Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Loan for Home > Home loan sanction letter vs disbursement explained

Loan for Home

Home loan sanction letter vs disbursement explained

Home loan sanction letter vs disbursement explained

If you’ve applied for a home loan and are waiting for its approval, you’re waiting for a loan sanction. A bank or financial institution provides this through a home loan sanction letter. The document is an official confirmation of the approval of your loan application. After you receive the sanction letter, the next phase is loan disbursement. It refers to the release and transfer of funds directly into your bank account. The home loan disbursement letter lets you initiate the process of purchasing a home. It is the stage from which your dream of owning a home is actually realized, and your bank account has the funds required to secure your new home.

This article explains the meaning of the two and the differences between a home loan sanction letter vs disbursement.

What is a home loan sanction letter?

A home loan sanction letter is the official document a bank or financial institution issues, confirming that your home loan application has been approved after thorough verification. It is a statement given by the lender regarding their willingness to grant a specific loan amount. The details covered in the sanction letter include key information, such as the sanctioned amount, loan tenure, interest rate, EMI, and terms and conditions related to repayment and processing.

To obtain it, you must submit necessary documents like property papers, income proof such as ITRs, salary slips, and KYC documents such as ID and address proof. These documents help the lender assess your repayment capacity, verify your identity, and ensure the property’s legality. A sanction letter is essential for loan disbursal.

What is a home loan disbursement letter?

The lender issues a home loan disbursement letter after the borrower accepts the loan offer and completes all documentation. It marks the stage when the sanctioned loan amount is ready to be released. The bank verifies property documents, legal clearances, and borrower details to ensure compliance with loan terms before disbursement.

The disbursement process involves signing the final loan agreement, submitting post-dated cheques or ECS details, and completing any pending formalities. Funds are then released either in installments for under-construction properties or as a lump sum for ready-to-move homes or resale properties. The letter specifies the disbursed amount, payment schedule, and recipient details, the builder or the seller. It ensures full transparency between the borrower and lender, confirming that the loan has been officially released for the intended property purchase.

Sanction letter vs disbursement: Key differences

A sanction letter and a disbursement serve different purposes. The sanction letter signifies loan approval, while the disbursement marks fund release. The following table entails a quick comparison of the sanction letter vs the disbursement letter.

AspectSanction letterDisbursement
MeaningOfficial approval of your loan application by the lenderActual release of approved loan funds
StageGiven by the lender after verifying eligibilityDone after the sanction is accepted
PurposeStates the approval of the lender to grant a specific loan amountTransfers funds for property purchase or construction
Documents requiredIncome proof, KYC, credit report, property papersSigned loan agreement, property registration, NOC, builder’s demand letter
TimingEarly stage, before the loan amount is givenFinal stage, when funds are paid out
ImpactBuilds borrowing abilityCreates financial liability (EMIs start post-disbursement)

To conclude, the sanction letter represents approval, while disbursement completes the funding process. Both are legally and financially crucial for home buyers.

Loan agreement and important documents

A loan agreement is an official contract between the borrower and the lender, mentioning the terms and conditions of the approved loan. It includes key details such as the loan amount, interest rate, tenure, repayment schedule, EMI amount, penalties, and rights and obligations of both parties. The agreement ensures transparency and serves as legal protection in case of disputes.

Documents required at the sanction stage include:

  • Income proof (salary slips, ITRs, Form 16)
  • KYC documents (ID and address proof)
  • Property documents (sale agreement, ownership proof)
  • Bank statements and credit report

Documents required at the disbursement stage include:

  • Signed loan agreement
  • Property registration papers and NOC
  • Builder’s demand letter or seller’s payment request
  • Post-dated cheques or ECS mandate

Together, these documents ensure financial authenticity and smooth loan processing.

In conclusion

A sanction letter indicates loan approval, while a disbursement indicates funds release. Since there are various steps involved in the loan disbursement process, you must be careful throughout. Read all the fine print and reach out to your lender in case of any queries. Check the validity of the home loan sanction letter before proceeding.

If you want to apply for a home loan, Tata Capital is here for you. We provide loans at affordable interest rates and offer flexible repayment options. Visit our website today!

Apply For Home Loan

Say Hello to Your New Home with Our Easy Home Loans!

