The Reserve Bank of India (RBI) is the sole authority that works alongside the Government of India to form policies, rules, and regulations for the banking and finance sector. Their regulations apply to all – banks, non-banking financial institutes, investors, and borrowers. These policies and regulations are amended from time to time to address the economic situation and financial needs of the country. Hence, it is essential that you know about the RBI rules and regulations before signing up for any loan or making any financial investment.
Recently, the Reserve Bank of India reformed theHome Loan rules and regulations in India. The new rules are designed to make Home Loans more affordable and trustworthy for the borrowers.
This article will take you through the significant reforms made in the Home Loan rules.
Loan to Value ratio (LTV):
The loan to value ratio is a ratio of the total loan amount offered by the bank to the actual value of the property. For example, if the LTV of your home is 60%, then the bank will provide you 60% of the funds to finance your home.
To encourage people to realise their dream of buying a house, the RBI has proposed the followingnew Home Loan rules:
LTV stands at 90% for homes that value 30 lakhs and lesser.
LTV stands at 80% for homes that value between 30 lakhs and 75 lakhs.
LTV stands at 75% for homes that value 75 lakhs and more.
The RBI further states that the LTV will not include costs related to stamp duty, registration charges and documentation. Bringing the upfront amount, the borrower must make for the loan by 10%.
Prepayment Charges:
If the loan is repaid earlier, either partially or entirely, it positively impacts your loan repayment. As the outstanding principal amount decrease, so does the interest payable.
To make loan repayment more flexible and favourable for the borrowers. The latestRBI guidelines for Home Loan 2021has waived off the prepayment charges for Home Loans. However, this is only applicable for loans subject to the floating interest rate.
Home Loan Transfer and Foreclosure:
The recentRBI rules for Housing Loanmakes refinancing your Home Loan easier. If you have an ongoing Home Loan and wish to switch the lender for a better repayment deal, you can opt for it in a hassle-free manner.
Furthermore, you can apply for a Home Loan transfer for the outstanding principal amount at zero foreclosure charges. However, this reform is only applied to floating interest rate loans and not fixed interest rate loans.
In addition to theseHome Loan rules and regulations,the RBI also recommends all borrowers to opt for Home Loan insurance. The insurance will secure your loved ones financially should anything unfortunate happen to you. It will keep your family worry-free about paying the Home Loan.
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FAQs
Loan to Value ratio (LTV):
For example, if the LTV of your home is 60%, then the bank will provide you 60% of the funds to finance your home. To encourage people to realise their dream of buying a house, the RBI has proposed the following new Home Loan rules: LTV stands at 90% for homes that value 30 lakhs and lesser.
What is the eligibility criteria for home loans in India? ›
| Eligibility criteria for home loan |
|---|
| Age limit of salaried individuals | 23 years to 70 years |
|---|
| Age limit of self-employed individuals | 23 years to 70 years |
| Required Credit Score for home loan | 725 or higher |
| Work experience of salaried applicants | Minimum 3 years |
3 more rowsWhen you apply for a housing loan online or offline, the lender checks your eligibility and if approved, disburses funds to your account. These funds can be used to buy an existing house property, construct a new house or rebuild your current house. The funds cannot be used for any other purpose.
What is the minimum income for home loan in India? ›
What is the minimum salary to apply for a Home Loan? The minimum salary requirement may vary, but generally, a stable monthly income of around Rs 25,000 to Rs 30,000 is advisable to apply for a Home Loan.
Do we get 100% home loan in India? ›
This is a crucial financial commitment that every homebuyer must consider. The down payment forms a significant part of your initial investment in the property. It's important to understand that banks are not permitted to provide loans for the full property value, which means you cannot avail a 100% loan.
What is the limit of mortgage loan in India? ›
A mortgage loan is one in which you secure funds by pledging your property. The interest rates on mortgage loans range from 8.15% to 11.80% p.a. Usually, the amount of funding you can avail will be up to 60% of the registered value of the property. Some banks also offer mortgage loans up to Rs.10 crore.
What is the maximum age limit for home loan in India? ›
Home Loan Eligibility Criteria
The maximum loan term is generally capped at 30 years. Age Limit for Salaried Individuals: 21 to 65 years . Age Limit for Self-Employed Individuals: 21 to 65 years.
Which bank is best for a home loan in India? ›
Comparison of 10 Best Home Loan Banks in India
| S.No | Bank Name | Interest Rate |
|---|
| 1 | Aditya Birla Capital | 9.05% onwards |
| 2 | Union Bank of India | 9.00% onwards |
| 3 | Kotak Mahindra Bank | 8.85% to 9.40% |
| 4 | HDFC Bank | 8.50% onwards |
6 more rows₹20 Lakh Home Loan EMI for 20 Years
| Loan Amount | ₹ 20,00,000 |
|---|
| Rate of Interest | 8.45% p.a. |
| EMI | ₹ 17,293 |
| Total Interest | ₹ 21,50,374 |
| Total Repayment | ₹ 41,50,374 |
How much down payment for a home loan should be done. Down payment for home loan is 20% of the property value. According to the RBI rules, lenders in India can only provide 80% of the property value as a home loan for loans above Rs. 30 lakh.
The maximum home loan tenure can go up to 30 years. Since long-term loans last for a significant duration, Longer tenure would also help in improving loan eligibility. Given the loan tenure, the EMIs will be less. Hence, long-term home loan tenures are more affordable in the long run.
How many home loans are allowed in India? ›
You can have as many home loans in India as you need, as there is no law barring you from servicing only one home loan at a time. If you want to purchase, say, 5 properties at once, you can take 5 different home loans from 5 different lenders.
What is EMI of 30 lakhs home loan? ›
So, the EMI for a 30 lakh home loan at an annual interest rate of 8.40% and a loan tenure of 20 years (240 months) is Rs. 25,845/- per month.
Can a housewife apply for a home loan in India? ›
No, a housewife cannot avail a home loan on her own. She can only get it if she is a co-borrower. Can women with irregular income streams apply for home loans? Yes, women with irregular income streams can still apply for home loans.
How much home loan can I get on 80000 salary in India? ›
How much home loan can I get on an 80,000 salary?
| Net monthly income | Home loan amount** |
|---|
| Rs. 84, 000 | Rs. 75,07,182 |
| Rs. 82, 000 | Rs. 68,39,877 |
| Rs. 80, 000 | Rs. 66,73,051 |
| Rs. 78, 000 | Rs. 65,06,225 |
1 more rowThe Federal Home Loan Bank Act is a federal law passed in 1932. According to its text, the act was intended to lower the cost of home ownership by creating a network of government-sponsored banks and boards to provide mortgage credit. The bill was signed into law by President Herbert Hoover (R) on July 22, 1932.
What is the home loan Protection Act? ›
Key takeaways. The Home Ownership and Equity Protection Act (HOEPA) is a federal law that aims to protect consumers from predatory mortgage lending. HOEPA mainly covers high-cost mortgages, which are defined as loans with an annual percentage rate (APR) that exceeds the prime rate by a certain amount.
What is the mortgage law in India? ›
According to section 58 (a) of transfer of Property Act, A mortgage is transfer of interest in specific immovable property for purpose of securing: The payment of money advanced by way of loan. An existing or future debt, or. The performance of an engagement which may give rise to a pecuniary liability.
Why was the Home Owners loan Act needed? ›
To provide emergency relief with respect to home mortgage indebtedness, to refinance home mortgages, to extend relief to the owners of homes occupied by them and who are unable to amortize their debt elsewhere, to amend the Federal Home Loan Bank Act, to increase the market for obligations of the United States, and for ...
