Estimated reading time: 7 minutes
From the moment your home loan is approved to the final transfer of funds, the disbursement process involves several important steps. Each stage, from documentation to the actual transfer, plays a crucial role in ensuring everything goes smoothly. Let’s take a closer look at what you can expect during each phase of home loan disbursement.
From Approval to Keys – Quick Home Loan Disbursement Made Easy!
What is Home Loan Disbursement?
Disbursement refers to the lender transferring the sanctioned loan amount to the seller, builder, or your account, depending on the property type and agreement. This occurs only after fulfilling all prerequisites, such as document verification, property checks, and down payment
Types of Home Loan Disbursement
When you buy a house with a home loan, the bank gives you money in parts or all at once. Here’s how it works:
1. Full Disbursement
| Aspect | Details |
|---|---|
| What It Is | Entire loan amount disbursed at once |
| Applicability | Common for ready-to-move-in or resale properties |
| Process | One-time disbursement after all legal and technical verification is completed |
| Advantage | Full amount upfront enables immediate property purchase |
2. Partial Disbursement (Stage-wise Disbursement)
| Aspect | Details |
|---|---|
| What It Is | Loan amount released in smaller instalments |
| When It’s Used | Typically used when constructing a new house |
| How It Works | Funds are released based on construction progress; each instalment is triggered after verifying that the work is on schedule |
| Benefits | Ensures funds are allocated and used properly for each construction stage |
3. Construction-Linked Disbursement
| Aspect | Details |
|---|---|
| What It Is | Similar to partial disbursement, with instalments tied to specific construction stages |
| When It’s Used | Ideal for buying an under-construction property |
| How It Works | Loan is disbursed in phases (e.g., foundation, wall, roof, and project completion) |
| Benefits | Aligns fund release with actual building progress, ensuring funds are available as needed |
Read More: Home Loan Sanction Letter
Step-by-Step Disbursement Process
The home loan disbursement process is the final step that transforms your approved loan into actual funds. Here’s a streamlined, step-by-step process:
1. Loan Application & Sanction
- Submit your application with personal, income, and property details. Attach documents like ID proof, address proof, salary slips, ITRs, and property papers.
- The lender evaluates your credit score, repayment capacity, and property details before issuing a sanction letter. This letter specifies the loan amount, tenure, interest rate, and terms.
2. Legal & Technical Verification
- Legal Check: The lender’s legal team verifies property ownership, title deeds, and ensures no disputes exist.
- Technical Check: For under-construction properties, a technical expert assesses construction progress and quality. For ready properties, they evaluate age, location, and condition.
3. Down Payment & Documentation
- Pay the down payment (typically 10–30% of the property value) and submit proof (e.g., bank statements, receipts).
- Sign the loan agreement and submit original property documents (sale deed, NOC, allotment letter) to the lender.
4. Disbursement Request
- Submit a formal request (online/offline) specifying the disbursement amount. For under-construction properties, this aligns with the builder’s progress (e.g., foundation, flooring).
5. Fund Transfer
- Full Disbursement: For ready-to-move-in properties, the entire amount is released at once.
- Partial Disbursement: For under-construction properties, funds are released in stages as the builder completes milestones. Each stage requires a demand letter from the builder.
Read More: Home Loan Top Up Eligibility
When Do Home Loan EMIs Start?
- Full Disbursement: EMIs begin the month after the entire amount is released.
- Partial Disbursement: Pay pre-EMI interest on the disbursed amount until the final tranche is released. Full EMIs start afterward.
Read More: How to Reduce Home Loan Interest Rates?
Documents Required for Home Loan Disbursement
- Sanction letter
- Down payment receipt
- Builder’s demand letter (for under-construction properties)
- Property agreement copies
- Insurance papers (if applicable)
Read More: Is it Possible to Get a Home Loan Without Property Documents?
Key Factors Influencing Home Loan Disbursement
- Down Payment: A higher down payment (e.g., 20–30%) reduces your loan burden and may expedite disbursement.
- Property Type: Ready properties receive full disbursement; under-construction ones get staggered payouts.
- Construction Progress: Lenders disburse funds only after verifying each construction stage.
- Lender Policies: Some banks disburse 90% of the property value, while others cap it lower.
Check Out: Home Loan EMI Calculator
How is Home Loan Disbursed for Under Construction Property?
- Based on Construction Progress: The loan amount is released in installments as the builder completes each phase of construction.
- Builder’s Role: After completing a stage, the builder issues a demand letter for the next payment.
- Your Role: You request the lender to disburse the required funds directly to the builder.
How to Pay EMIs for Under Construction Property?
Pre-EMI Interest Payments
- What is Pre-EMI? You pay only the interest on the disbursed loan amount until construction is complete.
- Why Pre-EMI? Since the full loan isn’t disbursed at once, interest applies only to the released amount.
Transition to Full EMI Payments
- Final Disbursement: Once construction is complete, the remaining loan amount is disbursed.
- Full EMI Begins: You start paying both principal and interest, reducing the loan balance.
Option to Start Full EMI Early
- Your Choice: You can opt to start full EMI payments from the first disbursement.
- Benefits:
- Reduces total interest paid over the loan tenure.
- Accelerates principal repayment.
- How to Opt In: Inform your lender before the disbursement process begins.
Read More: Home Loans for Under Construction Properties
How to Stop Further Disbursements on a Partially Disbursed Home Loan
If you’ve started a home loan but haven’t received the full amount yet, you might be able to halt the remaining funds. This can be helpful if you no longer need the extra money or if your plans have changed.
| Step | Description |
|---|---|
| Contact Your Lender | Reach out to your bank or lending institution. Explain why you want to stop the remaining disbursements. |
| Review Loan Agreement | Look over the terms and conditions of your loan. Check for any clauses about halting disbursements or possible fees. |
| Negotiate Terms | Be prepared to discuss changes to your loan agreement. Understand that there might be fees or adjustments to your repayment schedule. |
| Confirm in Writing | Get all agreements and changes in writing. Ensure that both you and the lender have a clear record of the new terms. |
| Adjust Repayment Plan | Update your repayment plan based on the new loan amount. |
| Monitor Your Loan Account | Keep an eye on your loan statements to make sure no additional funds are disbursed and that all changes are correctly applied. |
Read More: What is Loan to Value Ratio?
Get your home loan disbursed without delays—choose Credit Dharma for a seamless home loan process.
Why Choose Credit Dharma for Your Home Loan?
Buying a home is a big step. Getting a home loan can be hard, but we make it easy. Choosing Credit Dharma for your home loan simplifies this process. We offer expert advice and personalized assistance to make everything hassle-free. You’ll receive timely updates on your loan application and disbursement progress.
From the initial application to the final disbursement, we provide comprehensive support. Enjoy clear and honest communication at every stage, with no hidden surprises.
Frequently Asked Questions
The lender starts the disbursement process after approving the loan and completing the required paperwork.
Lenders disburse loans either fully or partially. They may release funds as a lump sum or in multiple installments based on the loan agreement and construction progress.
In construction-linked loans, lenders determine the disbursement amount based on the completion of specific construction milestones.
Lenders generally do not allow borrowers to cancel a home loan after disbursement begins. However, if the lender has disbursed only part of the loan, borrowers can negotiate to stop further disbursements or restructure the loan based on their situation.
If construction costs exceed the approved loan amount, you can apply for a loan enhancement with your lender. You’ll need to provide updated cost estimates and justification for the increased amount.
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