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What Do Banks Owe You When Disbursing A Home Loan?

What Do Banks Owe You When Disbursing A Home Loan?
India Mortgage Guarantee Corporation is urging the Reserve Bank of India (RBI) to bring down the loan-to-value ratio to 90 per cent. (PicServer)

After the completion of all the formalities, you home loan application has been approved by your bank. Now, you are waiting for the loan amount to be disbursed to you.

In the meantime, do keep the things mentioned below in mind:

  • Your bank is going to charge you the interest on the loan from the date the cheque was issued, not from the date when it was handed over to you.
  • In almost all the cases, banks issue the cheque in the name of the developer or reseller. It is only in exceptional cases that banks agree to issue it in your name. For that, the buyer has to give a written proof that the downpayment made had been more than the 20 per cent of the total value. It is an accepted norm that banks generally fund only 80 per cent of the value of a deal.
  • For an under-construction property, the bank will disburse the loan amount in a phased manner, depending on the progress of the construction and will charge you only simple interest till the final amount is disbursed. The EMI payments will start only after the final disbursal is made. In case of a resale property, banks issue the total amount in one go.

Banks also have to provide borrowers a copy of loan documents signed by their authorised signatories after sanctioning the loan amount, a responsibility which most of them might give a miss unless borrowers keep pursuing them. As a borrower, you have to make sure that you obtain the photocopies all loan-related documents.

Meanwhile, also keep in mind that

  • Complete transparency is mandatory on the bank's part, according to the Reserve Bank of India, in providing you with the information on interest rates and other charges that impact your repayment towards the bank.
  • Banks have to provide you authenticated copies of all the loan documents executed by you at their cost, along with a copy each of all enclosures quoted in the loan document on request.
  • Without citing a valid reason, a bank cannot reject your loan application.

Tags: home loan, resale property, banks, EMI, equated monthly installment, propguide, Money, Borrower, Underconstruction Property, Loan Disbursal

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