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Home Buying Process | 6th January, 2025
A home loan is a loan taken by an individual to finance their home. Like any other loan, home loans are offered by banks and financial institutions for a set tenure at a rate of interest. The borrower must repay the loan in the form of Equated Monthly Installments or EMIs every month as the name suggests. Depending on the loan amount, interest rate, and repayment schedule repayment tenure may go up to 30 years.
Eligibility
The eligibility criteria for home loans change with the financial institutions. However, certain criteria remain the same for all. The minimum and maximum ages that are eligible for home loans are 18 to 70. The applicant can be salaried or non-salaried with a credit score of 750 and above. They should have a minimum work experience of 2 years. They can be a permanent Indian resident or an NRI (non-resident Indian).
Home Loan Repayment
According to the home loan guide, the home loan is repaid in the form of equated monthly installments (EMI), paid every month for a set period (years) till the loan is repaid. The EMI amount is calculated by adding the principal amount of the loan with interest and divided into the number of months for which the payment is made to pay the loan completely.
So here is how it is calculated:
So the EMI is calculated as
EMI = [ P x r x ( 1+ r)^n ] / [( 1 + r) ^ n-1 ]
Where:
Factors Affecting Home Loan EMIs
Current Home Loan Rates
Home loan rates vary from 8 % to 10 % depending on the lender or bank, the borrower’s profile, the amount, and the tenure. State Bank of India, ICICI Bank, HDFC bank, etc are some major banks, and L&T Housing, Aditya Birla Capital, GIC Housing, etc are some of the major financial institutions that offer home loans.
Tax Benefits
Indian residents can avail themselves of the following tax benefits under the Income Tax Act:
Some Useful Tips
These are the important pointers from our home loan guide to help you when taking out a loan to finance your new home.
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