If you are an NRI, there are a few pre-requisites to avail a home loan. You would need a resident Indian as a co-applicant or co-borrower or co-owner of the property you wish to buy. Some banks may also ask for the educational qualification and the time spent overseas while approving a home loan for an NRI.
What you must consider is that the maximum loan tenure possible for a salaried person ranges from 20 to 30 years. For a self-employed individual, it is usually 20 years. You must factor your repaying capability while choosing the tenure of the home loan. If you are going for a higher value instalment, keep in mind the lifestyle you would need to carry during the tenure of the loan. It’s always a better to keep the instalment amount lower, as you can always prepay when there is surplus money with you.
Most lenders in India provide home loan on a floating interest rate, while a few also offer fixed interest rate option. The mixed interest rate home loans remain fixed for a predetermined period and then charged based on the floating rate. Even though few banks offer loans at a fixed interest for NRI’s, the interest rate for the same is usually steep. The lenders also allow borrowers to change their loans from floating to fixed or vice versa by paying a switching fee. In the case of Indian residents, if a female is the joint owner of the property, you can avail of a five-basis points reduction in the interest rate.
The interest paid on the home loan and the home loan repayment is eligible for tax deductions. If you’re an NRI and filing your tax returns in India, you are eligible for a reduction of Rs 1.5 lakh on repayment of housing loan under section 80C and up to Rs. 2 lakhs on interest payments if the home is vacant. If the house is on rent, then the entire interest payable will be tax exempted.
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