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RBI Guidelines for Home Loans

By Finserv MARKETS - Apr 18,2019
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RBI Guidelines for Home Loans

The Reserve Bank of India (RBI) is the central banking institution in India. RBI is a regulator and supervisor of Indian Banking System, and it also frames policies and guidelines for the banks. Every bank in India has to follow this framework laid down by the RBI by contract. RBI creates laws for lending and borrowing and also oversees transactions of these institutions. RBI also creates rules and regulations for Loans, let us discuss Home Loan in detail:

Guidelines Related Prepayment Charges

Home Loans come with massive interest rate and duration. Home loans repayment tenures can range anywhere between 10 to 25 years. Every borrower wants to reduce home loan interest rate, as we all know during the initial repayment stage, a major chunk of the EMI is the interest and then it moves to the actual loan amount. So, a lot of borrowers opt for some kind of prepayment if they have surplus income. Many banks discourage it and penalise the act as it reduces their income. But at Finserv MARKETS no charges are levied on prepayment of Bajaj Finserv home loan.

Home Loan Balance Transfer is another option that allows you to change your borrower midway during the tenure of your loan. If during the course of your loan, you realise your loan is too expensive, you get to change your borrower. Balance transfer is essentially foreclosing the current loan and taking a new loan for the unpaid principal amount. However, while making the switch, banks charge a penalty between 1 to 3% on fixed interest rate loans.

Guidelines Related to LTV (Loan to Value) Ratio

In 2015, RBI had announced certain borrowing criteria for borrowers from lenders. The criteria listed said that a borrower can take up to 90% of the loan if the value of the property is less than or equal to 30 lakhs. For loans between 30 lakhs and 75 lakhs, loan to value ratio is 80% and loans above 75 lakhs, the loan to value ratio of 75%.

Guidelines Related to Home Insurance

RBI has not made it mandatory for any institution to sell Home Loan Insurance with the Loan itself. Banks can at times be pushy and try to sell the loan for their profit but the final decision to purchase or not is to be decided by the borrower. The borrower also has the right to buy the same insurance but from another vendor. Therefore, no borrower is bound to purchase any top-up insurance mandatorily when they get a Home Loan.

The benefit of getting a home loan insurance is that this form of insurance covers the EMI of the house in an unfortunate incident of the death of the borrower. If the borrower is the only bread winner of the house, the family does not have to lose the roof above their head. Home Loan Insurance takes it upon them to pay off the EMI so that the family members get to keep the house. Even though this form of insurance sounds very reassuring there is no obligation on the borrower to purchase the insurance mandatorily.

Looking to purchase a new house? If yes, then we are here to help. With Finserv MARKETS, applying for Bajaj Finserv Home Loan is easy, quick and completely hassle-free. What’s more? Your home loan comes with a plethora of benefits like EMI holiday, customized offers etc. So why wait? Head over to Finserv MARKETS, and apply for a home loan on our website today.!

Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522