What is a home loan?
A home loan is essentially a financing option where funds are provided to an individual or an entity for the purchase, construction, extension, or renovation of a residential property.
What are the documents required to apply for a home loan?
To apply for a home loan, the client needs to submit documents such as proof of identity, proof of address, a loan application form that has been duly filled, and financial documents.
What are the parameters for arriving at Home Loan eligibility?
The eligibility is decided after considering various factors, including the monthly income, monthly financial obligations, current age, and retirement age, among other things.
How is the Equated Monthly Instalment (EMI) for a home loan calculated?
The EMI is calculated on the basis of specific factors like the amount of the loan, its tenure, and the rate of interest.
What is the floating rate of interest in a Home Loan?
A floating rate of interest is linked to a benchmark rate. As per guidelines of RBI, floating rate Home Loans from banks are linked to external benchmark rates. ICICI Bank’s floating rate of interest is linked to Repo Rate declared by RBI from time to time. So, the rate of interest on the housing loans changes in line with the Repo Rate. As a result, the EMI or the tenure of the loan will increase or decrease, depending on the change in the rate of interest.
What is the meaning of a fixed rate of interest on a home loan?
A fixed rate of interest on a home loan means that the rate of interest does not change throughout the tenure of the loan. So, the EMI will also remain fixed.
Is there any tax benefit available on home loans?
Yes, a client can claim the amount paid towards the repayment of the principal and the interest components as deductions in the income tax return. The limits on the amount deductible are governed by the applicable income tax laws.
What is Policy Repo Rate?
“Repo Rate“ or “Policy Repo Rate” means the rate of interest published by RBI on the RBI website from time to time as Repo Rate or Policy Repo Rate.
Is full tenure fixed rate loans linked to external benchmark?
Full-term fixed-rate loans are not linked to any benchmark. The rate is fixed for the tenure of the loan.
Can a client close the home loan? What are the charges for prepaying the loan?
The prepayment charges are as under:
Nil for Home Loans with a floating rate of interest.
2% plus applicable taxes on principal outstanding* on full repayment of Home Loan & Top Up on Home Loan with a fixed rate of interest.
2% plus applicable taxes on principal outstanding* on full repayment of Top Up on Home Loan if the end use is for business purpose
Can a client make a part pre-payment on Home Loan Account through NEFT with ICICI Bank?
Yes, ICICI Bank accepts part payment of the home loan through National Electronic Funds Transfer (NEFT) or RTGS.
What is the minimum part pre-payment amount the client needs to pay when taking a home loan?
The minimum part pre-payment amount should be an amount equivalent to 1 EMI.
If the client opts to increase the EMI, can he/she decrease the EMI in the future?
The EMI once increased will not be decreased at a later date except in the case of Part Pre-payment/ Conversion.
What is the external benchmark rate of ICICI Bank Limited for floating interest rate Home/ Mortgage Loans?
Currently, ICICI Bank benchmarks its floating rate Home/ Mortgage Loans to Repo Rate.
What does a reset of floating rate loans linked to an external benchmark mean?
As per Master Direction - RBI (Interest Rate on Advances) Directions, 2016, a floating rate loan means a loan on which the interest rate does not remain fixed during the tenure of the loan. Hence, in the case of a floating interest rate loan, the benchmark rate of the loan gets revised on a pre-defined frequency. As per RBI guidelines, floating interest rate loans linked to external benchmarks should reset at least once in three months.
What will be the frequency of benchmark reset for floating rate Home/ Mortgage Loans?
As per Master Direction - RBI (Interest Rate on Advances) Directions, 2016, the interest rate under external benchmark shall be reset at least once in a month. Thus, the Repo Rate component of the Interest Rate will be reset on the first day of the third subsequent month from the month in which the Facility is first disbursed (irrespective of the date of disbursement) and every three months thereafter, as a sum of Repo Rate + “Spread”, plus applicable statutory levy, if any. The applicable Repo Rate shall be the rate prevailing one business day preceding the reset date.
What will be the frequency of change in the spread?
As per Master Direction - RBI (Interest Rate on Advances) Directions, 2016, the spread of the facility may undergo change when the borrower’s credit assessment undergoes a substantial change, as agreed upon in the loan contract or the Bank could alter the spread once in three years. Thus, in case of any change in the spread of the facility, the effective rate of interest may change.
How will the benchmark reset impact the current Rate of Interest (ROI) in case the Repo rate increases or decreases?
On the reset date, if the applicable Repo rate has increased, the effective ROI of the loan account will increase which in turn will impact the EMI/tenure of the loan. In case of a decrease in the Repo Rate, the ROI will decrease which in turn will impact the tenure of the loan.
Will the existing loans booked under PLR/FRR/I-Base/MCLR get automatically reset under Repo linked benchmark rate?
No, the existing loans will continue under the existing benchmark rate.
Will the existing customers linked to FRR//PLR/I-Base/MCLR-based benchmark rate be allowed to convert to Repo-based pricing?
Yes, all existing customers have the option to switch from the existing system of FRR/PLR/I-Base/MCLR (FRR/PLR/I-Base/MCLR +/- spread) to the new system of Repo linked rate (Repo + spread) at the prevailing rate applicable for the new loan with the same category of customer.