Simplified facts and practical information about home loans in a simple language while avoiding the technical jargon associated with it! I was confused with Finance in Home Loans and this Blog is an simple expression! I am a Healing Artist, and not attached with any Financial Commercial Institution and am not responsible for any financial links posted Take care and surf information before committing!
Home loan preapproval is very advantageous to the buyer as they can narrow down their search for a home according to their budget. These statements from the banks understand our financial status and how much amount can be available as down payment as well as how much the borrower can afford to pay as monthly EMI.
Going for house hunting is a tedious process as there are plenty or options available. It may so happen that you may select a certain house but it may be out of the reach of your budget. This amounts to wastage of a lot of time and effort. Even your housing agents that offer lists will be de-motivated to show you many places. It is best to fist estimate your financial standing and how much capacity is there for the loan repayment. Here this loan which is preapproved by a bank helps. They undergo certain tedious procedures to jot down your financial assets. Liabilities and bottom line is how much amount you can shell out every month to repay the amount for the new home.
They will send agents who will check all the documents and the proofs of your securities. Your bank statements and all your financial assets available as ownership will also be examined. Their estimated value will then be calculated and they will come up with a certain figure which the bank or lending institution can offer as loan. This amount is pre-decided and helps the purchaser to select homes only under this range. You can also ask your housing agent to only show you offers within your budget. This will save lots of time and resources on your part as well as the agent’s part.
With the coming of credit card it has become much easier to purchase goods conveniently and immediately. This card is termed as the ’magic card’ as this gives consumers power of spending at their own free will and paying for this later at the end of the month. Easy availability of home loans is making many opt for the offer of taking a loan to purchase a house. Credit card history is also one of the criteria’s to be considered while fulfilling the requirements for approval of the home loan.
Home Loans simplified Facts
How does this relate to the new loan? The lender be it government nationalized banks or a private money lending institution goes through your past history of credit card usage. If the client has spent more than his limits then it is considered as negative point. If the client has spent 70 to 80% of the amount then also it is considered to be under scrutiny. Mostly the lenders are happy to lend to the client who rarely uses credit card but owns one for financial safety measures. This shows that the applier for the home loan is financially secure and can manage in his or her salary the monthly expenses.
The remaining amount or saving monthly needs to be a considerable amount since the cost of the house nowadays in substantial and one may have to give away 25 to 40% or our salary as EMI for repayment of the loan. If the client is a defaulter and has not repaid the credit amount on time then this is considered as a negative point from the lender. Thus while applying for a home loan one has to consider their credit card history as the lender goes through these documents before approving the home loan. All the Best from Rizwana! Read facts NRI from UK Home Price slashed Early closure Preclosure of home Loans Preapproval of home loans 8 Important Tips for buying NA plots
Home loans are taken for purchasing of the first home and also nowadays for second home options. Loans are available easily and procurement for home loans is available in simple and convenient procedures. When purchasing a home for investment purposes and going in for a home loan one must consider the following points:
Selection is best when the house is in a complex or housing society. As individual buildings are quick projects for many builders and they move away from construction site having no regard for infrastructure and other facilities for the clients staying in the lone building. Maintenance also becomes difficult sometimes when few members are involved in the society. Such houses have low appreciation value even though the purchasing rate per square foot may be same as of that particular area.
The construction site and property must have a clear title and ownership must be clear on the name of the builder. Disputed property matters to legal hassles and such house owners also have to bear the brunt of legal delays in construction. Loan taken on such flats sometimes becomes tedious as time lapses go on increasing and without mush development in the construction the client has to keep on repaying the loan amount.
Project under construction must have a clear cut plan and timeline for completion. Very quick projects may not have good quality construction and very lengthy time lines may lead to slow progress and delay in completion of the project on time. Delayed projects do not have a good rate of appreciation compared to other projects that are completing on time.
Infrastructure must be in the complex or near the housing society. Having to travel long distances for basic necessities is very difficult and such projects are slow to appreciate in value.
Promises and offers made by the builder during booking of the home must also be considered as many builders on completion of the project avoid giving the promised facilities on account of high costs and inflation.
Selecting the best home for an investment option considering the above mentioned points will help to save many bad experiences in the long run. Such homes are best for investment purposes and also their value is bound to appreciate over the time.
Easy tax concessions are a added bonus with your home loan. Purchasing a home has become like a rainbow and the pot of gold...so near yet so far! Our major salary can go in terms of repaying home loans. With property rates increasing day by day it is becoming more and more difficult to purchase a home even on loan. The principle amount is increasing and also the interest rate added puts a tight crunch on our monthly salary. Tax concessions and rebates come as a boon to lighten this burden a little bit.
