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Home Loan

The loan-amount for which one approaches a bank to buy a home is called home loan.

Down Payment

Banks want a loan seeker to contribute certain amount from his end while applying for home loan. It varies between 15 percent and 30 per cent of purchase price depending on the bank and loan seeker’s credit history / income.

Loan Eligibility

The amount that a bank lends to customers after considering their gross salaries and credit history. Each bank has a certain criterion to determine loan eligibility from loan seeker’s net monthly income.


It means joint loan applicant. Co-applicant can be father, mother, son, spouse or brother. A co-applicant, who is earning regular income, increases the prospects of loan eligibility.


The period for which one applies for home loan is home loan tenure. Tenure for a home loan could vary between 10 years and 30 years.

Interest Rates

  • a) Fixed interest rate

In this type of home loan, interest rate remains same for the entire tenure of a loan. A few banks give the option to switch either fixed or floating interest rate after completing five years of loan.

  • b) Floating interest rate

Interest rates are linked to prime lending rates and change frequently during the tenure of loan.

Equated Monthly Instalment (EMI)

This is the amount that a borrower has to repay to the bank every month for a certain period of time (loan tenure) and this depends on the interest charged on your loan.

Processing Fee

Banks charge certain amount of fee to process the home loan. It varies from bank to bank. Few banks charge no processing fee whereas others may charge 0.3 per cent to one per cent of loan amount.

Pre-payment Charges

There are bank charges involved if one pre-pays the loan amount. Different banks charge different pre-payment amounts. Generally, pre-payment charges vary between 0.5 percent and 2 percent of the prepaid amount.

Types of Home Loan

  • Land Purchase Loan
    Meant to buy a plot of land on which a borrower wishes to construct her/his house.
  • Home Purchase Loan
    This loan is used to finance the purchase of a new residential property or an old house from its previous owner.
  • Home Construction Loan
    Such a loan is availed by people who want to build a house according to their wishes.
  • Home Extension Loan
    This loan is used to expand one’s existing house.
  • Home Improvement Loan
    Made for those who own a house but lack the funds to renovate it.
  • Home Conversion Loan
    Availed by those who have purchased a house by borrowing a home loan but later, they wish to buy and move to another house.
  • NRI Home Loan
    NRI home loan is a home loan variant for non-residents who wish to buy a residential property in India.
  • Balance Transfer Loan
    Used when an individual wishes to transfer his home loan from one bank to another.
  • Stamp Duty Loan
    Such a loan is provided to pay off the stamp duty charges while purchasing a property.
  • Bridged Loan
    It’s a short term loan for people who previously own a residential property but they are planning to buy a new house.

Tax benefit against Home Loan

The amount paid as Repayment of Principal Amount of Home Loan is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C keeps varying in every financial year. To know more on tax benefit against home loan, consult your finance advisor/chartered accountant.

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