When purchasing a house, the most preferred choice to finance it is a home loan. HFCs nowadays provide a sizeable amount of credit depending on an applicant’s eligibility. However, with borrowing comes the concept of repayment which needs careful planning to prevent piling huge debts. To make the best utilisation of the fund available, borrowers must take some time to understand the process of repayment of housing loan elaborately. 

How is a home loan repaid?

Repayment includes paying the outstanding principal along with the applicable interest as the cost of borrowing. A house loan is repaid in small and manageable EMIs each month throughout the borrower’s preferred tenor. EMI or Equated Monthly Instalments are fixed amounts comprising certain portions of both the principal and the interests payable. EMIs are determined by the lender based on an amortization schedule, which shows all the payments until the tenor ends. 

The EMIs towards housing loan repayment usually start after the construction is completed and borrowers take possession of the property. Payments should be made on a fixed date every month.

Tips to make repayments stress-free

Here are a few tips for borrowers to repay their loans easily:

Trying for a lower interest rate 

Borrowers can approach the housing finance company which offers a lower housing loan interest rate. They can check out the tips to decrease their interest rates effectively so that outflow towards repayment is affordable.    

Making a bigger downpayment 

Only 75% – 90% of the property’s market value is sanctioned as home loans. The rest needs to be paid by the buyers. Instead of going for a lower down payment, borrowers can pay a bigger amount so that a lesser loan value sufficiently finances the remaining. This would incur a lower interest which eventually makes the repayments affordable. 

Choosing a shorter tenor 

While HFCs offer tenors up to 30 years for repayment, it is beneficial to opt for a shorter one. While the EMIs would be bigger, the total payable interest will be low. This simply means that individuals don’t have to pay excess for borrowing the fund. 

Lowering EMIs by part prepayments 

If individuals have extra earnings from their work, they can make part prepayments towards the outstanding principal. This eventually reduces the EMIs, thereby making repayments easier. 

The best tool available for assessing repayment is a home loan EMI calculator. This online calculator helps borrowers know the estimated EMIs on their housing loans instantly 

The EMI calculator also allows borrowers to adjust their entries and try different combinations before finalising a lender. 

How is the housing loan process?

After making the assessments, borrowers can proceed to apply for housing loan with an online application form. Eligible candidates are likely to receive quick approval if they meet all the criteria.  

With housing finance companies, they can also look for pre-approved offers that make the process of loan application easier and faster. Such schemes are applicable to a host of financial products such as home loans, loans against property and more. They need to provide their name and contact number to check their pre-approved offers instantly.   

However, before applying, borrowers must keep all the documents required for home loan for salaried person as well as self-employed applicants ready. 

List of documents to submit 

Documents needed for a home loan are:

  • Documents of the property like No Objection Certificate from builder or housing society, stamped agreement, allotment letter or sales deed, occupancy certificate, construction cost estimate, etc. 
  • Proof of identity and address like PAN card, Aadhaar card, voter ID, passport, utility bills, etc. 
  • Proof of income like account statements, salary slips, etc.
  • Proof of business vintage for self-employed applicants

Lastly, applicants must note that principal repayment of housing loan is eligible for tax benefits under section 80C of the Income Tax Act of India, 1961. They can claim up to a maximum of Rs.1.5 lakh per annum. The section also allows benefits for payment made towards registration charges and stamp duty. They can enjoy this deduction once the construction of their residential property is complete.