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18 March 2011

Seller has not Cleared Home Loan?

Purchasing a new house directly from the builder makes you prepare about all the aspects we have discussed in my previous posts. What if you are buying an old flat? Moreso if the seller has not cleared the home loan? In case of purhsing a flat that is already purchased by another buyer there are certain points one must remember before signing on the dotted line.
Never ever go in immediately for such a purchase. Because if the seller has not cleared the dues then the repayment of loan schedule is bound to be carried forward. The seller may assure you that the payments will be made when you give the amount of the flat but there is no such guarantee. You may purchase the flat and later the seller may not keep his promise then you are in a soup! Though they may be genuine cases but financial problems and other debts also will make their situation tight. That to if you need to go in for a home loan then you end up in a mess! Though the seller of the flat may be willing to pay the dues, it may take some time and sometimes months to clear off the previous loan. Even loan shifting, clearing has certain procedures and penalties that the seller will have to bear. Unless all this is cleared the title of the house is not in the name of the seller. The home loan lender still has rights on the flat and this will totally be owned by the seller only when,  their home loan is cleared to full.
Many times such sellers may compromise on the rates and you may get these flats at a cheaper rate. You will also be assured that as soon as you make the payment partly they will clear their home loan. Also remember that the original papers of the flat will be with the loan lending institution only. Unless the total loan is paid off the papers remain with the lender and the owner of such a flat has no legal rights to sell the flat.
Negotiate on such deals well as here you know that the seller is in dire need of funds. If you are lucky you may get a good deal on the house purchase. Consider how many EMIs are remaining and the total amount of the loan cleared.Take legal advice of a lawyer or financial consultant for any financial matters as you may not be aware of all these paper works and documents required in a home purchase..
If you consider making such a purchase then peruse the whole situation carefully. The seller if known  and reliable then you can calculate the remaining amount of the loan. The interest rate that has to be paid on this amount also has to be considered. Now consider the deal and put an appropriate offer. Always any home deal will be in your best benefit if you study the case carefully and not go in for an emotional decision in a hurry. Unless this is  a good bargain there is no need to go in for such a purchase. You must know the rates of new and old flats available in that particular area beofre coming up with an offer price.
Such offer can benefit the purchaser as you may be very lucky to get the place in a lesser rate as comapred to the rate of that area. You can also negotiate on the repairing and leakages and other maintainence required in the flat. So again here you save. But totally this deal will take more time as compared to a new purchase as the previous loan has to be cleared before you getting a new home loan.

14 March 2011

Before Taking The Final Plunge!

Brushing from the internet for all the information regarding home loans gives a fairly large amount of infromation. One feels thoroughly prepared but how to make the final plunge?
Think and do your home work correctly. Talk, discuss, enquire and have discussions with family, friends and relatives. Take their opinions, experiences, and personal choice and then take the final plunge. Remember what is good for one may not be for another. Every individual has different needs, finacial position and repayment capacity. One may be comfortable to go in for a larger loan amount and has collected a small amount for down payment. Whereas the other may have collected savings as a larger down payment and would prefer a smaller loan amount for the same flat. The decision has to be personal and not according to some one else. See what schedule you are comfortable with and how much you can afford as EMI without pulling too many strings of your budget!
There may be a vast difference in your situation and always go in for a personalized approach in terms of any loans. Take the plunge and enjoy the bliss of your new dream home.

