What is Home Loan: Everything about Housing Loan

Updated: Feb 18, 2022, 18:42 ISTShare:

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Buying a house is one of the biggest dreams come true for most people and is an extravagant affair altogether. Imparting life to such a dream requires a lot of effort from the buyers’ end and the best one can do to accommodate a home in their budget is through a Home Loan.

Home Loan Definition

The Home Loan meaning can be understood as a financial product offered by banks to help you buy, build or renovate a house. You are allowed to borrow a certain amount and repay it in monthly instalments (EMIs) over a set time period with interest.

Important Terms of Home Loan

1.Principal Amount

This is the total loan amount approved and disbursed by the bank.

2.Loan-to-Value Ratio

It means how much of your property's value the bank can finance. Banks may fund a specified percentage in accordance with RBI rules, while the remainder must be paid as a down payment.

3.Rate of Interest

It’s the percentage charged by the bank on your borrowed amount, which may vary based on tenure and loan type.

4.Tenure

It’s the time period within which you must fully repay your loan.

Purpose of Home Loan

A Home Loan can be opted for any of the following purposes:

• To buy a house/flat - under construction or constructed

• To buy a plot of land where you can construct the house

• Construction of the house on a land you already own

• Renovation, extension and repairs to an existing house

• Buy an independent house, along with the land.

There are many Public and Private Banks and Housing Finance companies that offer Housing Loans, where you borrow money to purchase the house of your choice and repay the loan in monthly instalments.

You can get up to 75% - 90% of the house’s market price in the form of financing. The lender will hold the house until you completely repay the loan. The remaining amount has to be paid for by the borrower from his/her savings and constitutes the owner’s equity or stake in the property. So, this is an important factor to consider and plan for when you are applying for a Home Loan.

Eligibility Criteria for Home Loans

When you apply for a Home Loan with ICICI Bank, there are a few important eligibility conditions. These are given below:

• Employment Type: Salaried or self-employed individuals

• Age: 20 to 65 years for salaried and 21 to 70 years for self-employed individuals

• Citizenship: Indian residents

• Income Proof: Must have a stable and regular income

• Buy an independent house, along with the land.

Housing Loan Process Application

The application process for a Home Loan from ICICI Bank is simple and can be done digitally:

1. Online application – Many of the banks/financial institutions have created an online application section on their website. If you have chosen the financier, you can opt for a digital and contactless application. The required documents for the assessment too can be uploaded and submitted online.

2. Branch – Visit the Home Loan section on the ICICI Bank’s website and click to apply. You will be redirected to a new page

3. Fill out the details as asked by the bank, upload important documents and submit the form

4. Pay the loan processing fee

5. The bank will then review your details and the application form to grant you the eligible loan

Upon applying, the bank collects the required documents from you. It initiates the processing of your application, including checking of CIBIL score, the value of the asset, eligibility calculation based on your income and liabilities, and more.

After evaluating and verifying all the documents, the banks decide to approve or reject the loan.

Housing Loan Documents Required

The following documents are required when you apply for a Home Loan, along with the application. This may vary based on the institution you are applying to, however, broadly the following documents are required based on your profile/income source.

Salaried Customers	Businessmen/Non-Salaried Professionals
Application form, with photograph	Application form, with photograph
Identity and Residence proof. PAN Card issued in India is no longer considered a valid proof of identity.	Identity and Residence proof. PAN Card issued in India is no longer considered a valid proof of identity.
Last 6 months’ Bank Statements	Last 6 months’ Bank Statements
Processing fee cheque	Processing fee cheque
Latest Salary Slip	Educational Qualifications Certificate and Proof of Business
Form 16	Business profile and previous 3 years Income Tax returns (self and business)
	Previous 3 years’ Profit/Loss and Balance Sheet

Benefits of Availing a Home Loan

A Home Loan offers affordable EMIs, tax benefits, faster ownership, financial flexibility and attractive interest rates for convenient home financing. Below are the various important benefits of getting a Home Loan:

• Due diligence of property:

Property’s legal and ownership documents are verified before approving a loan, reducing fraud risk and ensuring safe ownership.

This due diligence check from the bank’s end will reduce the risk of you being scammed. If the bank approves the property, that means you and your house are safe.

• Tax benefits:

Enjoy tax deductions on both the loan's principal and interest under Sections 80C and 24(b), reducing your taxable income.

• Lower interest rate:

The Home Loan interest rate is much lower, as compared to any other loan types available.

• Long repayment tenure:

Unlike any other loans, Home Loans come with longer repayment tenure, as much as 25 - 30 years. This, owing to the significant loan amount one will have to borrow to purchase a house.

• Top-up opportunity:

Easily get an additional loan on your existing Home Loan at attractive rates for renovation or personal needs.

Conclusion

A Home Loan can help you accommodate your dream home in your budget. You can get up to 75% - 90% of the house’s market price, in the form of financing. Availing a Home Loan has gotten easier than before, thanks to Internet Banking and Mobile applications.

There are multiple benefits of availing a Home Loan and funding your property through a loan. You can enjoy lower interest rates and longer tenure, reducing your monthly outflow. You will also enjoy tax benefits on the interest and principal amount repayment. When you go through a bank to purchase a house, the bank will conduct thorough checks on the property from a legal perspective and check if all the documents produced are valid. If the bank approves the property, that means you and your house are safe.

FAQs

What is the meaning of Home Loan?

A Home Loan is money borrowed from a financial institutio to buy or build a house. You can repay the loan in EMIs, including interest, over a fixed period, making homeownership more affordable and manageable.

Do we get a 100% amount as a Home Loan?

No, the banks may not offer 100% of the total cost as a Home Loan. You can get up to 80% of the property’s value , depending on factors such as eligibility, income, credit profile and property details. The remaining amount must be arranged through your own contribution or other funds.

What are the benefits of a Home Loan?

A Home Loan makes it easier to own a house without paying the complete cost up front. It offers tax benefits on principal and interest, flexible repayment options and help you build an asset while maintaining financial stability.

Is Property Loan & Home Loan the same?

Property Loan and Home Loan are different. A Home Loan is taken to buy or construct a new house, while a Property Loan (Loan Against Property) allows you to use an existing property as security to avail funds for personal or business needs.