Terms and conditions of a Home Equity Loan? (valuation loan)

What are the Terms and conditions
of a Home Equity Loan?

1) The loan can be used to meet any of your personal requirements other than those that are speculative or illegal in nature. Many HFIs insist that the utilisation of these funds should be declared upfront by the customer in writing.

2) The type of facility under this product is a term loan with a tenure that ranges between 5 – 10 years between HFIs. This tenure has to be lower than the residual age of the property as approved by the valuer of the HFI.
3) Most HFIs have a minimum and a maximum loan amount that it would finance under this product.
4) This product is available to resident Indians only.
5) The repayment for the loan would be by way of EMIs for which PDCs from the operating account of the customer has to be handed over to the HFI.

6) The eligibility calculations for the loan amount under this product would continue to remain similar to that of a normal home loan. However, the LTV ratio under this product would range between 50 – 60% as against the 85% in the normal home loan product.
7) Every case would require a valuation from a valuer as approved by the HFI. The lower of the market valuation or the valuation as per the HFIs records will be considered for computing the loan amount using the LTV ratio method.
The security for the loan can vary from one HFI to another depending on the loan amount, value of the property, location of the property, etc. Based on the above parameters, the HFI will decide on the type of mortgage on the property. All the above parameters are determined by the HFIs in advance.
9) Most HFIs would also insist on additional security in the form of personal guarantees, etc.

The disbursement of the loan amount is always in favour of the customer.

Stages in a Housing Loan

The various stages involved in a home loan are listed below: For a detailed explanation on each of the stages, click on the respective stage. The time frames mentioned are on an average and may reduce or increase depending on the peculiarities and the urgency of a case. The time lines have also been given assuming that there is no delay from your side.Submission of application form along with photograph, credit documents and a cheque for processing fees – Day 0 Personal Discussion with customer – Day 3 Field Investigation by the HFI – Day 3 Credit Appraisal by the HFI – Day 4/5 Sanctioning of the loan – Day 6/7 Handing over of offer letter to customer – Day 6/7 Handing over of acceptance copy of the offer letter and cheque for administrative fees – Day 7/8 Submission of property/legal documents by the customer to the HFI – Day 8/9 Legal check on the property by HFI – Day 10 Technical check on the property – Day11/12 Disbursement – Day 15 Repayment Interest tax certificate Prepayment by the customer

Application form

Once the customer is clear on his queries on home loans, he submits the application form to the HFI. He either submits it directly to the HFI or to a Franchisee of the HFI. Along with the application form, the customer also needs to submit various other documents as required by the HFI. These documents help the HFI in establishing the repayment capacity of the customer. They comprise documents to establish income, age, residence, employment, investments, etc. The customer also needs to hand over a cheque for payment of processing fees to the HFI.

Personal Discussion

Some HFIs insist the customer be present at the time of the credit appraisal. A practice undertaken to find out more details about the customer that are absent on the application form. Most HFIs list down the profile of customers whom they would like to meet for a personal discussion. The profile could be based on occupation, loan amounts, etc. For the personal discussion the customer needs to take with him all documents pertaining to the information provided by him on the application form. The HFI proceeds with the processing of the application form only if it is convinced favorably about the customer.

Field Investigation by the HFI

Every HFI validates information provided by the customer on the application form. Normal kinds of checks conducted by the HFI are on the residential address of the customer, the place of employment of the customer, credentials of the employer. In case of small organizations a validation check on the telephone numbers of the customer’s residence and employer and a reference check on the references provided by the customer on the application form is also performed.

Credit appraisal by the HFI and loan sanction

Under this stage, the customer’s repayment capacity is established based on his income, age, qualifications, experience, employer, nature of business (if self employed), etc. Every HFI lays down certain norms within which the customer needs to fit in to be eligible for a loan amount.