08 March 2011

Bankruptcy and Home Loans

The meaning of Bankruptcy means the individual or organisation who has borrowed money is unable to repay the same. The incapacity of an individual to repay the loan amount in the given period of time is termed as bankruptcy. How does this link to home loans and does a person who has declared bankruptcy be eligible for a new home loan?
The person declaring bankruptcy can be either voluntarily or involuntarily. Sometimes the borrower struggles with finances and has large sums to be repaid. If he cannot collect the amount in the given time tenure then he can declare voluntary bankruptcy in the court. This will give him some time to collect and find total value of his assets and also come up with the sum or part of the sum to repay the loan. His inability to repay the creditors for a long time compels them to go by the law. If the borrower has not paid his dues for a long period them it is understood that they are not in the position to repay the creditors. Some times the court of law can assign a trust or committee to manage the funds of the bankrupt individual or organization.  This committee will assess the assets and finances of the borrower and come up with the total funds  or part of it to repay the debt. This declaration must be resorted to at last and only when the other options of repayment are saturated. As this gives bad credit ratings and will be on credit record for at least another ten years.  The financial market and lenders usually refer to our credit records before approving any loan and filing for bankruptcy means they get a negative financial picture about you.
Still it is possible to get a home loan as there are many financial loan lending institutions who offer mortgage loans and bankruptcy loans considering your total assets and investments.  The first thing one can go about after filing for bankruptcy is that of opening a new credit record. It would be advisable to keep this record clear and all dues cleared on time. Following this clean chit for about a year or two will bring back your credit rating upward. Try to balance expenses and avoid extra spending and increase savings. This will be on your credit record and the new lender can go through the fresh credit history for approving of a home loan. Also they do no have risk as they can offer amount that is in par with your old home so that in case of default they can recover it by selling the property. If you are applying for a home loan for the first time after filing for bankruptcy then it is advisable to follow this advice of new credit history since you do not have any financial backing of any asset except for your qualifications and financial position and job security.  Try going in for a larger sum of down payment to increase your chances of loan approval after declaring bankruptcy maybe after a gap of two to three years.

07 March 2011

Meaning of Lock in Rate in Home Loans

Housing loans are available easily and from many loan lending institutions. Though their interest rates may sometimes differ and each have their own set of rules mostly they end up with the same procedures. This term lock in rate is used by the lender who offers loan amount to the borrower at a certain interest rate.
After discussing all the possibilities of home loans and the loan amount the most important thing to finalise is the interest rate. Here the borrower can keep negotiating and the lender also has to come up with some understanding to fix the rate. Till all the processing of home loan takes place and the formal applications and procedures are dealt with the lender has to fix the interest rate. When the borrower finally comes for the loan he can acquire loan on the predecided interest rate.
This is termed as lock in rate and this is decided prior to the application for a home loan. This totally depends on the repaying capacity of the borrower and the total loan amount. If the repaying schedule has high EMIs then the lender can offer loan on low interst rate as he is assured of quick loan repayment and recovering of the loan amount. If the repayment schedule has low EMIs then the loan tenure is more and here also  interest rate depends upon the lender. If they are assured with all the proofs and documents then they offer loans on low interst rates than if the lender has to take risk usually like in case of self employed personnel who have to prove identity and salary statements are not clear.
Whatever the negotiations before hand the borrower and the lender discuss and lock in the rate of interest the loan amount will be offered at.

Balloon Payment

The term balloon and home loans are far from being related to one another but this is used to explain a form of payment option.
As the term balloon means to float or make big same way it is linked with loans. Balloon mortgage of loan is a type of  repaying schedule of the borrower. Since all loans have to be repaid within a certain time frame and with certain amount of interest rate charged on the loan amount not all tenures are the same. This depends upon the individual borrower and how they wish to repay their loan. This often refers to a short term loan where the interest rate is usually fixed. This may last for maybe 5 to 6 years and the interest rate is normally high which is decided by the lender. Here the borrower has to pay back installments within a certain time frame of years and the last payment is a larger one hence the term balloon payment.
This is beneficial for the borrower who has judgement of his loan repayment capacity and steadily repays his loan amount over the years for a short term. He has assured income generated and is expecting to get payments in large sums after some years. This maybe by a job promotion, gifts, or selling of other property or assets. Then the borrower after this tenure of say 5 or 6 years can pay a large sum to complete the total loan amount. By paying this large sum he can repay the total principal amount and become free from the loan and get complete ownership of the house.

