If you are looking to buy a new home anywhere in India, you may rely on getting a home loan to get the funds. It is the most economically feasible way to buy your dream home rather than using up years of hard-earned savings. While many lenders in India offer home loans, getting the loan would require you to follow a step-by-step process. And getting a home loan involves three stages – application, sanction, and disbursement.
The last step in the process is disbursement. It is the stage when the financial organisation pays the approved loan amount either to the builder or to you as per the agreed loan terms. In most cases, the lenders pay the full sanctioned amount in a lump sum. But, if you are buying an under-construction property, the lenders pay the amount in smaller instalments based on how the construction progresses.
If you are a first-time home loan borrower, you know about the disbursement process. Let us understand the same in detail. The lenders in India disburse the home loan amount only after completion of the following three important steps.
- The lender has thoroughly verified your home loan application and completed the physical inspection of the property.
- You have submitted all the necessary documents as required by the lender. This includes income and property-related documents.
- You have made the down payment. Generally, the lenders in India sanction a maximum of 80% to 90% of the property’s value as loan. You must pay the remaining amount from your pocket. This is called down payment.
After the initial procedure is completed, and the lenders approve the loan request, they send a sanction letter. You must send back a signed copy and give your consent on the terms and conditions stated in the letter. After you give your acceptance on the sanction letter, the lender proceeds with the final disbursement process.
You can request the lender to disburse the amount online by signing in through the website or online portal with your loan account number and password. Once you sign in, click on the disbursement tab, and upload the receipt of the down payment.
At this stage, the lender may also require you to update the status of the property you want to buy. You must provide details of whether the home is under-construction or ready to move in property. If you want to buy an under-construction home, you inform the lender about the current stage of construction and submit relevant documents such as a demand letter you receive from the builder.
If you are buying a ready-to-move flat, you must provide details of the demand letter and the bank where you want the lender to credit the amount. In most cases, it is the property builder or the seller.
What are the stages of home loan disbursement?
Generally, the lenders disburse the full sanctioned amount in a lump sum or in smaller instalments depending on the construction stage of the home. Also, the lenders mention the disbarment schedule in the loan agreement papers.
If you are buying an under-construction property, you must know that the disbursement happens based on the construction stage and not on the payment schedule issued by the builder.
Once the loan amount is disbursed, the repayment term begins from the subsequent month and you must pay the EMIs till the end or the loan term or until you repay the full amount and close the loan account.