Amortisation
The process of gradually repaying a loan through regular EMI payments. Each EMI covers both interest and a portion of the principal. Early EMIs are mostly interest; later EMIs are mostly principal repayment.
Related: EMI, Principal
Carpet Area
The actual usable floor area within the walls of an apartment — the area on which you can literally lay a carpet. Carpet area is always smaller than super built-up area. RERA requires builders to quote prices on carpet area.
Related: Super Built-up Area, RERA
CIBIL Score
A 3-digit number (300–900) that represents a borrower's creditworthiness, based on their repayment history, credit utilisation, and credit mix. Most lenders require a minimum CIBIL score of 700 for home loans; 750+ gets the best rates. Issued by TransUnion CIBIL.
Related: Credit Score
Co-Applicant
A person who applies for a home loan jointly with the primary borrower. Co-applicants are equally responsible for repayment. A co-applicant with a higher income or better credit can improve loan eligibility and get better rates. Spouses, parents, or siblings are common co-applicants.
Related: Guarantor, Joint Home Loan
Co-Borrower
Same as co-applicant — someone who shares equal legal responsibility for the home loan. All co-borrowers should ideally be co-owners of the property for income tax deduction purposes.
Related: Co-Applicant
Conditional Approval
An in-principle approval from a lender that confirms the borrower's eligibility for a home loan, before the specific property has been verified. It is subject to property valuation and legal checks. Taksh Fin can arrange conditional approval within 24 hours.
Related: Pre-Approval, Sanction Letter
DSA (Direct Selling Agent)
An individual or entity authorised to market and originate home loans on behalf of banks, HFCs, and NBFCs. DSAs earn a commission from the lender upon successful loan disbursement — they do not charge the borrower. Taksh Fin operates as a DSA platform for real estate agents.
Related: HFC, NBFC
Disbursement
The release of the sanctioned loan amount by the lender to the seller or builder. For ready-to-move properties, disbursement is typically a single lump sum. For under-construction properties, disbursement happens in tranches as construction progresses.
Related: Pre-EMI, Sanction Letter
EMI (Equated Monthly Instalment)
The fixed monthly amount a borrower pays to repay a home loan. Each EMI consists of a principal repayment component and an interest component. The proportion of interest decreases and principal increases over time. Formula: EMI = [P × R × (1+R)^N] / [(1+R)^N – 1].
Related: Principal, Amortisation
Encumbrance Certificate
A legal document confirming that a property is free from any financial or legal liabilities (mortgages, loans, disputes). Required when purchasing a resale property to ensure the seller has clear title. Issued by the Sub-Registrar's office. Search period: typically 15–30 years.
Related: Title Deed
Floating Interest Rate
A home loan interest rate that changes based on the lender's MCLR or RBI repo rate. When the RBI reduces rates, floating rate home loan EMIs decrease; when rates rise, EMIs increase. Most home loans in India are floating rate. RBI prohibits prepayment penalties on floating rate loans.
Related: Fixed Rate, MCLR, Repo Rate
Foreclosure
Repaying the entire outstanding home loan amount before the scheduled end of tenure. There is no foreclosure penalty on floating rate home loans (per RBI guidelines). Fixed-rate loans may carry a foreclosure charge of 1–4%.
Related: Prepayment, Part-Payment
Form 16
A certificate issued by an employer to a salaried employee that summarises the salary paid, tax deducted at source (TDS), and details of tax computation for a financial year. It is the primary income proof document for salaried home loan applicants.
Related: ITR, Salary Slip
Guarantor
A person who guarantees to repay the home loan if the primary borrower defaults. Different from a co-applicant — a guarantor is liable but does not enjoy ownership or income tax benefits. Lenders increasingly prefer co-applicants over guarantors.
Related: Co-Applicant
HFC (Housing Finance Company)
A non-bank financial company that is specifically licensed to provide home loans. HFCs are regulated by the National Housing Bank (NHB) and RBI. Examples: HDFC (now HDFC Bank), LIC Housing Finance, PNB Housing Finance. They typically have more flexible underwriting than banks.
