Home loan against fixed deposit is a smart way to raise funds to purchase a new home. Typically, FD issuers offer you loans for up to 90% value of your FD.
The loan amount you can avail against your FD depends on whether it is a cumulative FD or a non-cumulative FD and varies for every issuer.
An important thing to keep in mind about availing a home loan this way is that you may not be able to avail of the loan immediately. You can confirm the terms for this with your FD issuer.
You can claim a deduction of up to ₹50,000 on the home loan interest payable in a financial year, according to Section 80EE. Note that only first-time home buyers are eligible for these tax benefits.
As per Section 24 (b), you can claim deductions of up to ₹2 Lakhs on the interest amount you pay towards the loan.
You can get a home loan against a fixed deposit by following these steps:
Check the eligibility criteria set by the fixed deposit provider that you need to meet to get the required funds against your FD.
If you are eligible for a loan, check the loan amount that the lender is offering against your FD. Most lenders offer up to 90% of the FD amount as a loan.
Check the documents that you need to submit to avail of the loan and keep them handy.
Submit your loan application along with the required documents to the lender for verification.
After the verification process, the lender will approve or reject your application. Once the lender approves your application, you need to accept the offer and sign the agreement.
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The repayment tenure for a home loan against a fixed deposit is generally the term of the fixed deposit. This means that you need to repay the home loan amount before the maturity of your fixed deposit.
Generally, the interest rates are 1-2% higher than the interest rates of the FD.
Yes, first-time home buyers can claim a deduction of up to ₹50,000 on the home loan interest payable in a financial year. Additionally, you can enjoy deductions of up to ₹2 Lakhs every year on the interest paid.
If you fail to repay a home loan against a fixed deposit on time, the lender can legally recover the home loan amount by foreclosing your FD.
Yes, you can repay your home loan against a fixed deposit before the tenure ends without incurring any prepayment charges.
No, you cannot withdraw a fixed deposit if you have a home loan against a fixed deposit. This is because the fixed deposit is pledged as collateral against the home loan. You cannot withdraw it till you repay the entire home loan.