Reliance Home Finance-Faqs

Choosing a Home Loan

What are the different types of home loans available?

There are various kinds of customized home loan products available to suit varied customer needs. Whether you require funds to buy a new home or renovate the old one, there are solutions for all your needs.

Some of the most popular loan products include:
1. Home Purchase loan:This home loan offers funding for purchasing a new home. This is one of the most commonly sought after loan products and is available at competitive interest rates with most lenders.
2. Home improvement/ extension loan: This home loan helps you to carry out partial repair work, improvement, renovation or extension in your home. You can even avail this loan for furnishing your home with furniture items, electronics or kitchen cabinets etc. The lender disburses this loan in full or in instalments depending on the work in progress.
3. Home Construction Loan: This home loan is specifically used for constructing a home on a plot that you own.
4. Balance Transfer Loan: This loan is available for people who wish to shift their outstanding loan to another bank or lending institution with more favourable terms, conditions and interest rates. It’s like taking a new loan in order to repay your existing loan.
What are the tenure options available for a loan?
The loan tenure offered varies from lender to lender. The usual tenure ranges from 3 years to 20 years.
Should I borrow from a public sector or a private sector lender?
The financial sector has become extremely competitive with lenders vying with each other to attract customers with a wide array of products. Any lender, public or private, which gives you the best deal from your perspective, would be the ideal lender for you.
What are the important points to be considered while applying for a loan?
Some important points worth giving a thought to before applying for a loan are:-
1. Loan amount:Identify the loan amount you require after assessing your existing finances.
2. Down payment:The amount of down payment to be made differs from lender to lender. Assess your availability of funds against the amount of down payment to be made, before applying for the loan.
3. Cost of loan:Compare the interest rates across various lenders and get detailed information on other costs involved.
4. Interest rate - fixed or floating:Your loan costs and EMI also depend heavily on whether you choose a loan on a fixed interest basis or floating interest basis. While a fixed rate is usually higher than a floating rate, it enables you to plan your outgo better.
5. Tenure: Decide on the tenure of your loan. The longer the tenure the lower will be the EMI and the higher will be the amount that goes towards interest payment.
6. Eligibility: Understand the eligibility criteria of various lenders. Apply to a lender where you are most eligible to get a loan.
7. Turnaround time: Enquire about the time various lenders will take to approve and disburse your loan.
8. Loan Agreement: The loan agreement describes the terms and conditions which are to be complied with in the future. Understand it and resolve all your doubts to satisfaction before signing it.
If I have the funds, should I yet opt for a loan to fund my house purchase?
If you have the funds, it may still be more prudent to opt for a home loan, if the funds can be invested in avenues which could deliver a better return than the outgo on the loan. The returns generated can not only service the home loan, but also add to your wealth. Further, the tax benefits offered by home loans help reduce the effective cost significantly. Further, since the lender does a thorough check on the title, you can rest assured that the papers would be in order.
What is the effective cost of a home loan?
The interest paid is not the only cost attached to a home loan. Depending on the lender, in addition the loan may also demand a processing fee, stamp duty charges, registration charges, etc. Further, in case of late payment, prepayment, change in the repayment schedule (interest rate type, EMI date, etc.) additional account statements, etc. may also attract a charge.

Eligibility for loan:

What factors contribute to my loan eligibility?
The basic parameter for a home loan is your repayment capacity, which depends on your age, stability of income, your assets and liabilities, other loan obligations and existing relationship, if so, with the lender. The aspects are applicable irrespective if you self-employed or salaried.
How can I improve my eligibility for a higher loan amount?
You can improve your eligibility for a higher loan amount by including a co-applicant who is earning a steady income. You can also give additional information about your other income sources, if any, such as agriculture, rental, inheritance, etc.
Should I add a co-applicant?
A joint applicant positively affects your loan application. If you add a co-applicant, his/her income too is considered while arriving at the eligible loan amount. You can include your spouse and relatives such as parents or children, provided they earn a steady income. Also, most of the lenders make it mandatory for the co-applicants to be co-owners in case of home loans.
What is a ‘CIBIL check’?
Credit Information Bureau (India) Limited (CIBIL), is a repository of credit information and payment records of borrowers. Most lenders share the information of their customers with CIBIL to ascertain the liability and payment track record. CIBIL provides information on existing debts and past payment records of the borrowers to the lenders. This helps the lender in taking an informed decision. Borrowers with a good credit history are able to get their Loans sanctioned easily while others may have to bear a higher cost/provide additional security or have their application rejected altogether.
Would CIBIL be having details of all my borrowings?
Yes. Being a central repository of credit information and payment records of borrowers, repayment details of any loan that you would have taken would be with CIBIL. Thus, a negative CIBIL report, would lead the lender to deduce that you do not have a clean credit history, and that you may default on the loan that you wish to acquire. Hence, to safeguard itself, it may impose a higher interest rate on the loan, ask for additional security or reject your loan application.
My earlier application(s) for a home loan have been rejected? Should I apply again?
Rejection of a loan application can be due to several reasons such as lack of proper documentation, your repayment capacity, inadequate income to service the loan, etc. It would be advisable to detect the reason. Once you know the reason, and have been able to rectify it, then, you should apply once again.

