Home loans
Rytvae Consulting · Loans distributed through partner lenders · Banashankari, Bengaluru
The longest financial commitment most people make, where the decisions that matter are taken in the weeks before sanction. What limits your eligibility, why the spread is the only negotiable part, and how the tax answer changed with the regime.
The largest and longest commitment most people make
A home loan is usually the biggest borrowing of a lifetime and runs for longer than most careers stay in one place. Small differences in how it is structured compound into very large differences in what it costs, and almost all of them are decided in the weeks before sanction rather than at any point afterwards.
Two constraints determine what you can borrow. The property constraint is the proportion of value a lender will advance, with the balance coming from you as margin, plus registration and stamp duty which are not financed. The income constraint is whether you can service the instalment, tested as your total obligations against net income, with lenders applying their own cushion. Your sanction is the lower of the two, and applicants are frequently surprised that it is the second.
Margin & own contribution
Lenders advance a proportion of value. The balance, plus stamp duty and registration, comes from you.
Obligation ratio
All EMIs including the new one against net income. Existing loans reduce what you can borrow, sometimes sharply.
Credit score
Drives both approval and pricing. Worth checking and correcting months before you apply, not during.
Joint application
A co-applicant’s income raises eligibility, and co-owners who are co-borrowers can each claim deductions on their share.
Property approvals
Title chain, approved plan, occupancy certificate and RERA registration for under-construction projects.
Balance transfer
Moving to a lower rate later is possible, and worth costing against the fees rather than assuming it saves.
Rate, and why the spread is the only negotiable part
Floating-rate home loans to individual borrowers are linked to an external benchmark, in practice the repo rate, plus a spread reflecting your credit profile, loan size and the loan-to-value ratio. The benchmark moves with policy and is not negotiable. The spread is, and it is worth negotiating, because it persists for the life of the loan.
When rates rise, most lenders extend the tenure rather than raise the instalment, which is comfortable in the short term and expensive over the loan. Ask explicitly what happens on a rate change, and if the tenure has been silently extended, consider raising the EMI instead.
Beyond interest, cost in the processing fee, legal and valuation charges, stamp duty on the mortgage deed and the memorandum of deposit of title deeds, and documentation charges. Regulatory restrictions apply to foreclosure and prepayment charges on floating-rate loans to individual borrowers, which is a significant advantage — part-prepaying a floating-rate home loan is generally one of the most effective things a borrower can do. Model the effect on our loan calculators before deciding between prepaying and investing.
The tax position, which changed with the regime
This is where most confusion now sits, because the answer depends on which tax regime you are on:
- Principal repayment qualifies under Section 80C, within that section’s overall limit — available under the old regime.
- Interest on a self-occupied property is deductible under Section 24(b) up to the prescribed limit — available under the old regime.
- Interest on a let-out property is deductible in full against rental income, though the set-off of any resulting house property loss against other income is capped annually, with the balance carried forward.
- Under the new regime, the position differs materially, and the deductions available for a self-occupied property are substantially restricted.
- Joint borrowers who are also co-owners can each claim on their share, which effectively multiplies the available deduction — but only where both are genuinely co-owners and both actually repay.
Work out which regime suits you before assuming a home loan reduces your tax, and confirm the position with your chartered accountant.
Under-construction property
Buying before completion introduces risks a ready property does not have. Interest may be payable during construction, often as pre-EMI covering interest only, so you are paying without occupying. Possession can be delayed. And the tax treatment of pre-construction interest follows its own rules, with the accumulated amount claimed over a number of years after completion rather than immediately.
Check the project’s RERA registration and its filings, confirm the builder’s delivery record on earlier projects, and make sure disbursement is genuinely linked to construction stages rather than released ahead of them.
How Rytvae helps
We work out what is realistically serviceable rather than what is sanctionable, prepare the file so property and income clear together, and place it through our lending partners. Model the instalment first on the loan calculators. See also loan against property, construction finance if you are building rather than buying, balance transfer, and term insurance, which should cover the outstanding loan.
Frequently asked questions
How much home loan am I eligible for?
The lower of two constraints. The property constraint is the proportion of value the lender will advance, with the balance plus stamp duty and registration coming from you. The income constraint is whether you can service the instalment, tested as total obligations against net income with the lender's own cushion applied.
Why is my eligibility lower than I expected?
Usually existing obligations. Every running EMI reduces the room available for a new one, sometimes sharply. Clearing a personal loan or a car loan before applying can raise home loan eligibility by more than the amount cleared.
How is the interest rate decided?
Floating-rate home loans to individuals are linked to an external benchmark, in practice the repo rate, plus a spread reflecting your credit profile, loan size and loan-to-value. The benchmark is not negotiable; the spread is, and it persists for the life of the loan.
What happens to my loan when interest rates rise?
Most lenders extend the tenure rather than raise the instalment, which is comfortable immediately and expensive over the loan. Ask explicitly what your lender does, and if the tenure has been extended silently, consider raising the EMI instead.
Can I prepay a home loan without penalty?
Regulatory restrictions apply to foreclosure and prepayment charges on floating-rate loans to individual borrowers, which makes part-prepayment one of the most effective things a borrower can do. Model the effect against investing the same amount before deciding.
What tax deductions does a home loan give me?
Principal repayment qualifies under Section 80C within its overall limit, and interest on a self-occupied property under Section 24(b) up to the prescribed limit — both under the old regime. Interest on a let-out property is deductible against rental income, with the set-off of resulting loss capped annually.
Do home loan deductions apply under the new tax regime?
The position differs materially, and deductions available for a self-occupied property are substantially restricted. Work out which regime suits your overall numbers before assuming a home loan reduces your tax, and confirm with your chartered accountant.
Is a joint home loan better?
A co-applicant's income raises eligibility, and where both are genuinely co-owners and both actually repay, each can claim deductions on their share — which effectively multiplies the benefit. Both conditions matter; co-borrower status alone is not enough.
What should I check before buying an under-construction property?
RERA registration and the project's filings, the builder's delivery record on earlier projects, and that disbursement is genuinely linked to construction stages rather than released ahead of them. Possession delay is the central risk.
How is interest during construction treated?
Interest may be payable during construction, often as pre-EMI covering interest only, so you pay without occupying. Pre-construction interest follows its own rules, with the accumulated amount claimed over a number of years after completion rather than immediately.
What charges apply apart from interest?
Processing fee, legal and valuation charges, stamp duty on the mortgage deed and memorandum of deposit of title deeds, and documentation charges. Registration and stamp duty on the property purchase itself are separate and generally not financed.
Should I take insurance against my home loan?
Cover for the outstanding loan matters, so that the liability does not fall on your family. A term policy sized to include the loan is generally more flexible and better value than a bundled loan protection product, but compare both rather than accepting whichever is offered at sanction.
Work out what is serviceable, not just sanctionable
The two are different numbers, and the gap between them is where home loan stress comes from.
Rytvae Consulting — AMFI Registered Mutual Fund Distributor (ARN-265474), EUIN E091320. Rytvae Consulting is a distributor of mutual fund and insurance products and is not a SEBI-registered Investment Adviser. Any assistance offered is incidental to distribution.
Loan approval, amounts, interest rates, tenure and final terms are at the sole discretion of the lender and subject to their eligibility criteria and internal policy. Rytvae Consulting facilitates loan applications through distribution partners and does not sanction credit. Norms described here are general industry practice and vary between lenders and over time. Tax positions depend on your own facts and on law as it stands from time to time; please confirm with your chartered accountant. All calculators on this site are illustrative and do not constitute investment, tax or legal advice.
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