I am thinking of taking a home loan to purchase a house. Do bank home loans cover the cost of expenses like stamp duty and registration charges?
Banks usually do not take into account the money spent for any statutory expense like stamp duty or registration charges, any VAT or service tax. Banks provide loans only up to 80-85% of the total cost of the property only and as per the agreement / market value, and this is excluding stamp duty and registration charges.
Although some public sector banks offer certain schemes from time to time supporting such a facility for a limited number of people like government employees, professionals etc, it is always a good idea to check with your bank in case if they are offering such a facility. Still I would suggest you to be prepared to make all such statutory expenses from your own pocket.
What is the maximum LTV for home loans? Who decides the value of the property, the bank or the borrower?
Banks will decide on the quantum of funds available for lending depending on their estimation of the property. According to NHB rules, banks usually offer a maximum LTV of 80% of the property’s market value. Therefore if banks judge that your property is worth Rs. 50 Lakhs as per their valuation, the maximum home loan you may get would be about Rs. 40 Lakhs.
The onus of raising the remaining amount rests with the borrower. Banks have their own in-house team of real estate experts that decide the final value of the property. There can be a possible difference in valuation of the real estate property and therefore it is a good idea to get your property valued from a certified valuator to know the right market price for your property before applying for the home loan.
Banks may not consider stamp duty and registration charges to be a part of the cost of the house while providing a Home Loan. However, Non-Banking Finance Companies (NBFC) may provide loans for stamp duty and registration when you opt for a Home Loan. You can claim the stamp duty and registration charges made by you as tax deduction under Section 80C of the Income Tax Act. For more information on such tax sops, you can read this post - https://blog.bankbazaar.com/5-hidden-home-loan-tax-incentives/.
Does bank approve home loan on base rate of home or does it count home loan eligibility on base rate+Registration+Possesion+Amenities charges
Banks usually do not consider registration and stamp duty charges when calculating your Loan To Value (LTV). LTV is the amount of loan that the bank will provide and you have to pay the remaing amount. The cost of the home will include the square feet rate, amenities, parking space cost and other building related charges. However, in case of affordable homes that are less than Rs. 10 lakhs, banks will take into account the registration and stamp duty charges when calculating your LTV. So, ensure that you have enough money for the down-payment, registration and stamp duty. Looking for a Home Loan? Click here.