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What is a Home Loan

What is a Home Loan

Are you in the market to buy a new home? But do you feel it is a little too heavy on your pockets? Well, there is a way you can buy a new abode without financing the entire purchase by yourself. Housing loans have now made it incredibly easy to own the house of your dreams. Wondering how? Here’s everything you need to know.

Types of home loans

1. Home purchase loan – This is the most popular type of home loan. You can avail of a home purchase loan to buy a new or pre-owned home. 

2. Home construction loan – This loan is designed for people interested in constructing their dream home instead of buying a pre-constructed one. However, the approval process for this loan is slightly different as it considers the plot’s cost as well. 

3. Home improvement loan – Are you looking to renovate and improve your home? A home improvement loan can help you do just that. This includes internal and external repairs, painting, construction of overhead water tank, electrical renovation, etc. 

4. Home extension loan – Make use of home extension loans to alter the current structure of your home and add new rooms. This loan can be used to increase the amount of built-up space at your home. 

Additional Read: What are the current home loan interest rates?

Factors affecting housing loan eligibility

1. CIBIL score

CIBIL or credit score is typically used to determine your creditworthiness. A lender can get a proper understanding of your repayment capacity and offer you an appropriate interest rate. If you’ve got a low score, you’ll naturally have lower loan eligibility and vice versa. So, make sure you have a credit score of 750 or above. 

2. Debt-to-income ratio

If your debt is eating up a chunk of your monthly income, you’ll automatically become a high-risk borrower. Having a low debt-to-income ratio, on the other hand, will increase your chances of obtaining the loan. It can also help you get a lower rate of interest.

3. Employment

A steady source of income and a secure job can convince the lender of your loan repayment capacity. Your loan eligibility will also depend upon your monthly income. The higher the income, the higher the chances of loan approval. 

Now that you know all about home loans, you can approach a financial institution confidently!

Additional Read: What Are the Benefits of Pre-Approved Home Loans?

Benefits of taking a home loan

Taking a home loan offers several benefits:

  • It makes it easier to buy a home without a huge upfront payment, allowing you to build equity in your own asset instead of paying rent.
  • You can avail of tax deduction of up to Rs. 2 lakhs on the interest amount under section 24(b) and up to Rs. 1.5 lakhs under section 80C.
  • Home loans come with long repayment tenures, often up to 30 years, allowing you to choose an EMI that fits your budget.

Documents required for a home loan

Here’s a list of documents required for a home loan from Tata Capital:

DocumentsSalariedSelf-employed professionalSelf-employed non professional
Application form with photograph duly signedYesYesYes
Identity, address and age proofYesYesYes
Bank statements for last 6 monthsYesYesYes
Salary slips of last 3 monthsYesNoNo
Processing fee chequeYesYesYes
Form 16/ Income Tax ReturnsYesYesYes
Proof of Business ExistenceNoYesYes
Business ProfileNoNoYes
Education qualification certificate and Proof of Business ExistenceNoYesNo
Income Tax Returns (ITR) of last 3 years with computation of incomeNoYesYes
Last 3 years CA certified/audited Balance Sheets and Profit & Loss StatementsNoYesYes

To sum up

With minimal paperwork and instant disbursal, Tata Capital can ensure that you have a comfortable borrowing experience. With our housing loan interest rates starting from just 6.70% and easy repayment options, you can comfortably finance your new abode.
So, wait no longer! Use our home loan EMI calculator to understand your loan liabilities and start your loan journey today.

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FAQs

How do I calculate my home loan EMI?

You can calculate your potential home loan EMI by using this formula: P x R x (1+R)^N / [(1+R)^N-1].

P is the principal loan amount

N is the tenure (in months)

R is the monthly interest rate

 

For a faster, more accurate calculation, you can use Tata Capital's online home loan EMI calculator.

What is the minimum salary required for a home loan in India?

The minimum salary required for a home loan in India varies from lender to lender. However, it typically ranges from Rs. 25,000 to Rs. 30,000 per month.

How long does it take to get a home loan approved?

It usually takes 1-2 weeks to get a home loan approved. During this time, the lender verifies all legal and eligibility requirements to approve and disburse the loan amount.

Is it better to go for a fixed or floating interest rate?

The decision between a fixed or floating interest rate depends on your financial situation and risk comfort. A fixed interest rate is better if you want stability, as it ensures your EMIs stay the same throughout the loan. But if you're comfortable with market ups and downs, a floating interest rate may be ideal. The rate may increase or decrease over time, which could lower your interest cost in the long run.