Loan for Property

Can I take a home loan for constructing a house?
Yes, many lenders offer loans for constructing a house. The lender usually disburses this loan in instalments, depending on the schedule of work in progress.
Can I sell or rent the property on which I have a taken loan?
Yes, you can rent the property on which you have taken a loan anytime. You may also sell property on which a loan is taken after securing a consent letter from the lender which should state the amount at which the loan is considered ‘fully paid’. Alternatively, some lenders may allow you to sell the property without completely paying off the loan if you are able to transfer the loan to your home buyer, i.e. the credibility of the buyer of your home allows him/her to take over the pending loan in his/ her name. In this case, you can take the sale proceeds net of the loan repayment, from the buyer of your house.
Will I get a loan to meet the entire purchase cost of my home?
No. It is mandatory for you to meet a portion of the cost. The minimum quantum differs from lender to lender.
To avail a home loan, do I need to mortgage my property in favour of the lender?
Yes, the property you buy from the loan would serve as the collateral for your loan until the entire loan is repaid.
I have already availed a home loan? Can I apply for another home loan?
Yes, you can apply for an additional home loan to fund the purchase of your second home. Before approving your loan, the lender will once again assess your repayment capacity, to service the additional loan obligation.
I am presently servicing one loan. Will it affect my current application? If yes, then how?
If you are presently servicing a loan, it will bring down your repayment capacity accordingly. In addition, your adherence to the repayment schedule will have an impact on your new loan application.
If I purchase a plot of land and wish to construct a house on it, can I opt for a home loan?
Yes. Home loans are available for construction of a house on a plot of land
Is it possible for me to get an in-principle approval for a home loan which I can choose to avail later?
Yes (this premise would generally be when you have yet not found your dream home). The lender will approve the loan amount in advance and issue a letter to you stating the approval of the loan. The loan amount will depend upon various parameters such as your income, past credit history, existing wealth build-up, etc. The loan amount will be finally disbursed to you when you have found your home, after the technical property check and property verification.
Should I opt for higher EMI for a shorter period or smaller EMI for a longer tenure?
The repayment schedule that you choose depends on your repayment capacity. A higher EMI will make the repayment period shorter while a smaller EMI will make it longer and will also make the loan costly. Calculate how much you can comfortably repay every month by taking all your other financial responsibilities into consideration and accordingly choose your repayment schedule.
Can I transfer my loan to another lender if he is offering a lower interest rate?
You can transfer your loan from one lender to another provided you comply with certain terms and conditions stated in your loan agreement. However, before considering a balance transfer, do discount for the fact that your existing lender may charge you a prepayment free and a switching fee, whereas the new lender may levy the processing fee for the new loan. If the interest rate differential between the lenders does not account for these costs, a balance transfer will not be a viable option.
Should I borrow the sum that I am eligible for or the sum that I need?
A loan, for whatever amount it may be, is a liability which you have to repay. Therefore, it is always advisable to borrow only what you need. This will help you to keep the financial burden of the loan to the minimum. However, if you feel that taking a loan will enable you to deploy your own finances and receive a return that more than compensates you for the outgo on the loan, you may consider that option too.