Related: NBFC, DSA
ITR (Income Tax Return)
The annual tax filing submitted to the Income Tax Department of India. For self-employed borrowers, 2 years of filed and acknowledged ITR is a mandatory home loan document. Salaried borrowers typically submit Form 16 instead.
Related: Form 16
KYC (Know Your Customer)
A regulatory process requiring lenders to verify the identity and address of borrowers before processing a loan. Home loan KYC typically involves Aadhaar, PAN, and address proof submission.
Related: AML
LTV (Loan-to-Value Ratio)
The percentage of the property's value that a lender will finance. RBI mandates a maximum LTV of 90% for loans up to ₹30L, 80% for loans ₹30L–₹75L, and 75% for loans above ₹75L. The balance (down payment) must come from the borrower's own funds.
Related: Down Payment, RBI
MCLR (Marginal Cost of Funds-Based Lending Rate)
An internal benchmark rate used by banks to set their lending rates, replacing the older base rate system. Home loans linked to MCLR reset periodically (every 6–12 months). Increasingly being replaced by the External Benchmark Lending Rate (EBLR) linked to the RBI repo rate.
Related: Repo Rate, Floating Rate
Moratorium
A temporary pause on EMI payments granted by the lender, typically during financial hardship or at the start of an under-construction loan (pre-EMI period). Interest continues to accrue during the moratorium and is added to the loan outstanding.
Related: Pre-EMI
NBFC (Non-Banking Financial Company)
A financial institution that offers loan products but does not hold a banking licence. NBFCs are regulated by the RBI and typically serve borrowers who do not qualify for bank loans — lower CIBIL scores, non-standard income, etc. — usually at higher interest rates.
Related: HFC, DSA
NOC (No Objection Certificate)
A document issued by a bank or HFC confirming they have no objection to a specific action — typically a property sale or home loan balance transfer. For a balance transfer, the existing lender issues an NOC confirming no dues remain.
Related: Balance Transfer
Part-Payment (Prepayment)
Paying a lump sum amount toward the outstanding principal before the EMI due date. Part-payment reduces either the EMI or the remaining tenure. For floating-rate home loans, RBI prohibits lenders from charging a penalty on prepayments.
Related: Foreclosure, Floating Rate
Pre-EMI
The interest-only payment made on disbursed tranches before full disbursement (common for under-construction properties). Pre-EMIs are lower than full EMIs since principal repayment hasn't started. Full EMIs begin once the final tranche is disbursed.
Related: Disbursement, EMI
Principal
The original loan amount borrowed from the lender, before interest. Each EMI repays a portion of the principal. The outstanding principal decreases with every EMI paid.
Related: EMI, Amortisation
Processing Fee
A one-time fee charged by the lender to process the home loan application. Typically 0.25%–1% of the loan amount (subject to a cap). This fee is usually non-refundable even if the loan is not sanctioned.
Related: Sanction Letter
Repo Rate
The interest rate at which the RBI lends money to commercial banks. It is the key monetary policy tool used to control inflation and credit growth. When the RBI reduces the repo rate, home loan rates typically fall; when it raises the rate, loan rates rise.
Related: MCLR, EBLR, Floating Rate
Sanction Letter
The formal letter from the lender confirming that the home loan has been approved, specifying the sanctioned amount, interest rate, tenure, and terms. A sanction letter is valid for 3–6 months (varies by lender). Disbursement happens after property legal verification.
Related: Conditional Approval, Disbursement
Super Built-Up Area
The total area of an apartment including the carpet area plus a share of common areas (lobbies, staircases, lifts, corridors). Super built-up area is always larger than carpet area and was traditionally used by builders for pricing (now restricted by RERA).
Related: Carpet Area, RERA
Title Deed
A legal document establishing the ownership of a property. Also called the Sale Deed or Conveyance Deed. The original title deed is held by the lender until the home loan is fully repaid. Lenders conduct title verification to ensure clear ownership before disbursement.
Related: Encumbrance Certificate
Top-Up Loan
An additional loan taken against an existing home loan, using the property's equity as collateral. Top-up loans have lower interest rates than personal loans and can be used for any purpose — renovation, education, or medical expenses. Usually offered after 12 months of regular repayment.
Related: Balance Transfer
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