Owning a place that you can address as your own is something many of you aspire to. It is not uncommon to avail of a home loan to attain your dream of becoming a homeowner. We all look at factors like EMIs, rate of interest, processing charges, repayment tenures etc., and do a lot of research too that practically makes us an expert on this topic! However, there are a few things regarding the home loan that we bet you may not know about. These include:

 Not all are eligible for a joint home loan offer

Individuals often avail of joint home loans to be eligible for a bigger loan amount. And while many individuals – parents, married couples, brothers, and children are permitted to avail of a home loan together, banks like HDFC Bank or Axis bank home loan and NBFCs like Tata Capital Home Loan do not provide this facility to everyone. We bet you didn’t know that banks usually do not offer home loans to friends, sisters, and unmarried couples.

Your home and your loan

Now, this is a situation that you may find yourself in. Assume your spouse, and you decide to purchase a home together. You hold adequate funds to cover half home cost and will prefer not to avail of a home loan. However, your spouse requires availing of a home loan to pay the share. Did you know if your spouse applies for the home loan, the bank or NBFC will ask you to become a co-applicant also?

As you also are going to become one of the homeowners, you also must become the co-borrower. Even if you are contributing the half amount from your own pocket and do not technically require any loan, the bank still will insist on you being a co-borrower.

If the flat or house is to be registered in 2 or more individuals’ names, banks need all the property co-owners to be the loan’s co-borrower.

Women power

Do you know if you are a woman, you get entitled to a little less rate of interest when you apply for a home loan? Yes, that is right. So, what to do if you are not a woman and want to attain the benefit of a reduced interest rate? Well, you approach your mother or wife to apply for a home loan along with you. But note that the woman must be the primary home loan applicant to get the benefit of a lower interest rate on the home loan.

Tax benefits

When it is about tax benefits, a home loan endows you the benefit under not just 1 but 2 sections of the IT Act. Yes, that is correct. When you avail of a Axis Bank Home Loan, you can get the tax deduction as per Section 80 C for principal proceeds of your home loan for up to Rs 1.50 lakh and under the Section 24 (b) for interest component for up to Rs 2 lakh. Additionally, if you avail of a joint home loan, then both the applicants can claim tax deductions. So, it takes the overall tax deduction amount up to Rs 3 lakh for the principal constituent and to Rs 4 lakh for the interest component.

Give a few and take a few.

Did you know that banks give you a loan amount of just up to 75 – 90 percent of the home value? The rest of the amount, i.e., 10 – 25 percent must be paid by you. Thus, if you are planning to buy a home, begin with your saving journey for a down payment right away.

If you are looking for a smart and safe way to save your money to form your down payment corpus for a home loan, then you can try a fixed deposit or recurring deposit. They are one of the safest investment instruments that aim to preserve your capital and offer satisfactory interest rates. You can also put your money in a high yield savings bank account. Open your savings account in small savings banks or private banks to avail higher interest on your parked amount.

How fixed exactly are fixed interest rates?

When you place an application for a home loan, you usually opt for either a floating or fixed interest rate. However, do you know that when you avail of the fixed rate of interest, it is usually fixed for a particular number of years & not for the whole repayment tenure?

Important tip: Ensure to go through the home loan agreement carefully to understand the terms and conditions of the home loan.

Mostly, it is advisable to opt for the floating rate instead of the fixed rate as floating interest rates are transparent in nature and linked with RBI’s repo rate.

Rate of interest and then the principal constituent

Do you know when you begin to repay your EMIs on a home loan, you initially repay the interest component and then the principal component? Thus, in the initial years, interest constituents are high. For instance, if you were to avail of a home loan of Rs 30 lakh for a repayment tenure of 20 years, at a rate of interest of 10 percent p.a., the EMI component will be Rs 28,951. In the initial years, the interest component will equate to Rs 2.48 lakh, and the principal component will equate to Rs 41,022.

Do you want to check how much the principal and interest component on your home loan will be? For this, you can use a home loan EMI calculator available online.

Tip: If you are planning to opt for prepayments in the future, it is best you do in your initial years when your interest constituent is high.

Understanding all about home loans may appear like a tough task, but it is simple if you read about the deal with full concentration. Also, ensure to compare amongst various home loan providers before applying for a home loan. An in-depth comparison amongst lenders would allow you to select the correct one as per your suitability and preference. Ensure to opt for the one providing the lowest rate of interest and offering optimal terms and conditions.