Make Sure to Keep These Documents Ready While Getting a Home Loan

ByPradip Mohapatra

India’s real estate sector witnessed significant growth in the past few years due to initiatives by the government as well as private sectors. According to a recent survey, the market size is estimated to grow from Rs.12,000 crore in 2019 to Rs.65,000 crore in 2040.

However, the rising demand for residential and office spaces resulted in an increase in home prices. Consequently, more and more individuals are opting for home loans to meet their housing requirements. 

Applicants need to provide the correct documents while applying for a home loan to ensure that their application gets approved and processed quickly. Given below is the list of documents required for a home loan –

  • Property documents.
  • KYC documents – Voter ID, Aadhaar card, PAN, passport, driving license, or any other officially valid documents.
  • Bank account statements for the last 6 months.
  • For Self-employed applicants – Income tax returns for the previous two years and proof of business.
  •  For salaried applicants – Latest salary slips or Form 16.

Borrowers should note that apart from the ones mentioned above, lending institutions may ask for additional documents. Therefore, they should contact their lenders for a full list of essential documents for a home loan.

Eligibility criteria 

Before proceeding with the loan application procedure, apart from documents required for a home loan, applicants should also check the eligibility criteria set by lending institutions. If they do not satisfy the requirements, their loan application may get rejected. Hence, they should also know about the factors that can affect your home loan eligibility. The requirements are as follows –

Salaried applicants 

  • They should be within the age of 23 – 62.
  • Applicants must have work experience at any reputed company for a minimum of three years.

Self–employed applicants 

  • Age of applicants should be within 25 – 70.
  • They should have a business operating for a minimum of 5 years.

Other eligibility requirements are –

  • Applicants should be a residing citizen of India.
  • They should have a steady source of income.
  • They should maintain a CIBIL score of 750 or above.

Features of home loans

Borrowers should have an accurate idea of some of the features of home loan besides knowing about the documents required for a home loan.

These have been discussed below –

  • Flexible tenor – Borrowers can opt for a repayment period of their choice for up to 240 months.
  • Balance transfer – You can opt to transfer your home loan balance to another lending institution that is offering more convenient features and lower interest rates. However, there are some things you need to keep track of when you do a home loan balance transfer such as balance transfer fee, terms, and conditions of the new lender, etc.
  • Property dossier – Some financial institutions also provide a customized report containing legal and technical factors regarding buying and owning a property. It will help you to make an informed decision and guide you through the whole transaction process.
  • Top-up loan – One can also avail top-up loans on an existing home loan from their current lending institution. Unlike home loans, these loans have no end-use restrictions and can, therefore, be used to meet a variety of financial obligations such as education fees, weddings, medical emergencies. Applicants need not provide any other document apart from the home loan documents submitted to the lending intuition.

Tax exemptions

Aside from knowing about the documents required for a home loan, applicants should also be aware of the following tax deductions –

Principal amount – 

One can claim an exemption of up to Rs.1.5 lakh on the principal component of his or her home loan under Section 80C. This exemption can be claimed on home loan taken for purchase or construction of a residential property.

Home loan applicants can also claim tax exemptions for stamp duty and registration charges under this section.

However, one can only claim this tax benefit if construction is complete within 5 years after the loan was availed. Additionally, if individuals sell the house before 5 years, the deductions claimed by them will be added to their taxable income.

Interest component – 

Under Section 24(b), one can also claim a deduction on interest accrued on a home loan for both purchase and construction of a house. For self-owned property, up to Rs.2 lakh of tax exemption is allowed. In the case of rented properties, one can claim an exemption on the total interest payable.

Individuals can claim tax exemption in five installments after the house construction is complete.

Joint home loan – 

Joint loan holders who are also co-owners can separately claim tax deductions on interest and principal components on their income.

Additional deductions – 

As per Section 80EEA introduced in 2019, home loan applicants can avail additional deduction for up to Rs.1.5 lakh on the interest paid.

To avail of this exemption, the loan should have been sanctioned between the financial year 2019 – 2020 and the stamp value of the property must not exceed Rs.45 lakh. In addition to that, applicants should not be owners of any other property on the day the loan is sanctioned.

Tax exemptions on home loans can help you save a substantial amount which you can use to prepay or foreclose your loan.

Apart from the documents required for a home loan, borrowers should also have an idea of other financial aspects associated with it. It includes charges such as processing fees, part prepayment and foreclosure fees, balance transfer charges, etc.