Apply now
Popular Searches
PMAY Calculator Home Loan for Government Employee Home Loan for Self Employed Home Loan for Women Home Loan Balance Transfer with Top Up Area Calculator Stamp Duty Calculator Home Loan Top Up Approved Housing Projects in India 12 Lakh Home Loan 15 Lakh Home Loan 25 Lakh Home Loan 30 Lakh Home Loan 35 Lakh Home Loan 40 Lakh Home Loan 45 Lakh Home Loan 60 Lakh Home Loan 65 Lakh Home Loan 70 Lakh Home Loan 75 Lakh Home Loan 80 Lakh Home Loan 85 Lakh Home Loan 90 Lakh Home Loan 1.5 Crore Home Loan 2 Crore Home Loan 2.5 Crore Home Loan 3 Crore Home Loan 4 Crore Home Loan
More About Loans
home loan Home Extension Loan Affordable Housing Loan Pradhan Mantri Awas Yojana Home Construction Loan Home Loan Balance Transfer Documents Required for Home Loan Home Loan Interest Rates Home Loan EMI Calculator Home Loan Eligibility 10 Lakh Home Loan 50 Lakh Home Loan 30 Lakh Home Loan 40 Lakh Home Loan

FAQs

What happens if a loan is sanctioned but not disbursed?

If a loan is sanctioned but not disbursed, it means that while the loan application has been approved, the funds have not yet been released to the borrower. The time between the loan sanction and disbursement can differ from one lender to another, and the borrower can contact the lender in case of delays.

Is EMI based on the sanctioned amount or the disbursed amount?

EMI (Equated Monthly Instalment) is calculated based on the disbursed amount, not the sanctioned amount. The sanctioned amount is the approved loan limit, but the EMI payments are determined by the amount disbursed to the borrower​.

How much time does it take to disburse a home loan after sanction?

The time taken to disburse a home loan after sanction varies but typically ranges from a few days to a few weeks. The duration depends on the lender's internal processes​ and may vary if they require additional documents from the borrower.

What is the difference between sanction and disbursement?

The sanction of a loan refers to the lender's approval of the loan application and the agreed loan amount. Disbursement, on the other hand, is the actual release of funds to the borrower after meeting all required conditions and documentation​.

Can a bank cancel a home loan after disbursement?

Generally, a bank cannot cancel a home loan after disbursement. They might, however, reject the loan application even after the sanction letter if there is a drop in the credit score or job instability.

What is the difference between sanction and disbursed?

Sanction refers to the approval of a loan or credit facility by a bank or financial institution for a specific amount of funds under pre-determined conditions. This sanction is based on your documents and eligibility. However, it doesn’t mean that the funds have been transferred to your account or released. Disbursement refers to the actual release or transfer of the approved funds. It is the step after loan sanction when the approved amount comes into your bank account.

In simple words, a sanction relates to loan approval, while a disbursement relates to funds transfer. 

What is the purpose of a sanction letter?

The sanction letter’s purpose is to officially confirm the bank’s acceptance and approval of your loan application. It is the lender’s formal offer, specifying all the necessary details of the loan, such as the sanctioned loan amount, tenure, interest rate, EMIs, repayment terms, and other conditions.

The sanction letter serves as proof of loan eligibility. It is often required for processing home loan and education loan applications. It provides the borrower with financial backing proof, essential for planning their budget and for using as a negotiating tool with sellers or for visa applications. Borrowers can use the sanction letter to understand the approved offer before final disbursal.

What is the personal loan disbursement and process for sanctioning?

Personal loan disbursement is the process of transferring the approved loan amount to the borrower’s account after the loan has been sanctioned. The process for sanctioning begins with the submission of an application, followed by credit evaluation, document verification, and approval. The final loan agreement is signed after the bank issues the sanction letter and the borrower accepts the terms. The lender then disburses the loan amount directly into the borrower’s bank account. The disbursement timeline for personal loans is 24 to 48 hours.

Is EMI calculated on the sanctioned amount or the disbursed amount?

Equated Monthly Installment (EMI) is calculated on the disbursed amount, not the sanctioned amount. The sanctioned amount represents the maximum loan approved. However, when it comes to loan disbursement, the amount may change. Some fees or charges, such as insurance premiums or processing fees, may be deducted upfront at the time of disbursement. Hence, you cannot calculate EMI on the sanctioned amount because it is the disbursed amount that you’re liable to repay to the lender. The calculation of EMI depends on the amount disbursed, the applicable interest rate, and the repayment period.

Do I get my sanction money back?

No, there is no refund for the sanctioned money because sanctions are approvals and not the actual transfer of funds. The money is released into your account after loan disbursement, and the amount may vary from the sanctioned amount, as it also includes deductions for processing fees, insurance premiums, etc. If you don’t want to proceed with the loan after reviewing the details on the sanction letter, you can cancel the loan before disbursement. In this case, you do not owe the bank or lender any money, except the minimal processing fees charged by the lender for certain types of loans.

Can a bank cancel a loan after it is disbursed?

Generally, banks cannot cancel a loan after its disbursal, as it has been transferred to the borrower’s account, and the borrower is legally bound to repay. However, the borrower can request early closure to treat cancellation as an early repayment. This process involves repaying the full principal amount along with any applicable interest and fees. Sometimes, there may be fraudulent or misrepresented disbursements. If that happens, the bank has the right to take legal action. Normally, cancellation is possible only before disbursement, not after.

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download