Q. What is a Home Loan?
A. Home loan is a loan disbursed by a financial institution for purchasing residential property whether for self-occupation or rental income purposes. Here, the lender holds the title of property (as collateral) until the loan is paid back in full along with interest. It is generally for a longer tenure of somewhere between 5 and 25 years as the amount is of higher value which takes time to get repaid.

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Q. What is floating rate home loan?
A. If the interest rate on the loan varies during the loan period due to fluctuations in market conditions then it is called floating rate home loan. For instance if the Reserve Bank increases loan rates, then people with flexible rate home loan will suffer an increase in the amount of EMI being paid for the particular loan.

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Q. What is a fixed rate home loan?
A. Fixed rate home loan is at a predetermined interest rate during the loan period, irrespective of market conditions.

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Q. What is reverse mortgage?
A. A reverse mortgage is for senior citizens (above 60 years of age) to apply for a loan and avail 60% of the value of the residential property he resides in and retain the right to continue to reside there. The maximum tenure for this loan scheme is 15 years.

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Q. Is there any tax benefit on getting a home loan?
A. The tax benefit on home loans is given both on repayment of the principal amount and on interest paid:

• Repayment of the principal amount - Under Income Tax Section 80C with a maximum tax deduction of Rs. 150,000.
• Repayment of the interest rate on home loan- Under Income Tax Section 24, with a maximum deduction limit of Rs. 200,000.

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Q. What is an amortization schedule?
A. Amortization is a break-up that shows the proportion of principal and interest payments for each EMI paid on a loan along with the amount outstanding after each payment, till the loan balance reaches zero.

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Q. What is EMI? How is it calculated?
A. An equated monthly installment (EMI) is the amount of money that is paid back to the lender on a monthly basis. It is essentially made up of two parts, the principal amount and the interest on the principal amount equally divided across each month in the loan tenure. The EMI is always paid up to the bank or lender on a fixed date each month until the total amount due is paid up during the tenure.

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Q. What’s the maximum amount that I can avail for a home loan?
A. The amount of loan you can avail depends multiple factors such as your salary, education qualifications, employer/business, years of experience, growth prospects. Generally, most banks use 30-40% of your gross monthly income as your loan EMI amount to decide what amount of loan to give you.