Help with home loan

[krishnakumar]

Hi

I am planning to start construction of my home and want to go for a construction loan. I have some queries which I hope experts here can help:

1. When availing loan will I get the entire amount at one go or will it be given in installments - what is the basis for such installments- is it flexible to some extent.
2. I understand that maximum funding is 80% of construction cost. Unfortunately I used up most of my cash to part-prepay my plot loan so I have lesser money to show as cash. Will I be able to include borewell costs and plan and approval costs also in the total cost - meaning will I also be funded 80% for the borewell costs etc.
3. If not what is the basis for deciding how much my construction costs. For example can I have a total budget of 30L but show an estimate of 35L so that I get funded for borewell etc also.
4. Can I avail home loan benefits for this financial year since I will be completing construction within March. Do I need to produce just the interest letter from bank or do I need any other proof of possession ?

I am planning to go for IDBI. People who have constructed homes with loans please help me out.

Krishna

[msn1270]

Hi Krishna

here are some of my opinion.

First Collect your CIBIL Report(https://www.cibil.com) by paying around Rs. 500/-. This gives your financial score including your Past Records of any loans, payment delays, defaults....etc, which is one of the key criteria for Loan Process. If you have good record, your chances of getting loan is higher, if any negative points, you will not get the loan.

1. When availing loan will I get the entire amount at one go or will it be given in installments - what is the basis for such installments- is it flexible to some extent.
Individual Home loans are linked to Construction Progress. So you don't get entire amount in one shot before beginning the construction(Reason:. A borrower can
cheat the bank without even constructing his building once he gets the money). Bank's authorized Engineer/surveyor will visit the actual site at regular intervals to verify
the progress claim and based on his report, Banks will release the Installments.

2. I understand that maximum funding is 80% of construction cost. Unfortunately I used up most of my cash to part-prepay my plot loan so I have lesser money to show as
cash. Will I be able to include borewell costs and plan and approval costs also in the total cost - meaning will I also be funded 80% for the borewell costs etc.
Funding Limit Cap & value Estimation (whether its based on Market Rate or Government Rate) varies from Banks to Banks. Private Banks may provide based on
Market Values. Plan and Pan approval costs are part of your Initial Ground Work. In order to go for Loans, you need to have Sanctioned Plans. you can't include those
expenses into the Home loan. Mostly in case of Combo loan(Loan for Plot+Construction) you might get this option. Better get it clarify with the Bank where you are
planning to borrow Loan.

3. If not what is the basis for deciding how much my construction costs. For example can I have a total budget of 30L but show an estimate of 35L so that I get funded for
borewell etc also.
You need to have sanctioned plan along with the proposed amenities and its estimates by a contractor or architect before applying for the Home Loan. This will be
verified by the Banks authorized Engineer and based on his report, bank will decide the amount to be sanctioned. First meet the Bank's manager and collect the all the
details to be submitted in order to process your Home Loan Request. Even after submission of the required documents, its up to the Banks discretion, either to Sanction
or Reject your Request, based on their internal Criteria.

4. Can I avail home loan benefits for this financial year since I will be completing construction within March. Do I need to produce just the interest letter from bank or do I
need any other proof of possession ?
Getting Home Loan is a more process oriented Task. Even with Private Banks, it may take 45 to 90 Days for the legal Opinion, Verification of your Document, your
Background and earning verification, CIBIL Report...etc. Then you may need to start your initial construction with your own money before getting the loan installments.
Even if you get one or two installments, Only its interest part will be considered for Pre-EMI Criteria for this financial year. In case of salaried Class, you need to provide
these by January or latest by February 2014. You can claim the Full Home Loan benefit only after the completion of your Building Construction/receiving the last
installments. .


I am planning to go for IDBI. People who have constructed homes with loans please help me out.

[krishnakumar]

Thanks msn very detailed and helpful reply as usual. I have checked the CIBIL score and this was good for a loan as I read on their site. Since I already have a plot loan with them it might be faster to convert to a composite loan. Your reply was really helpful. Just one question : Any idea if borewell costs are considered part of construction cost or out of it? Any idea about that?

[sreekbda]

Borewell, sump, compound, solar are not considered for home loan.

[msn1270]

for Solar Installation, you get a Soft Loan separately at an interest rate of 1% to 3% per annum as part of "Ministry of New & Renewable Energy" Program. Also you get 30% subsidy(So Called).

[krishnakumar]

Thanks for your replies. What I understood a slight increase is possible by balancing the quotation so that slightly higher amount is possible but not to a great extent.Please correct me if I am wrong.