Things to Consider Before Seeking Home Loan for a Resale Property
Jun 01, 2017 Home Loan
The resale property market, also called the secondary housing market, is forever active and in demand. A large number of consumers rely on bank loans to buy their dream homes. However, there are certain things one must keep in mind before applying for a home loan for a resale property.
Prepare for paperwork
The documents to be submitted in case of a resale property are more as compared to direct purchases. All the documents related to the change in ownership are to be submitted to the bank along with the regular document requirements. In case the seller had bought the property with a home loan that is still running, the list of documents to be submitted becomes even longer. One must thoroughly check the list of documents required by the bank and ensure that the paperwork is complete before submitting the application.
Banks are more cautious
It should be noted that not all banks are willing to sanction loans for purchase of resale properties. The banks that do provide such loans have a number of terms and conditions to be fulfilled. It is important to keep these parameters in mind. Some banks may ask the customer to pay 20 percent of the property’s value as down-payment and approve a loan for the rest of the amount. This percentage can be lower in the case of under-construction properties. Also, banks prefer that the tenure to repay the loan is not more than 20 years; or 30 years in the case of under-construction properties. The banks are also cautious in sanctioning loans for old constructions. Thus, the age of the construction may also be a criterion for approval of the loan. Some banks do not lend for purchase of a property that is more than 20 years old.
Bank evaluation
The banks usually send a team of technical experts to do an appraisal of the property before sanctioning the loan. This is done after the customer has submitted the application and the bank is satisfied with papers submitted. It is only after the appraisal of the property that the amount is sanctioned.
To elaborate this with an example, consider the following situation:
Jai wanted to buy the flat owned by Harish and the price agreed upon was Rs 50 lakh. Jai had only Rs 15 lakh ready with him to pay as down payment. He wanted to take a loan for the remaining Rs 35 lakh. After the appraisal, the bank found that the total value of Harish’s property should be only Rs 40 lakh. Thus, the bank was not willing to lend an amount of Rs 35 lakh as it was 87.5 percent of the value of the property. In such a case, the customer would have to arrange the amount required to bridge the gap in order to make the deal possible.
Prepare for paperwork
The documents to be submitted in case of a resale property are more as compared to direct purchases. All the documents related to the change in ownership are to be submitted to the bank along with the regular document requirements. In case the seller had bought the property with a home loan that is still running, the list of documents to be submitted becomes even longer. One must thoroughly check the list of documents required by the bank and ensure that the paperwork is complete before submitting the application.
Banks are more cautious
It should be noted that not all banks are willing to sanction loans for purchase of resale properties. The banks that do provide such loans have a number of terms and conditions to be fulfilled. It is important to keep these parameters in mind. Some banks may ask the customer to pay 20 percent of the property’s value as down-payment and approve a loan for the rest of the amount. This percentage can be lower in the case of under-construction properties. Also, banks prefer that the tenure to repay the loan is not more than 20 years; or 30 years in the case of under-construction properties. The banks are also cautious in sanctioning loans for old constructions. Thus, the age of the construction may also be a criterion for approval of the loan. Some banks do not lend for purchase of a property that is more than 20 years old.
Bank evaluation
The banks usually send a team of technical experts to do an appraisal of the property before sanctioning the loan. This is done after the customer has submitted the application and the bank is satisfied with papers submitted. It is only after the appraisal of the property that the amount is sanctioned.
To elaborate this with an example, consider the following situation:
Jai wanted to buy the flat owned by Harish and the price agreed upon was Rs 50 lakh. Jai had only Rs 15 lakh ready with him to pay as down payment. He wanted to take a loan for the remaining Rs 35 lakh. After the appraisal, the bank found that the total value of Harish’s property should be only Rs 40 lakh. Thus, the bank was not willing to lend an amount of Rs 35 lakh as it was 87.5 percent of the value of the property. In such a case, the customer would have to arrange the amount required to bridge the gap in order to make the deal possible.
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