When you are taking a loan of any kind, it is essential to be aware of the guidelines that govern it. Familiarising yourself with RBI’s guidelines for a home loan ensures that your lender keeps true to government policies and doesn’t overcharge you.
Loan to value ratio
According to the latest reports, the Reserve Bank of India has set new guidelines for home loans. To encourage home loans and make them more affordable, RBI has increased the LTV (Loan to value ratio) to 90% for home loans below Rs. 30 lakh. It means that lenders may fund over 90% of your home value. On the other hand, loans over Rs. 75 lakh have an LTV ratio of over 75%. So, this percentage of your loan can be financed via a home loan. A higher LTV makes it easier for you to purchase property via a home loan.
RBI further states that stamp duty, registration charges and other documentation charges should not be included while calculating LTV. This further reduces the 10% payment that the borrower has to make upfront.
RBI guidelines for home loan prepayment charges are also essential. RBI has abolished prepayment charges to encourage borrowers to pay off the loan in case of an increase in their income. This can help you reduce your tenor and your EMIs, which is very beneficial.
Home loan takeover and foreclosure
RBI has set guidelines for home loan balance transfers as well, so you can refinance your home loan at lower interest rates and a tenor that suits you. RBI has also waived off foreclosure charges, further adding to the benefits that you can accrue.
Here is an infographic that explains the mandatory RBI guidelines and will help you choose the right Home Loan.
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