipulation between residents and non-residents.

The conditions vary from Bank to Bank. Housing Loan is a long term commitment. Hence, it better to shop around for a while before finalizing on the lending institution.

Some of the major stipulations are with regard to repayment capacity, age, margin norms, clubbing of income of close relatives, CIBIL Score etc. Also the legal title of the seller and his absolute right on the property will have to be confirmed.

1. Repayment Capacity: The primary focus of any institution is ensuring safety of the amount lent. Though Banks insist on creation of mortgage of the property acquired, they are more concerned about timely repayment of the installments, as they are in the business of mobilization of funds and profitable deployment. Subject to certain conditions, income of spouse, parents etc are also allowed to be considered for assessing repayment capacity and fixing the loan limit.

2. Age : Housing loan is a long term commitment. The income generating capacity of a salaried employ may vary from that of a business man. Hence the period of loan is fixed based on the age of the person availing of the loan and his income generating capacity. It is always advisable to avail the loan at an young age to ensure maximum tenure and lower EMI.

3. Margin Norms: Banks never lend the full purchase consideration. Certain percentage of the amount to be given to the seller for transfer the ownership has to be borne by the buyer. This portion is known as margin portion. Margin amount to be brought in by the buyer vary from 10 -25% of purchase consideration, depending upon various aspects including the central bank stipulation. Again, Banks take independent views with regard to financing registration charges and other related expenses.

4. CIBIL Score : CIBIL is registry that maintains the record of repayment history in respect of earlier availed loans. Minimum cut off limit score is stipulated by banks.

5. Title of the Property: The seller has to have an absolute title to transfer the full ownership to a new buyer. To ensure this banks utilize the service of advocates.

6. Interest Rate: Since the Housing loan being a long term commitment, even a minor variation in rate of interest can result in a major impact over the long period. Housing sector being a priority sector, Banks offer the best rate for Housing Loan customers. Banks normally adopt a mechanism called rating system to finalize the rate applicable for each borrower. This takes into consideration many aspects like the value of property acquired, source of income, age of borrower, quantum of margin brought in, CIBIL Score, family and employment history, educational qualifications etc.