Is it possible to get tax rebate on the loan amount? Many of us are not aware that this is taxable income money and one can avail rebate on a certain amount. If all returns are filed regularly and all criteria for applying for a home a loan fulfilled then one can avail on tax rebate for a certain amount of the money taken as loan. The main criteria would be the loan has to be taken in the prior financial year and the project has to have a fixed date for completion. The possession of the flat has to be taken within three years since the flat loan has been taken.
The home loan consists of the principle amount and the interest amount. Tax rebate is possible on both these amounts. One can take a professional guidance from a tax consultant and other people who have gone for a home loan. There are certain rules for the amount applicable for tax rebate under all the sections of laws. A certain percentage of the total amount that can be taxable depends on the individual who can get rebates for PPF, Insurance and so on.
This opportunity offered by the government to apply for tax concessions on the total as well as interest amount helps to reduce the load of the repayment of the loan amount. Still many of us are not aware that they can get tax rebates and concessions on home loans, with principle as well as interest amount. Whatever money saved is money earned!
Credit information report is one of the most important criteria for approval of a home loan. Easy spending power with the consumer has led to many people using many different credit cards. Though they end up paying more as interest the consumer is happy to purchase at their own free will and then pay later at the end of the month. CIR as it is termed is the most important criteria for home loan approval.
The history of the client’s financial dealings that is salary and spending amount indicates their financial status. If both spouses are working than both their salary amount can be considered. Take away home pay and their monthly usage of credit card indicates how much expenses are incurred and how much remains as savings amount. This is very important by the borrower to plan their credit card history before hand and later apply for a home loan for better chances of approval. Let us note some important points for increasing our chances positively for loan approval.
1) Plan in advance before applying for a loan. Keep watch for your credit card usage and keep the amount low. The CIR must reflect your financial status.
2) Your history of repayment of loans on time will definitely be a plus point for the lender.
3) Never out spend your credit card amount. Always be in limits and your expenses must be less than the total amount available for credit. The lender will consider that you have to have a substantial balance for repayment of the newly applied loan without any hassles.
4) Always keep payments on time. Your monthly electricity, telephone and credit cards bills must always be paid on time. This shows your financial capacity and habit of paying on time.
5) Credit card usage must be limited to certain amount, in fact if the usage is less the better chances of your loan approval. This assures the lender that you can manage your expenses without credit.
Thus for better chances of loan approval and avoiding the rejection of your loan application it is better to keep a watch at your credit card history.
What is Loan to Value Ratio??? Home loans are a simple and best way to make your dream of owning a home come true. As the property rates are shooting up it is becoming more and more difficult to own a home in the city. Taking a home loan is the best option of owning a property and enjoying the present while continuing paying for the EMI’s in the later period. The term loan-to-value ratio is often used by government banks or lending institutions.
It is always understood that the loan amount is less than the total value of the house. While applying for a home loan one must understand that some amount of the total value of the house has to be kept prepared beforehand which has to be paid as down payment. Banks offer only certain percentage of amount as loans against the property considered for buying. This ratio or percentage may vary from institution to institution and may also vary for the interest rate applied to the loan amount offered.
The total estimated value of the house or property is calculated by the financial lending institution and then the loan-to-value ratio is calculated. Nowadays many nationalised banks have sealed this ratio as 80% and the rest 20% has to be paid in the beginning by the borrower as down payment. This down payment also comes to a substantial amount as when the flat price is 1 crore then the borrower has to be prepared with 20 lakhs as down payment before applying and getting approval of the home loan.
Increasing property rates and inflation has made banks and lending institutions becoming vary of lending large amounts as home loans and this has also led to many defaulters of the loan.Hence as a precautionary measure most banks have pre-decided the loan-to-value ratio as 80% of the total value of the house or property.
Down payment facts are easily understood by the layman as a small amount to be paid on booking of the flat. But due to rising property prices this also accumulates and comes to a big amount. With properties ranging from 1 crore to 10 crores it is understood that the down payment will be proportionate to this amount.
Usually 20% of the total value of the property has to be given as down payment and the rest has to be repaid in monthly instalments over the tenure of time period allotted for the home loan. Let us go through some of the simple facts regarding down payments:
1) The client has to arrange for this amount before going in for the purchase of the flat.
2) This amount varies from institution to institution and also from property to property.
3) This is a part of the total value of the property.
4) This does not include administrative costs, transfer charges, property taxes, stamp duty and registration charges.
