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Realty Guide: Finance

How much loan am I am eligible for?
Your repayment capacity will help decide how much you can borrow. Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation and savings history.
What is an annual rest?
When interest is calculated on annual rests. Principal repayments are credited at the end of the financial year. When interest calculated on monthly rest. Principal repayments are credited at the end of every month.
Is the interest rate fixed for the duration of the loan?
 There are usually two schemes available, (a) Fixed Rate Loans (b) Adjustable (Variable) Rate Loans. Under the Fixed Rate Home Loans the rate applicable on the date of disbursement remains fixed during the entire duration of the loan.
What is an EMI?
You repay the loan in Equated Monthly Instalments (EMIs) comprising principal and interest. Repayment by way of EMI commences from the month following the month in which you take full disbursement.
What is pre-EMI interest?
Pending final disbursement, you may pay interest on the portion of the loan disbursed. This interest is called pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement upto the date of commencement of EMI.
What is the size of the EMI?
 The EMI is 1/12th the Equated Annual Instalment. The size of the monthly instalment comprising principal and interest depends on the quantum of the loan, the interest rate applicable and the term of the loan. Please refer to the EMI Calculator for further details.
What security will I have to provide?
Typically the security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary.

Interim security may be additionally required, if the property is under construction. Collateral or interim security could be assignment of life insurance policies, the surrender value of which is at least equal to the loan amount, guarantees from sound and solvent guarantors, pledge of shares and such other investments that are acceptable.

Please do ensure that the title to the property is clear, marketable and free from encumbrance. There should not be any existing mortgage, loan or litigation which is likely to affect the title to the property adversely.
Can I repay the loan ahead of schedule?
Yes. You can repay the loan ahead of schedule. An early redemption charge is payable which varies from time to time and from scheme to scheme.
What tax benefit do I get on a loan?
Resident Indians are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. Interest repayment of Rs. 75,000 p.a. (for a loan on or after April 1, 1999) can get you a tax saving upto Rs. 25,000 p.a. Moreover, you can get added tax benefits under Sec 88 on repayment of principal amount upto Rs. 10,000 p.a. which can further reduce your tax liability by Rs. 2,000 p.a.
Does the Agreement for Sale have to be registered?
In many states in India, the Agreement for Sale between the builder and purchasers required by law to be registered. You are advised, in your own interest to lodge the Agreement for registration within four months of the date of the Agreement at the office of the Sub-Registrar appointed by the State Government, under the Indian Registration Act, 1908.
Are there any restrictions on transfer of immovable properties? In terms of Chapter XX C of the Income Tax Act, 1961, the Central Government has the first option to purchase certain immovable properties exceeding certain value and as such transactions covered by this can be proceeded with only after complying with the requirements prescribed therein.
Does the property have to be insured?
You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, during the pendency of the loan and to produce evidence thereof each year and/or whenever called upon to do so.
By vayaM CS