The first step of fulfilling your dream of owning a home is by taking a home loan. Instead of blowing up all your savings on buying a new home, it will support you financially. The final stage of the loan process is the disbursement of home loan. So, what is disbursement? It is the stage when the lender pays out the loan proceeds to the seller or the builder depending on the terms of the agreement you have entered into with the lender.
After you have submitted all the required documents to the lender, followed by a close survey, the time has come to get the cheque. And, the journey has not been a smooth one because you had to cross the necessary legal and technical viability procedures along with the credit appraisal process.
However, not all loans are of the same kind. It all depends upon the nature of the loan and the kind of property you want to buy. For instance, in the case of resale or ready-to-move-in property, the full and final disbursement of loan is made in one go. While for properties under-construction, only partial loan disbursement is made, which means that money would be released in stages. Let us understand the two types of loan disbursements available for a home loan.
1. Full disbursement
When the bank or banking institution pays the full loan amount to the loan taker all at once, of a sudden it is called full disbursement of loan. However, the final disbursement of loan does not mean that you will not have to set your foot in the bank ever because, from the lender’s perspective, it is just the beginning.
2. Partial disbursement
When the payment is done, constantly in stages. Generally, if you buy an under-construction property then, the bank or banking institution disburses the payments, slowly, as the construction progresses. This kind of process is called partial disbursement. Moreover, you will be charged interest on the disbursed amount at a given point in time. This interest component on the disbursed loan amount is called the Pre- Equal Monthly Instalment (Pre-EMI). The process will then continue until the final disbursement of loan takes place.
3. The Home Loan Disbursement process
The housing finance company will disburse the home loan amount on completion of the following stages:
1. The property you wish to buy has been technically appraised;
2. All legal documentation for a home loan has been completed;
3. You have invested your own contribution in full by making the down payment
You can then make your request for disbursement of the loan amount offline or online.
To make your request offline, you simply need to visit the office/branch of the housing finance company and the appointed representative will help you with the proceedings.
Making your disbursement request online will require you to visit the website of the housing finance company. You need to log in with your user ID/loan account number and password. Click on the ‘disbursement request’ tab, upload your ‘own contribution’ details, and update the status of the property. For a property under-construction, you need to fill in the details of the stage of construction and upload the necessary documents including the builder’s demand letter, architect’s certificate, etc. For a ready property, you simply need to add the demand letter date. You will then need to add the payment details, this would be the builder in case of an under-construction property; it would be the seller in case of a ‘resale’ property. You can make your online disbursement request from the comfort of your home or office.
The loan amount will get disbursed either in stages or in full depending on the stage of completion of construction. The disbursement schedule will be stated in the loan agreement. The lender will consider only the construction stage and not any installment payment timelines specified by the builder.
In case of full disbursement of loan, your EMI payments may start from the month following the month in which the full disbursement has been made. You can check the EMI schedule in the home loan agreement for the exact date of disbursement. In case of partial disbursement of home loan, you may need to pay ‘pre-EMI’ interest till full disbursement is made after which the EMI payment starts.
All banks charge interest on the loan amount disbursed, from the day the cheque/ pay order is made and not from the day the cheque is received. Therefore, avoid extra payment of interest on the disbursed loan amount by accepting the cheque on the same day when it is signed.
Disbursement of home loan is the path to fulfill your dreams of buying a new home. The home loan process is not as strenuous as it sounds. If you are well-prepared with an error-free application form and meet the criteria to be eligible for a home loan, your loan will be processed very smoothly.
Also, read about how to reduce home loan EMI.