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FAQ’s – Regarding Housing Loans

 Q : How much housing loan can one get ?

A: Housing loan will be sanctioned depending upon your repayment capacity and according to your income. Your spouse”s income can be included, if you want to increase the amount of your loan. The maximum loan that can be sanctioned varies with housing finance companies and ranges from Rs.10 lakh to Rs.1 crore.

Q : What are the tax benefits that are available if one avails of housing loan?

A : Tax benefits are available on both the principal and interest components of the loan as per the income tax act. The upper limit of the amount of deduction of interest repayment allowed from your gross total income is now Rs. 75,000 p.a.. Besides, Sec. 88 offers you tax benefits for principal repayments. The principal repayment amount included in the overall limit of Rs 60,000 offered by this section is Rs 10,000.

 

Q : What is reducing balance ?

A : Reducing balance is the method of reducing the principal amount already paid, from the outstanding loan amount. Every time you make a payment, you pay interest on that part of the original principal sum that has remained un-repaid till then.

 

Q : Which loan is cheaper the monthly reducing balance or the annual reducing balance ?

A : The best way is to compare the EMIs and the tenures of the two home loans. The loan carrying the lower EMI for the same tenure is the cheaper option.

 

Q : What is a fixed rate home loan ?

A : A fixed rate home loan, is a loan where the interest rate is constant over the entire tenure of the loan tenure.

 

Q : What is a floating interest rate ?

A : A floating interest rate loan, is a loan where the interest rate payable is linked to the market rate like the bank lending rate. As the bank rate varies, the interest rate payable by you will also rise and fall. Hence you will have to bear the risk of interest rate fluctuations, the floating interest rates offered are slightly lower than the fixed interest rates.

 

Q : What is a home Extension Loan ?

A : A home extension loan is a loan which helps you to meet the expenses of any alteration like extension/expansion or modification of your home. You can avail of a home extension loan, after obtaining the requisite approvals from the municipal corporation.

 

Q : What is home Improvement Loan ?

A : A home improvement loan is one that is made available for you to do certain external work like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting, etc.

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