Some Chat Questions on Home Loan

• Planning to take a personal loan for building a house at your native place. Is it a good move?

Ans: Taking a home loan would be better off rather than a personal loan as a home loan is cheaper.

Choose a bank which is active at your native place so that they can do the property verification. If that is difficult, then a personal loan could be taken though it will be quite expensive as compared to a home loan and will also be for a shorter duration. The EMI will also be much higher.

• Require Rs 20 lakhs for buying a flat but as home loan processing takes time, would it be better to take a personal loan and when the home loan is sanctioned, then repay the personal loan with it.

Ans: You need to disclose a huge amount of income for getting a personal loan worth Rs 20 lakhs. By making the banks complete for your home loan and providing you the best deal, you may end up getting more than expected as well as your home loan application would be processed faster.

• In an ideal scenario what should be the maximum EMI percentage an individual should/could afford, in percentage terms?

Ans: It depends on various components like -

1. Income - the higher the income, higher is the percentage you can afford to pay as EMI. However, as a general rule of the thumb, about 40 per cent of your net income is considered safe for an EMI. Anything above 55 per cent is in the red zone.
2. Loan Amount
3. Secured or unsecured loan

Some Loan Options for LAP

Overdraft option for LAP	Installment option for LAP
Limited Banks have this option with them	Both banks as well as housing finance companies who are offering LAP
Might have a higher processing fee, which also might be annually instead of one-time	One time Processing fee
Higher rate of interest (usually 0.5%) compared to the installment option	Slightly lower ROI
You pay interest only on the money you withdraw from the overdraft account to the extent you do not repay. You can keep withdrawing and repaying money as and when you like and incur interest expenditure only on the net outstanding amount from time to time.	You pay money on the reducing balance of loan amount outstanding as per the contract

Avail The Best Loan Against Your Porperty

FAQs related to Home Loan

1. Should you shift to a “fixed rate” home loan?

This is not advisable as very few banks provide genuine fixed rate loans anyway. Genuine fixed rate loans are those where the loan document does not have any clause in the agreement that allows the bank to change the “fixed rate” of interest. These loans are not available for less than 13.00% plus you will need to pay a fee for shifting to such loans. So your EMIs will go up immediately plus you will need to pay a fee to shift to such fixed rate loans. This shift will remain more expensive till the floating rates move beyond the current fixed rates of 13.00%. We must not forget that interest rates move in cycles and that over the long tenure of a typical home loan you will be able to benefit from the drop in rates (as and when they happen) also just like you have paid for the increase in rates.

Whilst the short term outlook on interest rates clearly points to an increase, an assumption that interest rates will forever remain high will be incorrect. We have already seen one cycle of interest rate movements in this decade (downwards from 2000 to 2004 and broadly upwards thereafter) and there is no reason to believe that this will not repeat itself again. Hence unless you are completely risk averse you should stick to the floating rate loan.

2. Should you shift to another lender offering a lower floating rate loan?

This is a worthwhile option. As a rule of the thumb if the new lender is providing a floating rate loan that is at least 0.50% cheaper than your existing lender and the balance tenure is not less than 7-8 years then this is an option that you should definitely explore despite pre-payment charges that you might have to pay to your existing lender. You need to be vigilant that you are getting the best possible floating rate loan in the market as some banks charge higher rates to existing consumers while giving lower rates to new consumers. So ask around in the market and keep yourself informed on this score. Remember your ignorance will prove quite expensive.

3. What are the other options to balance your monthly budget:
1. If you have the money pre-pay a portion of your loan to keep the EMI at the same level. In most cases banks do not charge for partial pre-payments and hence this is an excellent option, provided off course, you have the savings to make this pre-payment. In the given example you will need to pre-pay roughly Rs. 33,000/- for every 0.50% increase in interest rate to keep the Emi at the same level as earlier.
2. If you neither have the savings to make the pre-payment nor any money to pay the increased EMI then check whether the bank is willing to increase the loan tenure and keep the EMI at the same level. However normally the bank will not increase the tenure beyond the retirement age (normally assumed at 60 years for salaried people and 65 years for self employed people)
3. You can consider taking overdraft loans against your savings instruments (insurance policies with high surrender values, Mutual fund units, shares, etc.) to pay for the increase in the EMIs. The advantage of such loans is that for a small fee you get an option to draw upto the limit. You pay interest only for what you actually utilize and as long as the total amount does not exceed the limit you do not have to pay off either the interest or principal. Off course all this is only a temporary palliative. You should prepay the loan from your future savings or from the drop in your EMIs as and when the interest rates drop again.

4. If neither of the above options are feasible than you can consider approaching your existing lender to provide an additional loan on the security of the same house. You are likely to be eligible for the additional loan as house prices have gone up significantly in the last 2 years and your income would also probably have gone up.

5. Neither of option c or d are great options as you are actually borrowing money to repay your existing borrowings which is fiscally imprudent. Hence they must be exercised after due caution.

Source: http://www.apnaloan.com/articles/home-loan-india/homeloaninterestratehike.html

Loan Against Porperty - Mortaging your Home to get a loan

House, clothing and food are the basic necessities of life which a person acquires just for normal living.

During your financial crisis, out of these three, it is your home that will help you out of the situation. But then there is a problem attached to it again. Since our house being a non-liquid asset it take time to sell of our house during times of need and in case of emergencies it becomes all the mo9re difficult to find a good deal with the buyers.

Hence, it is always advisable to mortgage your house, as security, to take up the loan. This is what is "Loan Against Property".

But for banks or financial institutes even your house isn't much of any kind of asset, although it would be of more value than the loan take. It is difficult for banks as well to sell your property and get the money, in case of a default. Thats why they would require a proof of your income, although you would be mortgaging your property. Also, banks find it little difficult to evict the existing occupants to sell it off.

Therefore, banks also prefer that you pay them back through your salary and the situation of selling the security doesn't turn up only. Hence, you would be required to submit your proof of income while applying for Loan against Property as well.

Just remember few things:

• Banks will not lend you loan on the full value of your property, as the value of the property might deplete with time and area.
• Your loan would be based on certain percentage of the value of your property - 40-60%.
• Loan amount might also be given 2-2.5 times of your current income as compared to your house value, whichever is lower.

Don't Mortgage Property to the Bank for buying another property

It is always cheaper to get a home loan to buy a house rather than Taking loan against property (LAP) or in other words mortgaging your property.

The difference in cost can be as high as three per cent.

Bank Rates for Home Loans Compared

I was recently browsing this website and came across this comparison of the ROI offered by Major Banks. It is good enough as it gives us a broad idea of the current market rates and hence would be able to negotiate with the banks better.

Check out the link:

http://www.apnaloan.com/home-loan-india/rates.html

Remove all your doubts attached with your home loan

Buy your dream house without any tension.... Remove all your home loan related tensions by asking me at - surabhee.gupta@gmail.com

Parameters to keep in mind while selecting a property

The first step towards buying a property starts from being able to identify the one that suits your needs.

With a large number of builders competing with each other to get your attention (and you money, too), there is a wide range of choice available. However, it is important to select the property depending on:

Location Of Site- While choosing the location, you need to keep the following parameters in mind (Fill the table below and assign 1-5 values to the parameters for each flat you see in an area. A comparative table like this will help you to short list the flat)

Affordability – Does the location fit your budget?

Place of work – How far is the office from the desired location?

Market place – Where is the nearest market?

School – Where is the nearest school?

Public transport – Are buses/trains easily available from the location?

Builder – Does the builder have a good reputation in the market?

Availability of water and electricity – Is there a steady supply of both?

Residential/ commercial – Commercial areas face traffic jams during working hours and level of noise is rather high

Hospital/ Medical services – Are they available easily?

Society expenses – Is the monthly outgo on the society and maintenance a strain on your budget?

Security – Are the security systems in place, like a professional guard or electronic systems?

Parking – If you own a vehicle, you will need space to park it.

Type of ownership – In some areas, property is available only on a power of attorney or ‘pugree’ basis. Getting funding for such properties is a problem.

Self constructed property (SCP) – SCP is a situation where you buy a plot of land and construct a house there. All banks may not fund such projects.

Under construction property at an early stage – Many banks may not prefer to fund such projects. But if the builder is well reputed then it should not be a problem.

In case of a ready / resale property, you need to bear the following additional points in mind while selecting a property –

Chain of title – It is important to have all the proper registered documents from the proposed seller that declares his ownership. These documents are important for you to garner a loan from the bank.

Maintenance – Check the internal as well as the external condition of the building.

Water leakages – A flat with water leakages should be strict ‘no no’ as it adversely impacts the overall condition of the building.

Condition of the flat – Is the paint peeling off or concrete crumbling?

Neighbours – Grumpy neighbours can make life very unpleasant.

Society transfer charges – If they are too high then you need to factor that in your budget.

It is virtually impossible to select a property that meets all of the above-mentioned parameters completely to your satisfaction. It is, therefore, necessary to prioritise the above parameters and select a property on a trade - off that is acceptable to you.

Stage of construction – To decide on whether you need to go in for a property that is ready or under construction, you will need to keep the following factors in mind

Urgency – If you are staying in a rented property where the rentals are exorbitant and if you feel the need to shift immediately, you should opt for a ready property.

Discounts – If you are not in urgent need to buy a property, you could buy the property from a reputed builder on a cash down payment option and get a substantial discount on the cost of the flat.

Modifications – It is always easier to get a flat modified to suit your tastes/requirements at the time of construction than doing up a ready flat.

source: http://www.apnaloan.com/primers/home-loan-india/selectproperty.html

Reverse mortgage FAQs

• Who is eligible for a reverse mortgage?

The National Housing Bank (NHB), a subsidiary of the Reserve Bank of = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />India and the facilitator of housing finance in India, has set some guidelines for reverse mortgages. They include:

• Married couples can opt for financial assistance as joint borrowers. In such a case, the age criteria for the couple will be at the discretion of the Primary Lending Institution (PLI), with at least one of them being above 60 years of age.

• The prospective borrowers should be senior citizens of India above 60 years of age.

• The borrower should be the owner of a self-acquired, self-occupied residential property located in India, with a clear title indicating the same.

• The residential property should be free from any encumbrances.

• The residual life of the property should be at least 20 years.

• The borrower should use that residential property as a permanent primary residence.

• Reverse mortgage is not available for commercial property.

Apart from checking the property documents, the bank/housing finance company will ensure that you pay all taxes and charges (water, electricity, etc), have maintained the property in good and saleable condition and insured it against fire and other calamities.

• What’s the loan amount I can get for my property?

The loan amount depends on the market value of residential property, as assessed by the PLI, the age of borrower(s) and the prevalent interest rate.

The table, taken from the NHB website, can serve as an indicative guide for determining loan eligibility:

Age	Loan as a proportion of assessed value of property
60 – 65	40%
66 – 70	50%
71 – 75	55%
Above 75	60%

The above table is only indicative and the PLIs will determine the eligible quantum of loan at their discretion, taking into account the ‘no negative equity guarantee'. This means that the borrower will never owe more than the net realizable value of his/ her property, provided the terms and conditions of the loan have been met.

The bank will review the property at least once in five years and reserves the right to stop further disbursals if it finds the level of risk unacceptable. Further, the quantum of loan may undergo revisions based on these revaluations of property at the discretion of the lender.

For example, according to Dewan Housing Finance Limited, the loan amount for a 61-year-old living in a property worth Rs 60 lakh would be slightly over Rs. 10,000 on a monthly basis, at an interest rate of 12%. This is an indicative figure, calculated on the basis of actuarial tables. The actual amount will also depend on the age and condition of the property. A reverse mortgage is offered only for residential properties that are not more than 20 years old.

• How will my house be valued by the bank/ housing finance company?

National Housing Bank guidelines stipulate that:

• The residential property (commercial property cannot be mortgaged) should conform to the local residential land-use and building by-laws as stipulated by the local authorities, with approved layout and building plans.

• The bank/ housing finance company should determine the market value of the residential property through external approved valuer(s).

• The mortgaged property should be valued / inspected at least once every five years.

• Which banks/ housing finance companies offer reverse mortgages?

For now, not many banks/ housing finance companies have entered the reverse mortgage market. The major ones offering the products are Punjab National Bank (Baghban) and Dewan Housing Finance Limited (Saksham). Oriental Bank of Commerce too is all set to offer Reverse Mortgage.

Bank of Baroda (BoB), Allahabad Bank and Corporation Bank have also announced their intention to offer reverse mortgage schemes for senior citizens.

• For what purposes can I use the money?

You can use the loan amount to meet all your personal needs. But remember, you can’t use it for speculative, trading and business purposes.

• After approving a Reverse Mortgage loan to a borrower, what happens if property prices suddenly drop/rise dramatically after a few years during the tenure? Are the borrower’s regular payouts affected by this?
  

Yes, the borrower’s regular payouts will be affected by this. The lending house will conduct periodic reviews of the property value and revise the loan amount as per the property value prevailing at that time, answers Dewan Housing Finance Limited.

• What happens if the bank finds the mortgaged property risky after five years and stops further disbursals?

This does not usually happen, but in the rare event of the bank stopping disbursals after a certain period of time, for whatever reason, the borrower need not pay back the amount he has received so far. The bank will recover that money after the borrower and his/her spouse have expired by selling the property. Till then, interest will be charged on the amount paid to the borrower.

• Are there any prepayment charges?

The borrower has the option of prepaying the loan anytime during the tenure. There will be no charge/penalty on such prepayments.

• What happens if I do not want the loan after the loan transaction is finalised?

According to NHB guidelines, in such a situation, borrowers may be given up to three business days to cancel the transaction. If the loan amount has already been disbursed, then the entire sum is to be repaid by the borrower within these three days. However, the interest for the period may be waived at the discretion of the bank/housing finance company.

• Am I eligible for a reverse mortgage loan if my house is already mortgaged with another institution?

According to NHB guidelines, if the property is already mortgaged with another institution, then the bank/ housing finance company that is offering the reverse mortgage may consider allowing you to use part of the amount to prepay/repay the existing housing loan. But the loan amount will be paid directly to the institution to the extent of the loan outstanding with it with a view to release the mortgage

• Can the reverse mortgage be foreclosed? When does that happen?

Foreclosure of a loan means terminating the contract of giving regular payouts to the borrower by the bank/housing finance institution before the tenure gets over.

So as per the NHB, the loan is liable for foreclosure if:

• The borrower has not stayed in the mortgaged property for a continuous period of one year.

• The borrower fails to pay property taxes, home insurance or maintain and repair the residential property.

• The residential mortgaged property is donated or abandoned by the borrower.

• The borrower makes changes in the residential property that affect the security of the loan for the lender. For example, renting out a part or all of the house, adding a new owner to the house's title, changing the house's zoning classification, or creating further encumbrance on the property either by way taking out new debt against the residential property or alienating the interest by way of a gift or will.

• The government, under legal provisions, seeks to acquire the residential property for public use.

• The government condemns the residential property (for example, for health or safety reasons).

• Can I will my mortgaged property?

Yes, says NHB, but there are certain conditions. If the borrower wishes to will the mortgaged property to any of his/her relatives, it should be subject to the discharge of the mortgage debt by the inheritor and a statement that the heirs shall not be entitled to challenge the validity of the mortgage.

Also, in case of the borrower’s death, the legal representative should be willing to take the responsibility of paying the entire loan amount, along with the interest, to free the house of the mortgage. But if the legal heir is unable to repay the loan or does not wish to do so, the bank/housing finance company may sell the house to recover the outstanding loan and give the surplus to the former.

Source: http://www.apnaloan.com/primers/home-loan-india/reverse-mortgage-faqs.html

Why Property Insurance????

Most people (and basically banks) think that Property Insurance is not a that necessary, although some bank cash on it by giving it as an incentive for a certain time period.

Well insurance in today's time was is a MUST for everything that you own today.

Property Insurance Rates have fallen down drastically (Approximately Rs 60 per lakh of property value for a period of one year) and if you go in for a longer period insurance tenure then you can avail significant discounts as well.

Buy Your Dream House and not the problem attached with Home Loans

Below are marked some of the common problems faced commonly by common people after taking up home loan. Here are some solutions along with the problems so that you buy your dream house and not a headache for life time.

1. Home Loan Amount and ROI not as per the application

There is actually no solution for this problem except for this that you try and get a written (or even an email will be good enough) acknowledgment from the bank that the processing fee will be refunded if the loan amount is not as per what was promised to you.

2. Processing Fee Non- refundable on the occasion of non-sanction or non-use of the sanction

As said in the above point please have it acknowledged in written from the bank that they will refund your Processing Fee if your loan is not sanctioned. If you don’t get it in written then you would surely not get your fee back.

3. Loan amount getting stopped post-sanction because of the lower valuation of the property by the bank

To avoid this always get your bank to value your property before sanctioning of the loan amount, even though it means loosing of some more bucks as valuation fee. This is especially important for old and resale properties.

4. Legal problem or non-availability of chain of title documents and/or NOCs in the format desired by the bank

Always provide all your property papers, NOC (provided by the property lender or RAW) along with the application form so as to avoid any kind of complication in the later stage.

So in short, always remember to do all the transactions in a written format and provide all the papers that might be require now or on a later stage to the bank on the initial stage itself.

7 Golden Rules of choosing the Home Loan Lender

Statistics claim that on a daily basis around 1 lakh people migrate from one country to another and around thousands of people migrate within the country. To be more specific what I have heard is that over 300 people migrate daily to and from Mumbai alone.

