A List of Home Loan Terminologies
Down Payment
Lenders are usually permitted to disburse up to 90% of the property’s value as a Home Loan, leaving the remaining amount to be funded by the home buyer themselves. The money you put down by yourself is called the down payment amount.
Floating Interest Rate
A floating interest rate is sensitive to market conditions. If you choose a floating interest rate for your Home Loan, then your interest rate can both increase and decrease through your repayment tenor, in accordance with the market conditions.
Fixed Interest Rate
Fixed interest rates are unaffected by market conditions. As the name suggests, it is fixed for the tenor until reset by the lender.
Tenor
Tenor is the repayment timeline of a Home Loan specified by the lender. You must pay off your loan amount, both the interest and the principal amount, within the allocated period. Lenders commonly offer a tenor of up to 32 years.
Resale
Resale is a term that indicates that you are not buying a home directly from the builder but from a prior owner who is willing to sell it.
Joint Ownership
Joint ownership indicates that the property is jointly owned by two or more individuals. In the case of joint ownership, the financial responsibility of loan repayment can befall on all homeowners.
Sanction Letter
The Home Loan sanction letter is a formal letter that confirms the loan approval, details and sanction by the lender. The sanction letter is the legal proof of your Home Loan eligibility and approval.
Additional Read: Top Five Ways to Manage Your Home Loan
Collateral
Home Loans are big-ticket loans for which lenders request security, against which they can sanction the loan. Your collateral is an asset you need to provide the lender against the loan, and in the case of a Home Loan, it is the property you want to buy through the loan sanction.
Disbursement
The processing of disbursing the loan amount is called disbursal. Lenders can initiate the disbursement process once your profile and documents have been verified to their satisfaction. Home Loans, upon prior agreement, can be disbursed in one go or can be released to you in partial disbursements.
LTV or Loan-to-Value Ratio
The loan-to-value ratio tells you what percentage of the property’s value can an applicant get as a loan amount – in the case of a Home Loan. Lenders can sanction an amount starting from 70% of the property’s value, going up to 90%, of the Home Loan amount.
Equated Monthly Instalments or EMIs
EMI or an Equated Monthly Instalment is the monthly payment that you make to your lender as a part of your repayment schedule. The EMIs account for both the Home Loan principal amount and the interest accumulated, which the borrower is liable to pay back in full.
Foreclosure
When you pay off your loan amount in full before the end of your tenor, then it is called a foreclosure. To foreclose your Home Loan, you have to repay the entire outstanding amount in full – in one go. There is no additional fee for individuals with floating interest rate Home Loans, should they choose to foreclose their Home Loan accounts.
Also Read: Consider These Factors Before Foreclosing Your Home Loan
Final Word
If you are planning to avail of a Home Loan, we hope this glossary of terms will help you research and negotiate a satisfying deal with your lender.
DISCLAIMER:
While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.
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