The RBI, or the Reserve Bank of India, has laid out a set of guidelines pertaining to housing loans lending institutions offer to the general public. These guidelines have been drafted keeping the best interests of the lenders and borrowers in mind. It is important for borrowers to be cognisant of RBI guidelines for home loan and ensure that their lender is in compliance with them.
The Loan-to-value ratio can be defined as the percentage of the home value that can be funded through a home loan. According to the RBI guidelines for the same, if the property value is within the range of ₹30-₹75 Lakhs, housing companies can only fund up to 80% of the value of the property as a housing loan. If the property costs more than ₹75 Lakhs, housing companies can allow up to 75% of the property value as a housing loan. However, banks and housing finance companies are allowed to fund up to 90% of the price of the home. No bank or a housing finance company is allowed to fund the entire property cost for a home loan. However, the maximum amount a borrower can avail is at the discretion of the lender and depends on the applicant’s personal eligibility.
If the borrower wants to partially or fully prepay their outstanding home loan balance, he or she can do so for zero additional cost. Previously, housing companies charged close to 5% of the amount being prepaid as foreclosure penalties to make up for the losses in the interest revenue. However, back in 2014, RBI eliminated home loan prepayment penalties which attract interest according to the floating rate system. However, the borrower will have to pay up to 3% of the amount being prepaid if their home loan attracts an interest rate according to the fixed-rate system.
Home loan borrowers are also allowed to get their outstanding home loan balance transferred to some other lender to enjoy lower interest rates. To transfer the home loan balance to a different lender, the borrower will have to get a loan from a different lender and foreclose the loan taken from the original lender by paying off the outstanding amount. After the borrower has done that, he or she will repay the loan to the new lender as per a new EMI schedule. Previously, a lender had to face the brunt of hefty foreclosure charges. Now, the RBI has eliminated the penalties for foreclosing home loans given under the floating rate system.
Some general things that the future house loan borrower must keep in mind are:
The borrower must fulfil the home loan eligibility criteria laid out by the borrower and must have a CIBIL score of more than 750
Borrowers must submit documents verifying their identity and income to get the home loan
The borrower must agree to the laid out terms pertaining to home loan repayment and sign on the document(s) stating the same
The apex bank also recommends that the borrower must get housing loan insurance to mitigate the burden of home loan repayment upon the family members in the event of their demise.
A home is most probably one of the most expensive things one will buy, and buying one is a big step in itself. It is due to that reason why many people get house loans. Hence, everyone about to get a housing loan must know about the RBI guidelines and then make an informed decision regarding the same. A user can also get a home loan from Bajaj Markets at attractive interest rates, with flexible loan repayment tenures.