While home loans sound as the gateway to the dream home, do we ponder, if , for once, to think and analyse, as to what does the bank or banking institution that one looks at as a donor of money, require from the consumer or loan taker in this case , in return for some security.
In case one finds this concept absurd and rather rude, they should note that it is for the safety, extreme surety on behalf of the borrower as well as a safety on behalf of the lender, in this case , the bank offering the home loan; that the financial institution is not exploited by fraudulent activity and is legally safe and secure from all and any fraudulent people and fraudulent plans and fraudulent activities.
This, the bank does (and also, takes), in order to be prevented from defaults and payment delays. This is a measure taken by a bank offering a large amount of money in the form of a home loan, so that it does not go bankrupt , in itself while lending money to people who come in the form of customers and loan takers.
Enough of the introduction. Let us get to the content and purpose of this essay.
So, what are the securities that bank require from us, the loan taker, in order to give us a home loan, specifically?
Now we all dream of owning a house bearing our respective name plates. In cosmopolitan and metropolitan cities such as Bangalore, Chandigarh, Mumbai , our capital city, Delhi , and Kolkata, it really costs a lot if you stay in a rented house. The cost of staying itself can go up to more than your actual income and salary!
Hence guided by some common sense, people have taken a preference to to buy their own houses and pay equated monthly income (EMI) on home loans they take in order to buy a property or a house.
After selecting the property one wants to buy, they need to apply for a home loan in banks or housing finance companies. Once the banks or the housing finance companies approve their home loan , they have to provide banks with a security against their respective home loan.
Generally, the first mortgage of the property that is the title deed has to be provided to the bank as security against the loan. Banks or housing finance companies or such banking institutions ensure that the property is free from any concern that could adversely affect the property.
Mostly, the banks or housing finance companies asks the borrowers for down payments which becomes as the borrower’s contribution in the creation of the asset. If one is able to put a lump sum amount as down payments at first while they are availing of the home loan from the bank initially, then it will reduce the loan amount that they are required to take from the banks or housing finance companies, or banking institutions.
Lets give an example for better understanding.
For instance, one is buying a house that costs Rs. 40 lakh. For the possibility , that , if suppose, they make a down payment of Rs. 15 lakhs, then they must take a home loan of Rs 25. lakhs from the bank. However, and as far as common sense guides us, one needs to be financially sound to make such a hefty down payment!
Some banks or housing finance companies could also ask for collateral security. It could be anything considerable, be it their life insurance policies, the surrender value of which is set at a percentage to the home loan, anything relevant. Other security collateral can be pledge of shares or securities as well as investments investments like National Saving Certificates (NSC) or Kisan Vikas Patra (KVP).
To give a conclusion, we thus conclude and round off by saying, that one should be financially well prepared and sound before applying for a home loan because banks can be very merciless indeed.
As one has to, make it mandatory to submit the title deeds and other valuable documents to the banks or housing finance companies as security, it is better if they keep photocopies of the documents before submitting them, so that they can use the photocopies for reference in future, if any problem arises, vis a vis the bank and borrower.