Obtaining a loan for purchase of land, construction of a house or for acquiring a built house is one of the most cumbersome and challenging banking activities. The banks subject the customers, who intend to shop a home loan product, to rigorous and time consuming formalities. In the end, most of the time, it’s entirely the luck of the customer to get a home loan sanctioned and disbursed. To be precise, this popular banking product, home loan, despite being cheapest in the retail loan basket of the banks, is not so popular for the kind of hassles faced by the customers.
This is actually the impression which most of the customers dish out when asked about their experience in shopping for a home loan product. Even as the banks have tailor-made home loan schemes where terms and conditions and other pre-sanction and post-sanction formalities are detailed out in clear terms, most of the loan applications are either rejected or sanctioned with loan amount much below the expectations of the customers. This kind of situation leaves the loan applicants dejected as they feel their dream of owning a house being shattered.
There is also a huge section of home loan borrowers who need additional finance midway of the existing loan repayment schedule. Incidents galore where loan appraising officers advise the borrowers to take route of personal loan scheme to avoid ‘rigorous’ formalities required in getting a housing loan sanctioned and disbursed. It’s worth mentioning that personal loans, popularly known as cash loans, carry almost double the rate of interest as compared to home loans. Notably, home loans are also a rich source of getting income tax rebate.
Why do customers feel so much of hassles in obtaining a home loan? Are banks really discouraging their customers’ access to home loan schemes? There are a host of problems which home loan aspirants face while approaching their banks for processing a loan to fund their dream of having their own house. There may be deficiencies in customer service of banks, but they cannot be blamed wholly for hassles faced by the customers for getting their home loan sanctioned and disbursed. The customers have full access to the home loan scheme details where terms and conditions and other features are explicitly mentioned for their awareness. But it has been observed that most of the customers don’t bother to look at these details and randomly approach the bank for the loan facility. The problem gets complicated as the bank officials most of the time don’t bother to educate them about full details of the scheme. They ask the customers to comply with the formalities, be it pre-sanction or post sanction, not in one-go but in installments. This is what irritates customers the most.
However, customers too have a responsibility. They need to be proactive in understanding the design of a banking product/scheme before applying for the facility. They need to have sound knowledge and the right approach to ensure hassle free financing to meet their needs, such as housing needs.
What are the basic things to note while approaching your bank for a home loan?
First thing is to have access to the full features of the scheme. You may be attracted by a home loan advertisement, but it doesn’t tell you about the host of formalities you have to comply with. By having full features of the scheme in hand, you can check your eligibility in terms of your income, age, and other specified terms and conditions. Otherwise, submission of improper documents not in line with the features of the scheme can become the basic cause of rejection of your loan application just at the first stage. Here you have to also understand that you will be charged a processing fee upfront by the bank. Once your application is found ineligible for the loan, you won’t be able to get a refund of the processing fee. It happens in most of the cases. Very rarely banks refund this fee. So, apply only when you meet the eligibility criteria.
Many customers feel dejected when the bank sanctions less loan amounts. It happens when your repayment capacity, which is determined on the basis of your monthly income, existing loans, nature of employment and most importantly on the basis of your past performance in financial matters, does not warrant sanctioning of full loan amount. Here you can increase your eligibility by getting a co-borrower to get the income slab enhanced.
One more important thing to keep in mind is about the valuation of the property against which you are applying for the loan. It is also a common bone of contention between customers and the banks as less valuation impacts the quantum of finance required by the customer. so, before applying for a home loan, ensure yourself fully apprised about the valuation of the property. Get your property valued beforehand by a bank approved valuer.
What about down payment? Is it mandatory to pay?
Down payment, also called margin, is one of the most important features of a home loan scheme. It is the percentage of the total property value which you have to pay. This is mandatory. Otherwise, you are not eligible to get a home loan. So, before applying for a loan, you need to calculate the amount of down payment which you have to pay as per the valuation of the property against which you are intending to raise a loan. The percentage ranges from 10 to 20 percent across the banking industry.
To be precise, you need to take proactive steps and get yourself fully acquainted with the terms and conditions of a home loan scheme before applying for it. Always cut your cloth according to your size.
What is a Top-Up Loan?
Top-up loan is a finance facility for existing home loan borrowers, By virtue of this facility, a home loan borrower is allowed to avail additional loan over and above the existing home loan.
To be precise, if you are already a home loan borrower and repaying your EMIs regularly, you can avail top-up loan facility to meet your immediate needs. Documents required for a top up loan are minimal in comparison to new loans as your bank already has all your details with respect to your existing home loan.
Notably, J&K Bank has already introduced a top-up loan facility for its home loan borrowers under Individual category with Account status as Standard with no overdues and having completed repayment period of at least three years. The borrowers can avail up to Rs. 25 lakh as top-up loan facility and they can use the funds for personal use without any end use verification.
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author. The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.