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home loans
Home Loan Types  Tax Benefits
Interests & EMI’s Calculators
Required Documents
 
Home Loan Types
There are variety of home loans available in India, offered by various financial institutions like Banks and Housing Finance Companies, They are
  • Home Purchase Loans: These are the basic home loans for the purchase of a new home.
  • Home Improvement Loans: These loans are given for implementing repair works and renovations in a home that has already been purchased by you.
  • Home Construction Loans: These loans are available for the construction of a new home.
  • Home Extension Loans: Are given for expanding or extending an existing home for example addition of an extra room, etc.
  • Home Conversion Loans: Are available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through a home conversion loan, the existing loan in transferred to the new home including the extra amount required, eliminating the need for pre-payment of the previous loan.
  • Land Purchase Loans: These loans are available for purchase of land for both home construction and investment purpose.
  • Bridge Loans: Bridge loans are designed for people who wish to sell the existing home and purchase another. The bridge loan helps to finance the new home, until a buyer is found for the old home.
  • Balance Transfer: Balance transfer loans help you to pay off an existing home loan and avail the option of a loan with a lower rate of interest.
  • Refinance Loans: These loans help you pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present home.
  • Stamp Duty Loans: These loans are sanctioned to pay the stamp duty amount that needs to be paid on the purchase or property.
  • Loans to NRIs: These loans are tailored for the requirements of NRIs wishing to build or buy a home in India.
Tax Benfits

A home loan helps you reduce your tax burden besides offering the pleasure of owning a house and living in it.
Home is where the heart is, and in today's world, home is what takes up a good part of your income as well. Most people, young and old, have equated monthly installments to worry about, which makes home loans a subject of pressing concern.

Coming to the benefits, apart from the obvious one of having the pleasure of owning a house in due course of time, taking a home loan is a great way to reduce your tax burden. Resident Indians are eligible for tax benefits on principal and interest components of a loan under the Income Tax  Act, 1961. The tax deduction can be claimed on interest payments subject to an upper limit of Rs 1, 50,000 for a financial year.

Moreover, you can get added tax benefits under section 88 on repayment of principal amount up to Rs 20,000 per annum which can further reduce your tax liability by Rs 4,000 per annum (tax rebate of 20 per cent on the principal repaid, subject to a principal ceiling of Rs 20,000 per year).

Both principal as well as interest of home loans attract tax benefits. With effect from 1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965:

Principal amount of repayment of loan along with other savings such as PF, PPF and Life Insurance premium etc up to a maximum of Rs 1, 00,000/- will be eligible for deduction from gross income.

Interest paid on loan after completion of construction will be deductible from the tax for the income earned on property. Benefits aside, most of us still have to grapple with the fine print of a loan agreement.

Other Costs Involved:

Home loans are usually accompanied by the following extra costs:

  1. Processing Charge: It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required by you cannot be less than the processing fee.
  2. Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks / companies, which is usually between 1% and 2% of the amount being pre-paid.
  3. Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.
  4. Miscellaneous Costs: It is quite possible that some lenders may levy a documentation or consultant charges.
  5. Registration of mortgage deed.
Required Documents

The minimum requirement in getting a home loan is having a particular source of income and/or security.
The basic documents required for any basis loan is as follows.

  • Income Proof
  • Residence Proof
  • ID Proof
  • Age Proof