Banks and non-banking financial institutions lend for purchase or construct a new home. For a smooth home loan (also known as housing loan in some banks) process, the prospective borrower must submit a duly filled application along with important documents such as identity proof, address proof, income proof, etc. If there is a co-borrower they must submit the same set of documents as the co-applicant, and they must sign the application form too. The prospective borrower must also mention the amount of loan and tenure of loan required in the loan application.
If the prospective borrower has already short-listed a property, he/she must provide the details in the form and submit photocopies of the property-related documents for legal and technical assessment. This will make your Home loan process much easier. Mention the amount you wish to borrow. Fill in additional details like your income, date of birth, employment details, etc. For a smooth legal and technical assessment of the property, it is advisable to submit all the available documents in one go. These include the complete chain of title documents (in case of a resale property), sale agreement with the builder, NOC (no-objection certificate), OC (occupancy certificate), and any other document that the Bank may require to verify. We will also carry out a technical inspection of the property to check if the property is constructed as per the sanctioned plans and other applicable norms and to assess the market value.
However, Identifying a property for purchase is not just about the price of the property, locality, or amenities like a gym, club swimming pool, etc. Along with identifying a property that suits your above requirements, you have to consider two important aspects before entering into the sale agreement with the vendor. The first job is to ascertain whether the seller has absolute title over the property. The second aspect is that you need to find out whether the construction is legal and authorized. Your job is made slightly easier when you apply for the loan, as the lender also looks into the above aspects before releasing the loan, still, you need to be in the loop. Therefore, once you identify a property for purchase, you have to go for preliminary verification of title deeds of the identified property on your own. If you are not conversant with the method of verification of title deeds, you need to take the help of someone who has at least rudimentary knowledge of verification of title deeds. Preliminary verification of the title would avoid unnecessary legal expenses if the vendor does not have the title on the face of the available documents.
The lender would appraise the eligibility of the borrower for the loan requested based on income, liability, cash flow, and credit score of the applicant to accept or reject the loan eligibility based on information provided in the application. During the period of credit appraisal of the home loan process, the Bank conducts a field credit investigation, wherein the Bank Manager or their representative may call or visit the applicant’s home/office, to validate the information provided in the application form. If the loan application is approved, the Bank will sanction the loan amount and issue a Sanction Letter. The Sanction Letter will contain the loan amount, interest rate, and other important details.
Taking a Home Loan at a fixed interest rate or floating interest rate
Fixed interest rate Home Loans will have an interest rate fixed from start to end of the loan. This means the EMI amount will remain fixed throughout the loan repayment period. These loans are suitable for people who prefer stability and wish to avoid fluctuations in repayments. However, the fixed interest rate on loans is usually higher than the floating interest rate. On the other hand, floating interest rate Home Loans have an interest rate that is subject to change based on market conditions. This interest rate is linked to the Bank’s base rate or Repo Rate set by the Reserve Bank of India (RBI). This means the EMI amount can increase or decrease during the loan repayment period.
Loan disbursement:
After the sanction letter is issued the applicant has to submit the original title documents to complete the home loan process. The bank will search at the Sub-registrar’s office to ensure no encumbrance is recorded on the subject property. The borrower must sign the loan agreement before the lender hands over the disbursement. After verifying the documents, the lender will disburse the loan to the property seller or builder. The property on which the loan is obtained shall be mortgaged to the bank.
Key steps include:
- Title Verification: Ensuring clear title and absence of encumbrances
- Agreement to Sell: Outlining the terms and conditions of the transaction
- Stamp Duty and Payment: Completing statutory payments
- Registration of Sale Deed: Registering the transaction with the local sub-registrar
- Possession and Handover: Physical transfer of the property
- Utility Transfers: Updating ownership of services such as electricity and water
Essential Documentation
Some of the crucial documents involved in a property transaction include:
- Registered Sale Deed
- Encumbrance Certificate
- Approved Building Plan and Occupancy Certificate (if applicable)
- Property Tax Receipts
- Khata Certificate/Extract (in certain states)
In India, under certain conditions, particularly when establishing an equitable mortgage, the MODT can be registered in lieu of a formal mortgage deed. The borrower declares in the MODT that they have deposited the property’s title documents with the lender of their own free will, in consideration of a loan. Unlike a registered mortgage, this method does not require a formal mortgage deed; instead, the title deeds are deposited with the lender and acknowledged via the MODT.
Registration of MODT:
When duly registered with the relevant sub-registrar’s office, the MODT provides legal sanctity to the mortgage arrangement and serves as an essential document in safeguarding the interests of both the borrower and the lender. It ensures the lender’s right to enforce the mortgage in the event of loan default, thus facilitating debt recovery.
Need for Legal Assistance
Given the complexity and risks associated with real estate transactions, legal counsel is strongly advised. Professional guidance helps ensure that all legal and procedural formalities are properly observed, minimizing the risk of future disputes or liabilities.
Loan disbursement:
After the sanction letter is issued the applicant has to submit the original title documents to complete the home loan process. The bank will search at the Sub-registrar’s office to ensure no encumbrance is recorded on the subject property. The borrower must sign the loan agreement before the lender hands over the disbursement. After verifying the documents, the lender will disburse the loan to the property seller or builder. The property on which the loan is obtained shall be mortgaged to the bank.
Related Posts:
