10 Important Legal Aspects While Availing Home Loan!

10 Important Legal Aspects While Availing Home Loan!

Living in your own house is a dream for all people. Owning a home provides you with a feeling of achievement and, perhaps, will allow you to save money for other things. Home is a fundamental requirement of human life. For many, a dream is to have a beautiful home. A successful person is recognised by his home. There is a strong real estate market, due to the large demand for housing. This demonstrates how important a home is to human life. Home also reflects status. You will then find actors, entrepreneurs and other wealthy people flaunting their expensive homes. In order to make your own home, the financial institutions registered under RBI and acting within the Ambit of RBI guidelines provide a service of granting home loans to those who can’t afford the huge payment of a home in one go. Financial institutions providing house loans to home buyers seeking buyers to build their own houses, such as banks and LIC, also provide this service. Furthermore, employers such as the state central/state government, PSUs, and MNCs offer affordable home loans to their employees.

As a customer or loan seeker, the following points should be taken into consideration.

  1. The loan amount and the interest rate
  2. The method or procedure for repaying the loan (principal and interest).
  3. The property from which we are purchasing, for example, a government authority (DDA, LDA, HUDA, etc.)/Housing Cooperative Society (Registered under the Cooperative Act)/Private Builders.
  4. Necessary Legal Clearances, such as Revenue, Forest, Irrigation, and so on.
  5. Town planner and local authorities’ permission for residential use and approval of the map for the construction of a colony/flat/building/house. This has to be asked of the seller/builder.
  6. A Non-Encumbrance Certificate from the Tehsil office should be obtained for a period of 13 years to check for any pending dispute or encumbrance on the property.
  7. This implies that the property in question is not associated with any other bank for a loan and entirely belongs to the person.
  8. Permission for a drainage/sewage/drinking water pipeline/electricity connection, among other things.
  9. In the case of a private builder, it should be registered as a firm or company under the Relevant Acts and the purchaser should see the registration/incorporation certificate and their scope of work.
  10. The company/firm/builder, as well as their project/building, must be RERA-registered.

Generally, financial institutions ask for the above-mentioned information or documents from the loan seeker before processing the loan application. If they find the above documents up to their satisfaction, then they enquire about the financial capacity of the salary slip and past 3-year income tax return (ITR) filed by the individual who is seeking a loan.

On Approval of a Home Loan, Financial institutions ask individuals to submit certain affidavits, surety/guarantee bonds, and loan agreements, which are generally standard formats for financial institutions. Thereafter, they issue an official letter of disbursement of the loan, either in one lump sum or in instalments. After completing the loan, the financial institution issues an official letter to the borrower mentioning the principal amount of the loan along with the interest (Fixed or Floating), other charges, if any, and the duration of the payment. The general above is for acquired land or purchased freehold land. A home loan might last anywhere from five to thirty years. The tenure of the home loan sanctioned to you depends on the loan amount taken, annual income, and age, among other factors.

Some other points to keep in mind while obtaining a home loan

  • A home loan comes with a slew of tax advantages. Buyers are free from paying taxes on both payments, i.e., interest and principal amount.
  • Home Loan Collateral refers to the security that a home loan penalises the lender for. Collateral is sometimes referred to as secured loans or asset-based lending. The property you are looking to buy will serve as security in the case of a home loan. If you fail to repay your home loan, the bank will claim ownership of your house, or take possession of it. Securities/collateral protect lenders from defaulting on home loans.
  • CIBIL Score is a term you’ll hear a lot of times when you apply for a home loan. In truth, winning a home loan is the most important deciding factor. With a good CIBIL score, up to 85 percent of your property’s total value can be financed. Alternatively, it is 100 percent.
  • Another factor affecting your eligibility for a home loan is your age. Banks decide your loan tenure according to your age. The younger you are, the bigger the Home Loan reserves. And of course, vice-versa.
  • When you don’t pay your EMI on time, you’ll be charged a late fee. The fee will be charged to you by the bank. You will be charged interest in addition to the EMI in case of late payment.

A Memorandum of Deposit of Title Deed (MODT) is used to secure a mortgage by voluntarily submitting the document of title with the bank. Registration costs are subject to a stamp tax imposed by the state. Stamp duties can vary from state to state. A portion of the home loan is paid off.

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