Repayment of Loan

How do I repay the loan?
The most convenient way of repaying a loan is through equated monthly instalments (EMI) either through post dated cheques to the lender or by giving your bank standing instructions to transfer the monthly instalment directly ( ECS service) into the lender’s account. You may also pay a lump sum amount to prepay your loan; however this may involve additional charges.
What are the various fees and charges involved?
In addition to the interest rates, the lender charges various costs and fees which increase the effective cost of your home loan. The fees and charges typically consist of loan processing charges/non refundable processing fees, stamp duty charges, asset verification and legal charges, account transaction charges, amortization schedule charges, cheque bounce and swapping charges, late payment charges, prepayment charges, charges for changing from fixed to floating rates of interest, etc. These charges vary from lender to lender and are sometimes negotiable.
What is an EMI?
An EMI or an equated monthly instalment is a fixed instalment paid to the lender every month in order to repay the loan taken. EMI comprises of two components:
1. Principal to be repaid
2. Interest component
In the initial phase of the repayment of loan, the major part of EMI consists of interest payment but as you keep on paying EMI, the interest component reduces and principal portion increases.
How is EMI calculated?
To calculate an EMI payable, various factors are considered such as the loan amount, loan tenure and interest rate payable.
What is a Pre EMI interest?
In case of a construction loan or home purchase loan where the house is not complete and is under construction, the lender disburses the loan as part payment or in instalments. For this part payment or instalment loan, only the monthly interest is payable only on the disbursed amount. This monthly interest is called pre-EMI interest.
What is a balance transfer advantage?
Balance transfer advantage is a form of home loan whereby you transfer your loan to some other lender who offers you better terms and conditions with lower interest rates. It’s like taking a new loan to repay the existing loan.
What is an amortisation schedule?
An amortisation schedule is a schedule which provides the breakup of every equated instalment towards the loan as repayment of interest and outstanding principal. Generally, an amortisation schedule will indicate both the completed and outstanding payments towards interest and principal.
What if I am unable to service the loan?
Any failure to service the loan as per the agreed repayment schedule can have negative implications for you. Not only will you have to bear additional late payment charges (thereby further increasing the cost of your loan), your house which serves as a collateral may get confiscated by the lender. Further, as CIBIL compiles details of all payment records of borrowers, your future credit lines may be adversely impacted. Due to a lack of a clean credit history, your future borrowings may come at an incremental cost or be rejected altogether. Therefore, it is advisable, to arrive at an alternate payment plan with your lender.
Can I prepay my loan?
Yes. All lenders offer you the facility prepaying your loan obligations. However, the prepayments come at a cost which you should take into account prior to pre-payment.
A loan is a long term commitment. What are the things to do so that my loan re-payments are smooth?
Some of the things which can make your repayment easy are:-
1. Borrow the amount you need.
2. Pick the EMI you can comfortably repay.
3. Pay your EMIs on time to avoid any penalty.
4. Inform the lender in advance if you have difficulty paying the EMI.
5. Keep a record of all your loan statements and EMI paid.
Inform the lender about any change in personal details like residential address, etc
I travel most of the time. Can I pay my EMIs from anywhere?
Most lenders offer a variety of payment modes such as post-dated cheques, electronic transfers and payments through the electronic clearing system for deduction from your bank account. In addition, most of them have a network of branches in major cities where you can deposit your EMI. With such a wide array of options on offer, EMI payments have become effortless.
I plan to stay abroad for some time in the future. Will I be asked to pay the entire loan amount before I go?
As long as you are servicing the loan on time, there is no question of the lender asking you to prepay your loan, due to a change in your address. However, if this move leads to a change in your bank account, then you may have to deposit new PDCs with the new bank details with the lender.
Can I increase or decrease my EMI based on changes in interest rate or my level of income?
You can increase or decrease your EMI in future based upon your repaying capacity and the amount that you have prepaid, if any. So, if the interest rates have increased, you can increase your EMIs in accordance with your repaying capacity. If your income has increased and you wish to repay the loan earlier then increase the EMI and vice versa. Of course, you have to pay the minimum EMI as stipulated by the lender.
How can I avoid falling in to the trap of not serving EMIs?
To avoid late payment charges or defaulting on your loan obligation, it would be advisable to:
1. Aspire to purchase a house that matches your financial conditions.
2. Borrow only how much you can comfortably service.
3. Chart out a repayment schedule (EMI amount and sum) which is supported by your income.
4. Ensure to create a contingency fund to meet your EMIs.
5. Use technology and avail of the different methods to make your EMI payment.
If I delay my payments towards EMI for a month or two, what would be the consequences?
In general, not paying your EMIs for 2-3 months will attract penalties from the lender. The lender will also have the option of transferring your account to a recovery agent. Moreover, late payments of EMIs will also adversely affect your credit history.
What if my post dated cheque bounces?
In case your post dated cheque bounces, you will have to bear an extra burden of charges towards the bounced cheque and delayed payment.

Application Procedure

What are the stages involved in availing a loan?

When you avail a loan, typically, you will have to undergo the following procedure:

Submit the Application:First you need to approach a lender with the duly filled and signed application form, photographs and credit documents of all applicants, property documents and a cheque for payment of processing fees.

Processing of Application:Once the lender receives all the requisite documents and fees applicable, he will process your loan application and assess the validation of the same. On the basis of this, the lender will determine your ability to repay the loan you have applied for.

