Buying a home is a major milestone in life, but not everyone has the financial resources to pay for it upfront. This is where a Home Purchase Loan comes in. It provides individuals with the necessary funds to buy a new or resale property and allows them to repay the amount in monthly installments (EMIs) over a fixed tenure.
What is a Home Purchase Loan?
A Home Purchase Loan is a type of secured loan offered by banks, financial institutions, and housing finance companies. It helps borrowers purchase a ready-to-move-in property, an under-construction house, or a resale home. The property itself acts as collateral until the loan is fully repaid.
Features of a Home Purchase Loan
- Loan Amount – Depending on your eligibility, lenders offer up to 75%–90% of the property’s value.
- Flexible Repayment Tenure – You can choose a repayment period ranging from 5 to 30 years.
- Interest Rates – Offered at fixed or floating rates, varying from lender to lender.
- Tax Benefits – You can claim deductions under Sections 80C and 24(b) of the Income Tax Act.
- Processing Fees – Lenders charge a processing fee (typically 0.5%–2% of the loan amount).
Eligibility Criteria for a Home Purchase Loan
Lenders evaluate several factors before approving a home purchase loan:
- Age Limit – Typically 21 to 60 years for salaried individuals and up to 65 years for self-employed applicants.
- Credit Score – A 750 or above score increases the chances of loan approval.
- Income Stability – A steady source of income ensures the ability to repay the loan.
- Employment Type – Both salaried and self-employed individuals can apply.
- Property Verification – The property must have clear legal ownership and approvals.
Documents Required for a Home Purchase Loan
To apply for a home loan, you need to submit the following documents:
- Identity Proof – Aadhaar Card, PAN Card, Passport, or Voter ID
- Address Proof – Utility bill, Passport, or Rent Agreement
- Income Proof – Salary slips (for salaried), ITR and business records (for self-employed)
- Bank Statements – Last 6 to 12 months
- Property Documents – Sale Agreement, Title Deed, and Approved Building Plan
Types of Interest Rates for a Home Purchase Loan
- Fixed Interest Rate – The rate remains unchanged throughout the tenure.
- Floating Interest Rate – The rate fluctuates based on market trends.
Tax Benefits on Home Purchase Loans
A home purchase loan offers tax deductions under:
- Section 80C – Up to ₹1.5 lakh on principal repayment.
- Section 24(b) – Up to ₹2 lakh on interest paid annually.
How to Apply for a Home Purchase Loan?
- Compare lenders – Check interest rates, processing fees, and terms.
- Check eligibility – Use online loan eligibility calculators.
- Submit documents – Provide all required documents for verification.
- Loan approval – If eligible, the lender sanctions the loan.
- Disbursement – The loan amount is transferred to the seller or builder.