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.