3 Things To Know Before You Go To A Bank For Loan To Buy Resale Property
Given a choice, none of us would want to wait. We would like to buy a property today and shift there the very next day. This is precisely the reason why activity in the resale property market, also known as the secondary housing market, never goes down. However, if you plan to realise the transaction using bank finance, there are several points that you must consider before you ring their bell.
Every link in the chain
Keep in mind that the list of documents in case of resale properties transactions is longer when compared to under-construction properties. Here, a buyer has to present before the bank the whole paper trail — all the documents with regard to the change in ownership have to be submitted to the bank, along with the regular documents. This list is likely to get even longer if the previous owners had bought the property using a home loan which is still running. Do arrange all these papers before you approach the bank with your home loan application. Any slip in this respect and your wait to buy the property might get prolonged.
Unfair as it may sound, financial institutions exercise more caution while lending to resale property transactions. As a result, there are several terms and conditions involved before they sanction a loan to for the purchase of such properties. First, not every bank lends for such transactions. Now, those who do also have several parameters in place. For instance, many banks will ask you to pay 20 per cent of the property's value as down-payment; for under-construction properties, the limit could be set much below that of you negotiate. Then, there are tenure issues, too. Banks also do not want to stretch the tenure further than 20 years; in case of under-construction properties, this goes up to 30 years. The age of the property will be another criterion based on which the bank may or may not grant you a home loan, For instance, most banks do not lend if the property is over 20 years old.
After you submit all the documents and the bank is convinced it is alright to lend you, it will send a team of technical experts to do an appraisal of the property. It is only after this team evaluates your property, the bank will be ready to lend you the amount you are asking for.
Kamal Rai decided to buy Vinod Sharma's flat for Rs 50 lakh. Rai had only Rs 15 lakh to pay as the down-payment and was expecting the bank to fund the remaining amount. However, the bank from which Rai was planning to take a home loan evaluated the total worth of the property to Rs 40 lakh and has refused to lend him Rs 35 lakh — this is 87.5 per cent of the total value. The deal could not come through because Rai could not bridge the gap using his own finances.