Meaning of Index

The term  index is used in home loans. Usually the lender offers loan on a predetermined rate of interest. The borrower has knowledge aboout this and this is discussed during the processing of the loan amount.
As we have understood in my previous posts about FRM and ARM. This means fixed rate of interst and adjustable rate of interest for the loan amount to be repaid.
Index is the measure of interst rate changes that the lender uses to determine how much interest will be charged and how much it will change over the loan tenure. Considering the amount and the loan tenure the lender adjusts the index rate. The repaying capacity of the individual is also considered and the lender decides at what rate of interest he will offer the loan. Then how will the interst rate increase or remain same over the total loan tenure will solely depend upon the borrower and how they select fixed interest rate or adjustable interst rate for the repayment of their home loan.
Usually this all is planned and fixed by the lender as they have different packages of repayment according to the total loan amount and monthly repaying capacity of the borrower.A predetrmined index is availabel with all lenders for the benefit of the loan taker so that they can judge about the comfortable repaying options of their home loan.

Appreciation in Value of Home and Home Loans

This term is used to assess the total value of the property in consideration. If the borrower has to mortgae his property to take  a new home loan then an appraiser of the property comes and assesses the total market value of the house. This is done considering the area per square feet in that area, the total area of the house, the property rates in that area and availability of houses in thht particular area.
When the rates of homes increase and we say that the borrower of the loan had purchased the home at say 20 lakh rupees. After few years due to increase in property rates the same house will cost for 50 to 60 lakhs. This is called appreciation in value of homes.
Appreciation is taking place at a veyr fast rate and houses are soon becoming unaffordable. Many have to opt for purchase in the suburbs or outskirts of the city as rates of houses are shooting up at a very quick pace.
Selecting area is also important if one thinks of investment purposes for the buying of property. There are some areas which appreciate in value much faster than the others. Places near the railway station, sea sides and also the hub where public is more and have easy access to the destination really appreciate much faster. Where as places far from the city and on the outskirts with less facilities and commuting services may take loanger to appreciate or even remain with stagnant prices. It is also possible that some area may suddenly appreciate in value when government proposes redevelopment plans like railway station, airport or a flyover so the same property which was available for less will become unaffordable after  a few years.
Selecting a home and applying for a home loan it helps to take an estimate of the appreciation of that area in the past few years. This will give you an idea about the rate of appreciation in that particular area.

Meaning of Amortization of Loan

The meaning of amortization is a gradual loan amount reduction after repaying or debt reduction. This takes place over the tenure of loan repayment.
It is important to understand that home loan taken byt he borrower is for a certain period of time. The lending institution be it private banks or lenders or nationalised banks and other loan lending institutions have certain rules and format for each type of loan. There is a set period of tenure and the packages for loan repayment are adjusted accordingly. After the procedures for applying for a loan and loan approval the EMI are adjusted according to  financial capacity of the individual and their repaying position.
As the monthly installments begin after the down payment and the borrower starts paying monthly EMIs regularly it is observed that loan repayment starts. One can notice the reduction in the debt gradually over the months and the final loan amount is reduced after every installment.

Choose Home Loans from a Wider Range of Options

Before selecting any financial home loan lending institution one must carefully go through a vigorous market research about the options available. How is it possible to get information about many loans by one person. Let us discuss this.
Internet has become the inthing now and everyone has access to the internet either at home or in office. They can search in Google or other search engines and get latest information regarding home loans. Just by a click you can get info about home loans available, which institutions offer loans and at what interest rate. Even many banks and private lenders offer packages and discount offeres and this is advertised on their website and in advertisements. Our good old  newspaper still has the charisma as before and many rely on this for latest information. Also this does not require much knowledge of internet and one can brush up information by the daily reading sessions. Our friends and relatives also form a major role players in giving personal advice regarding loans and home purchasing. You can enquire easily about rate per square feet, available options in builders and properties under construction and cheap offers on home loans. Mention also must be made of certain websites which offer EMI calculators so that you can calculate the monthly installments according to your area of home and thus prepare for a home loan in advance.
Just talk and gain information before finalising any deal. Believe me it always helps to take opinions as you may get lucky to get an unusual discount on any offer and end up saving a lot of money on the home purchase!

