Know The Home Loan Terms Before Taking Home Loan

Home Loan Terms You Should Know Before Taking Home Loan

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Home Loan Terms

A home loan is an amount of money an individual borrows from a bank or financial institution. He/She borrows this to purchase or construct his dream home. A home loan is a contract agreement between the moneylender and the borrower that allow the borrower to acquire some money to buy or construct their own home. However, before applying for the home loan, it is very important for a borrower to be aware of some very important home loan terms. Let’s discuss the terms one by one.

Important terms generally used in Home Loan:

EMI: EMI is one of the most talked-about terms when it comes to home loans. For loan repayment, borrowers utilize Equated Monthly Instalments (EMI), a method involving consistent monthly payments. This value is often pre-calculated based on factors such as the total amount of loan, loan tenure, rate of interest, and the borrower is communicated about the same at the time of the loan.

Down payment or margin: Generally, the bank would approve a home loan, calculating nearly 70-80% of the property value. But the liability will be on the borrower to arrange the rest of the money. A down payment or margin is the sum of money that the borrower would need to arrange by his/her very own methods.

Credit Appraisal: Before approving a home loan, the bank generally checks your repayment capability by considering the factors like income of the borrower, age, the order of assets and liabilities, and so forth. Credit appraisal is the procedure through which banks check your repayment limit and ensure that there is no possibility of default.

Post Dated Cheque: Post-dated cheque means the list of the cheque that the borrower draws, for the next 1 or 2 years which would serve to withdraw EMI installment (over Electronic Clearing Service mode). These cheques have future dates and have to be cleared on the mentioned date.

Pre-Approved Property: Before approving the loan, banks generally check the practicality of a project or property before the home loan sanction. A few builders complete this activity to utilize it as a pitch to promote the property. However, before acquiring any property, carefully check all the legal documents, regardless of pre-approval status.

Resale: Resale refers to purchasing a property that someone else previously owned. It states that you are not buying another home directly from the builder. While purchasing a resale property, be sure that you have a record of all previous owners of the property, and the current seller has undisputed possession. This will guarantee the smooth handling of the loan application.

Pre EMI: Amount paid as interest before completing the disbursement of the loan amount.

Collateral: In some cases, the bank needs security which is an asset to guarantee repayment capacity. This benefit serves as a mechanism for recovering the sum in the event of a default.

Disbursement Mode: Once the verification and all the legal formalities are completed, the bank grants the home loan. There are three methods of home loan disbursement.

A) Advance – In this, construction borrowers typically get access to the full loan amount before the construction of the home.

B) Partial – When the bank disburses a part of the loan amount before the construction and pays the remaining amount after the completion.

C) Full – When the total amount is disbursed only after the construction of the property.


A home loan agreement could be known as the guidebook for your loan. Before benefiting a home loan, be sure that you go through all the details of the agreement. If needed, look for explanations from your loan specialist or look for proficient help. You have to examine all the details carefully before you sign on the dotted line fundamentally.

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Your home loan will be processed in 2 steps:

  1. You receive the approval of your home loan.
  2. You sign the loan agreement papers and complete other necessary documentation. The loan amount is thereafter paid directly to the builder by Home First Finance Company.

Loan decisions are made in less than a week. You will receive an SMS on your registered mobile number as soon as we make a decision.

HomeFirst does not charge any prepayment fees. This applies to both partial and full repayments. In fact, we have a special Auto-Prepay feature to facilitate this process for you.

HomeFirst offers loan tenures between 1 year to 25 years. If you opt for a longer tenure, you can get the advantage of a lower EMI each month.

HomeFirst can provide finance up to 90% of the property value. The balance has to be arranged by you from other sources. Please note: 90% financing is only available for loans amounting to less than Rs. 30 lakhs.

All co-owners of the property have to be co-applicants to the loan. A person who is not a co-owner can also become a co-applicant to the loan.

During the construction phase, HomeFirst will disburse funds to the builder on your behalf. These will be based on payment requests made by the builder as per the construction schedule.

HomeFirst will charge interest only on the amount disbursed as loan during the construction phase. In this period, interest is charged only on the disbursed loan amount. For example, if you have a sanctioned loan of Rs 10 lakhs, but the property is under construction and we have disbursed only Rs 4 lakhs, you will be charged interest only on 4 lakhs. These interest payments are referred to as pre-EMI interest payments.

EMI payments will start only after completion of the project and registration of the property.

All cheques to HomeFirst should be written out in favor of ‘Home First Finance Company India Limited’.

In the event of an unfortunate incident, home loan insurance will help you or your family pay off the home loan. This ensures that the burden does not suddenly fall upon family members at a bad time.

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