Verification of Documents: After the verification of your income papers, a lender will undertake a legal and technical verification of the property documents. Though this process is time consuming it ensures that the title of the property is clear.

Loan Sanction: Once all documents are verified and a background check of the property is undertaken, the loan is sanctioned if you meet all the requirements of the lender, subject to certain terms and conditions. The sanctioned amount can be lower than what you have originally applied for, depending upon your loan application. In case you fail to meet the criteria set by the lender for disbursing a loan, your loan application may be rejected.

Loan Disbursement: Finally, the loan sanctioned is disbursed in whole or in instalments, depending on the type of the property (newly constructed property, old property or property under construction) for which the loan is taken.
How do I apply for the loan?

To apply for a loan, you first need to identify the lender. It is always advisable to check the terms and conditions, interest rates, fee structure, etc before zeroing in on the lender.

Once you have finalised the lending institution, contact him through the various contact points like his branch, contact centre, SMS or by e-mail or submitting your contact details on his website. The representative from the lender will meet you and discuss your Home needs and will advise on the process. You will have to fill up the application form and submit the basic KYC documents, photographs and your income documents to apply for the loan.
What are the documents I need to submit for availing a loan?

Documents need to be submitted for availing the home loan for salaried people includes:
1. Application form
2. Photograph
3. Photo Identity Proof
4. Signature Verification and Residence address Proof
5. Property documents (such as original Sale Agreement with Builder/Developer, land documents indicating ownership, certified true copy of approved plan, etc.)
6. Last 3 months' salary slips
7. Form 16
8. Bank Statement for last 6 months from salary account
9. Repayment details on any existing loans
Over and above this, you need to pay the requisite fee as well to avail the loan.

Documents need to be submitted for availing the home loan for non salaried people includes:
1. Application form
2. Photograph
3. Photo Identity Proof
4. Proof of existence of the business entity , Office Address along with signature Verification
5. Property documents (such as original Sale Agreement with Builder/Developer, land documents indicating ownership, certified true copy of approved plan, etc.)
6. Income Tax Return (both for business and personal of partners/directors) for the last 3 years certified by a CA
7. Receipts of advance tax payments if any made
8. Bank Statement for last 6 months from operating account
9. Repayment details on existing loans or loan closure letter
10. Board Resolution in case of a company
11. Proof of investments (FD Certificates, shares etc.)
Over and above this, you need to pay the requisite fee as well to avail the loan.
Do I need to provide any security to avail the loan?
Usually you don’t need to provide any separate security to avail the loan. Your purchased property itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. But in some cases, such as if the property is under construction, interim security in terms of pledge of life insurance policies, shares , mutual fund investment document or FD papers or the guarantees from sound and solvent guarantors may be needed for availing a loan.
Who can be a co applicant with me?
The co-owner of the property can be the co-applicant with you. Usually your parents, spouse or children are considered as your co applicant. Having a co-applicant with a regular and consistent source of income helps you enhance your eligibility for a greater loan amount.
I don’t have a personal guarantor; can I still apply for a loan?
In case you have a clear title of property and your credit information confirms your regular source of income, you will not be asked for a personal guarantee. This is because in this case, the property that you have purchased acts like the security and is mortgaged to the lender till the entire loan is repaid.
What is a sale agreement and does it need to be registered?

Sale agreement is an agreement between the purchaser and seller confirming the sale consideration, date and place of execution of deal, size of the property and other terms and conditions of the deal.

In many states in India, the ‘Agreement for Sale’ between the seller and the buyer is required to be registered under the existing laws. It is always advisable to register the sale agreement at the office of the Sub-Registrar appointed by the State Government, under the Indian Registration Act, 1908.
If I am in business and therefore cannot produce salary certificates, can any other documents be produced as proof of income?

Most lenders allow businessmen and others who can’t produce their salary certificates to show their balance sheets, income tax Challans, etc., in place of the salary certificates as proof of income.

Processing a Loan

What is the processing time for getting a loan?

Generally, it takes between 2 to 15 days to process a home loan application, provided the application form and attached documents are complete and in order.
In how many instalments can I get my loan disbursed?

Loan disbursement is based on the requirement of funds and the progress of construction of property. It is usually disbursed in full for the ‘ready’ property and as part payments in instalments for under construction property.

Tax Benefits

Do home loans offer any tax benefits?

