Every HFI insists on all co-owners of the property being co-applicants to the loan. In case of acceptable relationships as stipulated by the HFI, the income of the co-applicant can be included in arriving at loan eligibilities.In case of any other relative being a co-applicant to the property, the HFI would not include the income of the co-applicant for the calculation of loan eligibility.
Combination Income clubbing of co – applicants
- Husband – Wife : YES.
- Parent – Son : YES (if only son).
- Parent – Daughter : YES (if only child).
- Brother – Brother : YES (if currently staying together and intend staying together in the new property).
- Brother – Sister : NO.
- Sister – Sister : NO.
- Parent – Minor child : NOT ELIGIBLE FOR A LOAN.
Since the foreclosure laws in India (laws pertaining to recovery of loan by disposing off the property) are still weak it is difficult to re possess the property of an applicant. The HFI, in order to safeguard its interests and to ensure that the repayment of the loan comes on time, insists on a guarantor. Some HFIs require a guarantor in all cases while others insist on a guarantor only if certain requirements are not met.
The guarantor is equally liable to repay the loan incase you default on your loan. By taking a guarantor, the HFI also puts some sort of a moral obligation on you to repay the loan.
Some of the conditions when a guarantor is required are as follows:
- In the case of a sole applicant to avoid the risk of a default in case something goes wrong with the applicant.
- If the applicant’s job is of a transferable nature.
- If the applicant is residing in a city different from the city where he intends to purchase the property.
- Certain industries, typically the software industry, where the likelihood of the applicant going abroad either on assignments or to seek a permanent job is high.
- Absence of a co-applicant to the loan.
- Lack of professional qualifications in a self-employed case.
A guarantor should satisfy all the norms relating to age and income of a normal customer. This is because the guarantor is equally liable to pay the loan in case you default to repay. Some HFIs may allow blood relatives to stand as a guarantor while others may not.
On the death of the co-applicant you have to intimate the HFI with necessary proof. Subsequently if the co-applicant is the main owner or the co-owner you will have to get the property transferred in your name through the Co-op.Hsg.Soc, or the Registrar of Properties and intimate the HFI about the change in the ownership of the property.
In the event of the guarantor’s death, you have to approach the HFI with another guarantor and get the original one replaced with the new one.
In future your guarantor can apply for a loan if he is capable of repaying the installment on your loan (in case of a default in your loan) and the new installment of his loan. If his repayment capacity does not make him eligible for a loan, you have to arrange for a replacement guarantee. This has to be done by releasing your current guarantor and providing your HFI with another guarantor(meeting all specified norms for a guarantor). Once your guarantor is released, he can apply for a loan.
No, most HFIs do not allow for a disbursement before you have put in your contribution. However, in cases, where you avail of finance from a source (like PF), which generally takes a long time to get disbursed, some HFIs agree to partly disburse the loan. Yet it is necessary to put in some money towards the property at least before you avail of a part disbursement from the HFI. You also need to produce adequate evidence that you have got the source of income (sanction letter in case of a loan from PF).
For Example: Suppose the cost of your property is Rs. 10 lacs and you avail of a loan of Rs. 6 lacs from a HFI. Savings of Rs. 2 lacs and a PF loan of Rs. 2 lacs are the sources of your own contribution. The building is about 40% complete and you have put in Rs. 2 lacs out of your savings. You also have a sanction letter from the PF authorities sanctioning the loan to you. However, the time for you to receive a cheque from PF will take about 4 months. Since the building is already 40% complete and the construction is going on in full swing, the builder is pressurizing you for more money. He will also charge you interest on late payments made to him. In such a case, you can approach the HFI for a disbursement by showing them the sanction letter. The HFI will then release you part disbursement. Please note, however, the last disbursement of the HFI will be held back till you invest the PF funds also in the project.
You can switch jobs / leave job for self-employment during the course of your loan. However you have to keep the HFI informed about the same. If your repayment happens by way of deduction against salary, you have to get this deduction from your new employer. Alternatively arrange for PDCs for the installments. A copy of your new appointment letter also has to be sent to the bank for their data maintenance.
Every HFI requires you to hand over the registered agreement before it disburses the loan. What you can do is show the seller the sanction letter of the HFI and pay your contribution that is due to him. Once this is done, enter into a partly paid agreement with the seller. This mentions the cost of the house and the amount paid to the seller along with the balance amount to be paid. The agreement sets a time limit for the balance payment to be made and contains a clause that the agreement would be null and void in case of a failure of payment within the stipulated time. This agreement gets registered and the disbursement is taken from the HFI. The flat purchaser has to take sufficient care to take a proper receipt for the amount paid to the seller. These receipts should cover the flat purchaser’s own contribution and a receipt for the amount paid by the HFI.
Most HFIs do not insist on property insurance. Some HFIs even offer it to the customer as an incentive for a certain period of time. However, if your property is not covered under insurance, it is advisable to go in for an insurance cover on your property. The rates of property insurance are very low and today the rates are Rs. 60/- per lakh of property value for a period of one year. If you decide to go in for a longer tenure for insurance, you can avail of huge discounts being offered by the various insurance companies.
You can sell your property when your loan is still outstanding. However, you need the consent of the HFI to let you sell the property. Based on this consent letter, you can negotiate a sale with potential purchasers. Incase the new purchaser opts for a loan, your loan will get transferred automatically to his name. The new purchaser can take even an additional loan at the time of entering into a loan arrangement with the HFI. In the event of an outright payment by the new purchaser, he will make a cheque favoring the HFI for an amount equivalent to your outstanding principal. This will clear off your loan. For the balance amount, he will provide a cheque in your name. Your property documents will be released only when you have prepaid your entire loan.
You can transfer your loan to a third party. However, you need the consent of the HFI for the same. Based on this consent letter, your loan will get transferred automatically to his name. The new purchaser can take even an additional loan at the time of entering into a loan arrangement with the HFI. In the event of an outright payment by the new purchaser, he will make a cheque favoring the HFI for an amount equivalent to your outstanding principal. This will clear off your loan. For the balance amount, he will provide a cheque in your name. Your property documents will be released only when you have prepaid your entire loan.
Yes, you can take a loan against your existing property. However, the normal home loan cannot be taken. You have to opt for a Home Equity loan where the end use of the finance is not monitored. You can avail of this loan from most HFIs. The terms and conditions and procedures of such loans would be different from that of a normal Home Loan.
Yes, you can request for an increase or decrease on your loan amount at any point of time. Most HFIs charge you fees on the new increased amount. Any excess fees paid in case of a decrease of your loan amount normally gets adjusted towards subsequent payments that you would be making to the HFI.