A home loan is simply borrowing money from a banking company to buy a property such as residences, apartment complexes, under-construction structures, and so on. Bought assets are used as leverage in this case, and the asset is transferred only after the loan is fully repaid.

The RBI has established specific guidelines that must be followed. Let's go over some of the RBI regulations.

1. Prepayment Fines

Borrowers also have the option of prepaying their home loans, which allows them to reduce the total amount of interest charged on their loans. Earlier, lenders charged up to 5% of the exceptional loan balance on such prepayments. However, under the new RBI guidelines, borrowers are excluded from prepayment fees in the scenario of floating interest rates and 1% to 3% in the case of fixed rate of interest.

2. Home Loan Cash Advance

Borrowers can use this service to transfer their debts from one lender to another. It is usually done when the interest rate of the other lender is down from the previous one. The borrower can only obtain a home loan from a new lender after he has seized on the loan of the previous lender. According to the new rules, there are no fines.

3. loan-to-value (LTV) ratio

It is the most a borrower can borrow against the price of the asset. If the property value is Rs. 30 lakh or less, the borrower can contribute 90 percent of the loan amount, 80 percent if the property value is Rs. 30 lakh to Rs. 75 lakh, and 75 percent if the property value is Rs. 75 lakh or more.

Including these guidelines, it is also advised to have home insurance and a home loan to financially secure the family's future in the event of a tragic crisis before loan repayment. Debtors must tread cautiously throughout the process of obtaining home loans.