Yes. So far, both the principal repayment and the interest offer a tax benefit. As per the Income Tax Act, 1961, you can avail an exemption of up to Rs 1 lakh under section 80C for repayment of principal on home loans and exemption of up to Rs 1.5 lakh on interest paid on the loan. These figures are as per the assessment year 2009-10. The benefits vary every year as per the provisions of Income Tax Act. In fact, there has been a proposal to do away with some of the tax benefits pertaining to home loans. So, please consult your tax consultant for a detailed advice.
Do both the applicant and co-applicant enjoy the tax benefits on availing a home loan?

A co-applicant can only enjoy tax benefits if he or she is also a co-owner of the house that is purchased from the loan. The tax exemptions are based on the proportion of the ownership of the house purchased from the loan. So, if you own 60 per cent and your spouse owns 40 per cent of the house, then exemptions will be given as per your ownership percentage. For e.g. in the above case, a loan amount of Rs 20 lakh will be split as Rs 12 lakh and Rs 8 lakh, respectively, and interest and principal applicable will be taken into account for each individual and the exemptions will be calculated accordingly.

Miscellaneous:

Most experts advise on ‘productive borrowing’? What does it mean?

Productive borrowing means borrowing for investment in a real capital. For example, if you are presently living in a rental accommodation, then, availing a home loan to purchase a house would be productive borrowing as it would help you save on the rent, which could instead be used to build an asset, in this case a house; in addition to giving you tax exemptions.
What is ‘consumption led borrowing’?

‘Consumption led borrowing’ constitutes borrowing that does not result in creation of a productive asset. Instead it involves borrowing to meet a fancy. The easy availability of credit has led to the phenomena of consumption led borrowing. People avail loans beyond their repaying capacity only to fall in to a debt trap which can be financially fatal in the long term. In addition, it also tarnishes their credit history which may make them ineligible for loans in future.
What are the benefits of responsible borrowing and why it is recommended?

Responsible borrowing means availing a loan when it is absolutely necessary and with a commitment to service the EMIs regularly. You can borrow responsibly by only availing a loan when you need it and that too well within your means. The other aspect of responsible borrowing is repaying the loan amount as per the schedule. Responsible borrowing is recommended so that your repayment period becomes hassle-free and your credit record remains spotless.
Do I need to inform the lender about any change in personal details like name, contact details, etc.?

Yes, it is very important and in your own interest to inform the lender about any change in personal details including your contact numbers. This will help you to timely receive all communication sent by the lender and make your repayment process hassle-free.
If I run into a dispute with the lender, who will redress my grievance?

There are various levels of grievance redressal. You can consult the company representative regarding any matter related to your loan or other services and can lodge a complaint. If you are still unsatisfied with their response you can then approach the Banking Ombudsman, details of which can be obtained on www.rbi.org.in. A further legal course of action can be taken thereafter.
Can I insure my loan?

To ensure that your family is not faced with an additional financial burden of repaying a home loan taken by you, you can choose to insure the loan. What this insurance takes care of is the amount you will owe to the lender. What is paid is not taken into account, but, what is owed. Like in any insurance policy, a premium will have to be paid. This premium will depend broadly on four conditions – your age, outstanding loan amount, loan tenure and your health.

Home Loans from Reliance Home Finance (RHF)

Who can apply for a home loan from RHF?

Any salaried individual in the age group of 21 to 58 years (or 60 years) depending on the retirement age or self employed individual in the age group of 21 to 65 years (i.e. below the age of 65 years when the loan matures) having proprietorship, partnership or private Ltd. firm, with a minimum gross income of Rs 2 lakh can apply for a home loan from RHF.
What are the different tenures that are available on a loan from RHF?

RHF disburses loan for a minimum of 3 years and a maximum of 20 years.
What are the benefits of taking a home loan from RHF?

RHF is one of the fastest growing non banking financial organizations enabling people to fulfil their dreams. At RHF, we offer you a maximum loan of up to 90 per cent of the property value based on our underwriting criteria, to meet your requirements. Available for both salaried and self employed people, you have the flexibility to choose your loan tenure and repayment options. We offer loans even to individuals with a gross annual income of as low as Rs 2 lakh.

RHF also allows you a balance transfer advantages via which you can transfer your existing loan to us for better terms and conditions and lower interest rates. To expedite the whole process of buying a home, we offer a surrogate income/No Income Document programme, online application, simple documentation and quick approvals.
Does Reliance Home Finance assist me in selecting an accommodation of my choice?

The Reliance Property Solutions, a separate division of Reliance Home Finance assists you in buying, selling and leasing a property. www.reliancepropertysolutions.co.in

*Note – Content is as per the tax laws applicable for the Financial Year 2009-10.