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Home Loan FAQs: Things you must know

Friday, July 14, 2017

Taking a home loan is almost a lifetime commitment. Hence, it is imperative that you are thoroughly aware of what you are getting into. These Q&As should help

What is the difference in terms of paperwork and sanction between buying a flat in a new project and a resale transaction?
There is no major difference in terms of paperwork in case of a flat directly purchased from a builder or a resale transaction as the basic documents to be obtained remain the same.

If I am buying a flat directly from a builder, what documents are required?
In case of purchase of a flat directly from the builder, the following are the documents that have to be necessarily deposited with the finance company in order to avail a housing loan:

  • Original allotment letter
  • Original cash paid receipt
  • Legal opinion in respect of the property certifying that the landowner/builder  has got clear marketable unencumbered title to the property and no equitable mortgage.
  • Khata / 7x12 extract.
  • Completion certificate
  • Sanctioned building plan
  • Copy of the latest tax paid receipt
  • Original deed of conveyance of land conveying the undivided interest in land, common areas and facilities along with original agreement for construction entered into with builder.

And if it is a resale transaction?
In case of a resale transaction, the following are the documents to be deposited with the finance company

  • Original absolute sale deed executed between the Vendor and the original owner
  • Original absolute sale deed executed between the Vendor and yourself
  • Original possession certificate
  • Original Khatha / 7X12 extract
  • Sanctioned building plan
  • Legal opinion in respect of the property certifying that the land owner/builder/developer has got clear marketable unencumbered title to the property and no equitable mortgage or any other mortgage subsisting.

What are the safeguards that one must take?
So far as safeguards to be taken either in a resale transaction or otherwise are concerned, it is important to ascertain the marketability of the title of the property. The original documents including the parent documents should be carefully studied, in order to ascertain that there are no restrictive clauses in the conveyance deed and the property is not encumbered by way of mortgage by deposit of title deeds. Further, one also needs to find out whether the property to be purchased is free of any charge of any nature by obtaining an encumbrance certificate from the registrar's office as the said certificate will project the name of the present owner as well as the name of any mortgagee, if the property is mortgaged by way of registered mortgage.

Is it necessary that the flat agreement should be only in the name of the person taking the housing loan? Can the first name be of another family member?
If you wish to avail a housing finance facility from any finance company, it is imperative you own the security provided to the company. Thus, if you wish to purchase a flat by availing a loan, the flat should be registered in your name either exclusively or jointly. However, in the case of joint ownership the co-owner should also be co-applicant in the loan transaction along with you.

It is difficult to find a buyer for our existing flat. Can we get a loan for a short period until we can find a buyer?
You can avail of a short-term loan such as bridge loans/ mortgage loan. This is done by mortgaging your property by depositing the title deeds of your flat with the finance company/bank from where you intend to avail the loan. The major difference between a housing loan and a mortgage loan is that the interest rate in a mortgage loan is higher in comparison with the former and for a mortgage loan availed you do not get any tax benefits which are available for long-term housing loans.

How is the loan disbursed?
So far as disbursement of the loan amount is concerned it is directly made in favour of either the builder or the vendor and paid only at the time of registration of the property.

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