The Reserve Bank of India (RBI) is the sole authority that works alongside the Government of India to form policies, rules, and regulations for the banking and finance sector. Their regulations apply to all – banks, non-banking financial institutes, investors, and borrowers. These policies and regulations are amended from time to time to address the economic situation and financial needs of the country. Hence, it is essential that you know about the RBI rules and regulations before signing up for any loan or making any financial investment.
Recently, the Reserve Bank of India reformed the Home Loan rules and regulations in India. The new rules are designed to make Home Loans more affordable and trustworthy for the borrowers.
This article will take you through the significant reforms made in the Home Loan rules.
Loan to Value ratio (LTV):
The loan to value ratio is a ratio of the total loan amount offered by the bank to the actual value of the property. For example, if the LTV of your home is 60%, then the bank will provide you 60% of the funds to finance your home.
To encourage people to realise their dream of buying a house, the RBI has proposed the following new Home Loan rules:
LTV stands at 90% for homes that value 30 lakhs and lesser.
LTV stands at 80% for homes that value between 30 lakhs and 75 lakhs.
LTV stands at 75% for homes that value 75 lakhs and more.
The RBI further states that the LTV will not include costs related to stamp duty, registration charges and documentation. Bringing the upfront amount, the borrower must make for the loan by 10%.
Prepayment Charges:
If the loan is repaid earlier, either partially or entirely, it positively impacts your loan repayment. As the outstanding principal amount decrease, so does the interest payable.
To make loan repayment more flexible and favourable for the borrowers. The latest RBI guidelines for Home Loan 2021 has waived off the prepayment charges for Home Loans. However, this is only applicable for loans subject to the floating interest rate.
Home Loan Transfer and Foreclosure:
The recent RBI rules for Housing Loan makes refinancing your Home Loan easier. If you have an ongoing Home Loan and wish to switch the lender for a better repayment deal, you can opt for it in a hassle-free manner.
Furthermore, you can apply for a Home Loan transfer for the outstanding principal amount at zero foreclosure charges. However, this reform is only applied to floating interest rate loans and not fixed interest rate loans.
In addition to these Home Loan rules and regulations, the RBI also recommends all borrowers to opt for Home Loan insurance. The insurance will secure your loved ones financially should anything unfortunate happen to you. It will keep your family worry-free about paying the Home Loan.
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*Terms and conditions apply. Home Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Banks requirement.
