If you are working for the Indian government or for any of its departments, you can avail of some very interesting schemes of home loan for government employees. You would be surprised to know that even the home loan interest rate for government employee entails a discount to the normal rack rate, although the LTV would still depend on the size of the loan. After all, once your government job tenure is over, you would no longer be able to get the facilities like government quarters and other facilities. You need to secure your future by going for an apartment well in advance. The good news is that you have plenty of options to take a home loan and buy a home, if you are a government employee.
You have some unique government employee advantages
Yes, that is absolutely true. The whole idea of home loan for government employees is to encourage government workers to get their own abode early and for that, the special schemes also offer concessional home loan interest rate for government employee. Here are some unique benefits on the home loan front for government employees.
- As a government employee, you are entitled to higher than normal funding for home loans. That is largely due to the security offered by a government job, but even the government encourages banks to lend to its departmental employees at higher LTVs. That means, as a government employee you can make choices like a better area, tony locality, better amenities, better connectivity etc. You could also include some of the renovation and remodelling cost into the home loan.
- Normally, if you are a government employee, banks (especially PSU banks) would exempt you from any foreclosure charges, should you opt to close the loan early. So, if you have some intermittent cash flows, you can as well use that money to reduce your debt without worrying about the exit costs from a home loan.
- While most of the home loans in India go up to 15 to 20 years with few going to 25 years; in the case of government employees, it goes all the way up to 30 years. That means; the government employee can enjoy lower EMIs on the home loan. However, one caveat here is that a longer tenure also means a higher interest outgo. This is a trade-off and you must play this game carefully.
- Best rates plus flexible repayment terms are other advantages for government employees. For instance, most of the banks (especially PSU banks in India) would give the government employees a discount of 25 to 50 bps on the rack interest rate considering the security of their jobs. Also, the concessions for women are over and above these and so if you are a lady government servant then you get double the benefits. The other key benefit is flexibility. Not only do government employees get longer tenures up to 30 years, banks are also more willing to structure repayments such that a lumpsum can be repaid at the time of retirement when the retiree gets the PF, gratuity etc and other benefits.
- In most of the case, if you are a government servant with the government issued identity card and other essential papers, then the documentation and procedural hassles for a home loan are minimized. Only basic documents of address, and identity are called for and the process can be a breeze and also very quick.
Restrictions on government employees getting home loans?
Are there any restrictions on government employees getting home loans from banks? Here are some basic limitations you must be familiar with.
- Any government servant taking the home loan must be between the ages of 21 and 70 at the time of taking the home loan.
- There is a base property size of 150 square feet (SFT) and properties below this threshold will not be funded by banks, even if you are a government servant.
- The maximum funding percentage (LTV) or loan to value ratio can go up to 90% in the case of properties up to Rs30 lakhs. The LTV falls to 80% for properties up to Rs75 lakhs and above that, the LTV falls further to 75%.
- While the property documentation requirements are lower for government servants, basic documentation is still required. Government servants also need to furnish identity proof, address proof, and proof of relationship in case of joint home loans. Routine documents like government identity card, PF statement, passport, Aadhar Card, PAN are all basic documents admissible.
Armed with these, you are all set to take home loan for government employees. You can also enjoy concessional home loan interest rate for government employees.