Most of us dream of owning a home. When you think of buying a new home, it requires a considerable amount of money. Many of us cannot afford to buy a house in one go.
Then comes the option of a bank home loan. If you are thinking of applying for a home loan. Best to gather and gain as much information as possible to get the better end of a deal.
The good news is The Govt. of India provides many benefits and tax rebates to facilitate home buyers.
RBI plays a crucial role in the Indian financial system. RBI regulates and supervises the overall financial system of India. That also put home loans under the domain of RBI.
Let’s see how RBI affects and governs the factors of a home loan.
RBI governs and issues guidelines for a home loan. It keeps varying the factor due to dynamic factors affecting the economy.
It is the rate at which the central bank gives money to commercial banks in a time of cash shortage. In May 2022 RBI increased the repo rate by 40 basis points to 4.40% from the 4% repo rate.
The repo rate has a direct bearing on a home loan. Therefore, banks can loan out a home at a low rate if RBI decreases the repo rate passing on the benefit to customers.
Loan to value(LTV) ratio
Loan to value ratio is an assessment of lending risk undertaken by the bank before approving a mortgage. RBI increased the LTV ratio up to 90% when the home loan is below Rs 30 lac. And the loans above 75 lac are up to 75%. In this way, RBI encourages people to own a house by making home loans affordable.
RBI also announced to exclude the charges of registration, stamp duty, and documentation charges from the LTV ratio. That means the borrower has to make a 10% home loan as a down payment.
A home loan can go up to 1 crore. The maximum tenure for a home loan can be 30 years. However, you might come into some extra money. You want to pay off your loan early. Bank doesn’t like when you pay off your loan early as they lose interest. Hence, they levy the prepayment charges to cover the loss. Earlier, a bank could impose a prepayment penalty of up to 5 percent of the home loan. However, RBI has taken measures to help home loan borrowers in a case when they want to prepay their home loans early. RBI has waived the prepayment penalty for borrowers who pay off the loan at the floating interest rate. And cap the prepayment charges at 3 percent for fixed-rate home loan borrowers.
Want to change bank
Now home loan borrowers can refinance their home loan and take advantage of the benefit of a low-interest rate. To ease the way to foreclose a loan with the current bank. RBI has waived the foreclosure charges. Earlier banks took foreclosure charges if a person wanted to refinance the loan from a different bank.
Research is very crucial when buying a house. Therefore, you must know-Important terms to consider before buying a property
Vision India group has tie-ups with SBI bank. So you need to worry about going from bank to bank for a loan to find out if they would approve the builder or not.
For more information, get in touch with us today.