Housing Finance
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The document discusses housing finance. It describes the different types of housing finance like direct finance, supplementary finance, and indirect finance. It discusses the purpose, quantum, eligibility, and terms of housing loans. Housing loans are typically provided for purchasing or building a house. The loan amount usually ranges from Rs. 100,000 to Rs. 2 crores. Individuals over 18 with sufficient income are eligible, and loans are typically repaid over 15-25 years. Housing loans have a margin of 80-85% of the property cost and are secured by a mortgage on the property. Interest rates can be fixed or floating.
Housing Finance
- 1. Housing Finance Introduction Types of Housing Finance Purpose, Quantum Eligibility and Terms of loan Margin, Interest, Security Housing Finance Retail Banking Chapter 15
- 2. Introduction A housing finance is refers to finance provided to individuals or group of individuals including co-operative societies for purchase/build house or houses. The R.B.I. has states that banks are free to decide the guidelines on accepts such as age of dwelling units, repayment schedules, margin and security with the approved of their board. Housing Finance Retail Banking Chapter 15
- 3. Types of Housing Finance The different types of Housing Finance are shown in the chart. Types of Housing Finance Direct Finance Supplementary Finance Indirect Finance Finance provided Finance provided Finance provided Finance provided to purchase For letting it out for To other housing another house for Rent alteration/repairs financial institution Purchase of plot Financed provided provided after obtaining Buy an old house borrower Declares that “Pain Passu” or he intends to construct “Second Mortgage” a house on the plot Housing Finance Retail Banking Chapter 15
- 4. Purpose, Quantum The housing loan provided for; 1. Purchase of flat/house or purchase of plot of land. 2. For renovation/repairs of an existing house/flat. 3. For extending an existing house. 4. Short term bridge finance while purchasing another house/flat. The quantum of loan is vary from bank to bank normally bank stipulate minimum of Rs. 1,00,000/-. The maximum would depend on the bank and it could vary from Rs. 10 lakhs to Rs. 2 crores or more. For repairs the amount is less, around Rs. 10 lakhs. Housing Finance Retail Banking Chapter 15
- 5. Eligibility and Terms of loan All individuals are eligible who are above the age of 18 years having sufficient income to repay the loan. The loans are not normally extended to the individuals who are above 58 years of age. The amount of advance will be based on individuals gross pay or net take home pay. The criteria may be differs from bank to bank as per the suggestion of R.B.I. The terms or the period of repayment is also depend on age of buyer. Normally it is from 15 years to 25 years. The main aspect behind this is the amount of loan along with interest should be repaid before the person retires. Loans provided for self employed personals are some time a shorter duration. Housing Finance Retail Banking Chapter 15
- 6. Margin, Interest, Security The housing loan is normally between 80% to 85% of cost of the house/flat. The entire amount is rarely advanced by nationalized bank. Some private banks are now financing 100% amount. For housing loan there are two types of interest rate. One is fixed for entire tenure of the loan and the other one is floating. Which is charging through out the duration of loan. The security in respect of housing finance is the property purchase with a mortgage is taken on the same. For additional security guarantee may be taken. Housing Finance Retail Banking Chapter 15
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