Tips for Selecting a Home

Applying for a home loan has become very easy and many of us have got the benefit of purchasing a new dream home by the facility of home loans. How does one go about selecting a home when the loan is available.
1) One has to be very very clear and specific about their personal requirements about  the area of home. How many rooms you will require and whetehr the family is a joint or nuclear plays a mjor role in selection of the area in square feet.
2) Do you have elders in the family or will you be getting frequent relatives for long periods as guests then it is best to accomodate a guest room so that the whole family routine does nopt get upset on the coming of a guest. Usually people go in for purchasing a hoem which has a big living room and less bedrooms but this then creates problems when guests take charge of the bed and you or the children end up ont he sofa!
3) Lifestyle amenities are availble in many societies and complexes. But it must be remembered that they are all paid for and nothing is free. You pay extra for this during purchase and also have to pay maintenance charges every month for the use of the same.
4) Parks, hospitals, schools, malls and theatres have become a must nowadays and close proximity for these is essential before selecting any home.
5) One of the most important and the most essential space crunch we all face is parking facility. It is important to see whether the builder has provided adequate facility for parking space to the buyers.
Consider these tips before selecting a home and then go in for a home loan accordingly.

Adjustable Rate Mortgage and Fixed Rate Mortgage in Home Loans- ARM and FRM

People are willing to mortgage their homes or property to own a second home or business offices. Thought his involves a certain amount of risk but it has become an acceptable form of home loan. Many lending institutions are willing to offer loan against mortgage. ARM and FRM are two terms most commonly used in mortgage home loans and they pertain to the interest rate applied by the lender for the loan amount.
The borrower has the option to select a procedure for the repayment of the home loan. Mortgaging property gives the lender possession of original papers of the property which are returned to the borrower on completion of loan repayment. Fixed rate mortgage is when the interest rate is fixed for a certain period of time of repayment or loan tenure. This usually is on the higher side because the lending institution offers loan amount at a decided interest rate and they have to cover the inflation costs over the years of loan repayment. Adjustable rate mortgage is when the interest rate is adjusted periodically on a pre decided index.  This has slabs of interest arte increasing over the years taking into account inflation and rising property costs.
Any borrower will first have to consider their expenditure style and total income available before going in for a fixed or adjustable rate of mortgage in home loan.  If they have assured income coming from assets and investments they can opt for any scheme for the repaying schedule of loan repayment. People also opt for ARM as they know that the lender has to give consideration for inflation and their salaries will also go on increasing proportionately every year. Selecting any offer by the lender is a personal choice of the borrower and depends upon their financial loan repayment capacity.

Why was my Home Loan Not Approved Because of Age?

Home loan approval is one matter of stress for every applicant. Owning a dream home by taking loan is the easiest way to fulfil our dream of a home. Loan application procedures and approvals are dependent on every loan lending institution. The borrower has to do market survey and talk among friends and relatives to come up with the best home loan deal. The most important point in loan approval which is not talked much about is the age factor.
Why does age matter in home loans? Yes age does matter as the lender sees your productive years after taking the loan. The individual has to repay the loan for a fixed tenure maybe 10 , 20 or more years. Will their financial standing be the same after so many years? They may happily give a loan for a younger individual who is salaried but hesitate to offer loan to a borrower who has crossed 45 or 50 years of age. This in no way means that your loan will not be approved. The lender will critically appraise your assets and expenditure habits. Your credit report will indicate your financial standing. Documents and proofs of your assets like house e, car and other property will give the assurance to the lender before approval for the loan. It is not the fault of the lender as they have to consider the repayment capacity of the individual for the next say 20 to 30 years.  The younger loan applicant will have salary proofs and is expected to work till the workable age limit decided by the government. Hence it is understood that their salary will increase over time.  Most lending institutions though critical about accepting loan applications from older and middle age groups are open to this as most of the applicants here have independent properties and also vehicles of own. They may have a substantial bank balance and assets that can be an assurance to the lender in case of failure on the borrower to repay the loan on time. The lender will also go through all the documents that will assure that the loan will be repaid on time. Usually borrowers also go in for mortgage loans where other property of the same value or more is mortgaged to get another new home loan.
The lender may be hesitant to approve loan but they will definitely not leave aside this age group of applicants only for this one reason of age. They cannot let go of such a cream of individuals who are financially well settled and stable in assets as loan takers.  Also many people of this age group have a home of their own and are opting for a home loan for a second home or for investment purposes.