While home loan borrowers are usually aware of the loan application process, most of them do not have a fair idea regarding how the disbursement of the loan amount works. Once the home loan is sanctioned, there are certain formalities that are carried out from both the borrower and the lender’s end before the final disbursement takes place. Read further to know more.
Steps Involved in the Home Loan Disbursement Process
- Issuance of sanction letter
After evaluating your loan eligibility and verifying all the documents furnished during loan application, the lender will provide you a sanction letter. The sanction letter consists of all the loan-related information such as the loan amount, tenure, applicable interest rate, and other general terms and conditions. The validity of the sanction letter is usually 6 months, and the loan amount must be disbursed within this timeframe. Otherwise, you may have to re-apply for the home loan.
- Submission of property-related documents
Before the final disbursement of the loan amount, you will be required to submit original property documents to the lender. These documents will remain in the lender’s custody until you repay the loan in full. The basic property documents typically include title deed, No Objection Certificate (NOC) from the required authorities and encumbrance certificate.
- Property verification and legal check
- The lender will also conduct a technical valuation of the property before disbursing the housing loan. The technical officer appointed by the lender will visit the property for inspection. In case of under-construction property, the officer will scrutinize the property’s location, the stage of the construction, quality, and progress of the construction, etc. For a ready-to-move-in property, the technical officer will evaluate the property’s age, ownership, maintenance, locality, etc.
- Moreover, a legal check of the property will be conducted to ensure that the title is clear, and the property is free from any dispute.
- Home loan disbursal
Following the legal and technical verification of the property, the loan amount will be disbursed as per the terms and conditions stated in the sanction letter.
For ready-to-move-in properties, the entire loan will be disbursed at once. The loan EMI will start from a month after the disbursement is made.
For an under-construction property, the loan will be disbursed either in stages or in full based on the stage of completion of construction. In case of full disbursement, the EMI payments may start from a month after the loan is disbursed. Whereas, for partial disbursement, you may have to pay ‘Pre-EMI’ interest until full disbursement is made, after which EMI payment will start. Pre-EMI are the monthly instalments that are paid only towards the interest component of the housing loan.
Home loans in India are secured loans. Hence, after the loan is disbursed, you must make it a point to repay the loan amount timely by being punctual with your home loan EMIs. You can get an estimate of your EMIs by using an online home loan EMI calculator. This will help you settle for an affordable EMI and make repayment easier.