“Food, cloth and shelter” are the three necessities of a man for living. Every corner of the road today has a small shop selling the everyday eat food at a cheap price. Cloths are something that everybody packs with themselves when they migrate. So that takes care of food and clothes part. Now shelter is not something that people carry with themselves. They have to get one in that place when they shift. But how to get the best deal for a home loan without getting cheated in a new place?

So to be safe than sorry... here are 7 GOLDEN RULES of home loan which will ensure that you do not repent in future.

Rule 1: First finalize the property then go in for the loan.

Go for a home loan only after you have decided on the property. Without it the banks themselves would not be ready to give in a home loan. This is so because some banks do not readily finance a property that is being self constructed or under construction or on a very old building. They would not have any problem with a ready-to-move-in property. So it is better to look and finalize your home first then go in for the loan.

Rule 2: Be clear about the loan amount you are eligible for

It is always advisable to talk to multiple banks before choosing the bank for getting loan as all the banks have got different ways of calculating loan eligibility. Loans are given basically based on your and your spouse’s income. There are banks which consider your close relative’s income as well (like parents, children etc) to increase your loan eligibility. So choose this option as well before taking up loan.

Rule 3: Restore minimum 10-15% of the house cost with you for future use

Let us understand this rule through an example: If the house costs Rs 5 lakh, the bank expects you to pay at least Rs.50, 000 to Rs.75, 000 from your own sources while the remaining amount Rs 4, 25,000 – Rs 4, 50,000 will is provided as loan subject to your income based eligibility. With time it is might be so that the value of the property might decrease. Hence to ensure that the bank’s interest is protected it becomes important to ensure that the outstanding loan amount is less than the realizable value of the property. So, again it makes sense to ask the bank to value the property (on payment of a small fee), especially if it is an old resale property. The small fee will be worth the while to avoid future hassles.

Rule 4: Research well and Get the best Deal

Get information about all the banks: their eligibility and ROI. After all this then short list 4-5 banks and, get the short-listed banks to compete for your loan. The more banks you have in your list the more bargaining power you have on your side. Point to Remember: All terms and conditions are negotiable. Apart from interest rates, also check various hidden or on-top fees like processing fee, pre-payment charges, legal fees, valuation fees and other hidden costs. Take all these things into account before choosing your bank.

Rule 5: Be prepared to shell out processing fee from your pocket

Nothing comes free in today’s world. So is the case with the loans as well. For taking loans even you have to pay your lender a fee known as “Processing fee”. This differs from banks to banks, but is usually around 0.50% to 1.00% of the total loan amount. But paying the fee doesn’t mean that you will get the loan, this is the fee to get them to just the ‘take a look’ at your loan application. No matter what the bank representative informs you; the processing fee is ‘NOT REFUNDABLE’.

Keep all the promises made by the bank in writing. This will ensure that if your loan application is rejected or is sanctioned for a lower amount or at a higher rate than promised, atleast you claim your processing fee.

Rule 6: Fixed or floating ROI?

Majority of people go in for floating ROI as they find it more suitable even when you opting for “Fixed ROI” it always does not remain fixed as it might change with the drastic increase in the finance market. Hence always read the fine prints carefully before signing. Also for floating it is advised to keep checking the market after every 6 months so that you don’t get duped by the banks.

Rule 7: Give your loved ones a Home to stay and not home loan

Home loan is a long-term commitment and with life being so unpredictable don’t let your family members suffer after you. Provide them with a home and not your home loan. Income is something which does not remain stable with time. It might increase or even decrease. So to ensure the continuous payment of your home loan always go in for some continuous income payment source such as accident insurance or life insurance. The banks with which you have the tie-up for loan will be happy to give you a insurance policy as well.

Fixed and Floating ROI for Home Loan

As the word suggests: Fixed ROI is the one which remains fixed for the entire loan amount period and in floating the ROI will keep waving up and down depending on the market and the benchmark set up by the banks in the contract.

Which one to go for???

Frankly there is nothing like which one is better and for which one to go for? If there would existed such a thing like which is better then the market would not have existed as people would have gone for the better one, of course.

This decision depends on person to person choice and more importantly on the current market scenario. Depending on the rate by which the market is going up or down fix the type of ROI you would like to pay the banks with regards to your loan principal amount. However to understand the market and ROI type better it is always advisable to keep a track of the market and to review your decision after every 6 months, at the least.

How much interest is charged for House Loan???

Hello and welcome everyone...

The current rates for a floating rate home loan is around 11% for a 20 year loan. But actual rates applicable to a specific person will depend on your profile and your income and the documents you where able to show up and also on your own negotiation power.