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