5) Home loan refinancing and other mortgage on older property can be arranged for accumulating the down payment amount.
6) Only legalised buildings and properties are eligible for getting home loan approval.
7) There is no upper limit for payment as down payment. It depends on the amount one can arrange for. The larger the down payment the lesser the amount has to be taken as home loan and the less tenure for repayment.
8) One can also start saving and borrower from family and friends for the arrangement of this amount for the time being. This can be got without any hassles and interest free.
The best way to arrange and go in for the purchase of the home is to start saving! Collect your assets and start saving for this down payment amount if you are dreaming of buying a home and considering opting for a home loan.
Home loans are the best way for any person to fulfil their desire of a home and everyone wishes for owning a roof above their head. House is a basic necessity and each individual dreams of owning a dream home but the rates of property being very high it becomes impossible to save this amount and purchase a home. Home loans come as a boon for many customers and they can avail this offer and buy a place of their own.
The total amount offered as loan is reducing due to inflation and property prices rising. A normal 1 bedroom hall kitchen flat comes to 12 to 15 lakhs and a 2 BHK flat comes to 25 to 30 lakhs, depending on the area of property. Many people take home loans but removing instalments every month becomes tedious and stressful. If there are unexpected financial problems or death in the family this leads to defaulters and bad home loans. Many properties come up as distress sales due to this and the lending financial institutions are at a loss.
Hence many nationalised banks and private lending institutions have fixed the loan amount on maximum 80% of the total value of the property to be taken on loan. This ensures that the borrower pays a substantial amount before as down payment and the rest is recovered by monthly EMIs. Also the borrower has the benefit of taking less amount as loan and later leading to less monthly payments, as it is always advisable to take loan on lesser amount because this adds with interest during repayment.
Home loans are easily available and at very attractive interest rates. Some institutions and nationalised banks offer loans at very low interest rates and flexible terms for repayment. Whatever the perks applied for home loans there is a certain amount to be paid by the buyer called down payment which is usually a big amount. What is the reason behind this figure?
Earlier many banks offered larger amounts as loans and it was very easy to purchase a property and then later keep paying the monthly EMIs. But due to property rise and inflation it is becoming difficult for the client to repay the loans. Unpredictable future and unexpected financial issues has made the banks vary of lending higher loan amounts. Many banks and private financial lending institutions would consider the background of the client and the past history of loan repayment and consider offering larger amounts as loan. But due to many defaulters and bad loans many nationalised banks have come to terms with this problem by sealing the percentage of loan amount to 20% of the total amount of the property or house.
The reason for this is certain amount of commitment from the customer. This down payment is not refunded and in case of default the client loses on this amount. Also this assures the bank that certain amount of the total property value has already been recovered. This is also good for the borrower as they have to repay a lesser amount and a certain percentage has already been taken care of before purchasing the home. This is a banks assurance and insurance that the client has made upon taking the home loan. In case of any problems in repayment the borrower has the fear of losing on this down payment as well as the property taken on loan.
How does one go about selecting the best home and the best home loans deal? Home selection depends on individual likes and rates per square foot in the particular area and best home deal offers whereas the criteria for selection of best home loans depends on the interest rate and easy availability of home loans.
Once the selection of a financial institution is done keeping in mind all the factors like interest rate on the loan amount, period for loan repayment in years, advance payments required by the lending financial institution one can easily go about applying for a home loan. It is very important to not get carried away by tall claims made in advertisements by the builder and be practical while selecting a house. Always consider beforehand the perks and facilities offered by the builder and time line for completion of the project. Unrealistic time schedules for completion lead to haphazard quality and incomplete work done during construction. Select a good builder as the quality of work during construction is very important in the long life of materials used for construction in your home. Go in for a good layout plan for construction where there are a group of building with infrastructure available. Single buildings mostly have security and maintenance concerns. Also townships and complex societies have a good chance of value appreciation over the years. There must be good medical facilities, schools, public transport, good roads, shops and basic amenities available nearby.
Also it is observed that good financial offers by lending institutions are on houses by reputed builders who have faced the testing of time. One can go about the procurement of the home loan on property and homes which are made by builders who have a good completion history and also many successful housing projects.
Home loans are a very easy way to make the dream of purchasing a home come true. When applying for a home loan one has to be prepared with the required documents and paper work for processing the applications for taking a home loan. While the selection of the home is done on the basis of personal requirements and the financial budget available it is also required to consider the availability for home loans and the amount available for this.
Usually person applying for a home loan has gone through the procedures of application and different administrative procedures in procurement of the loan and is prepared with the required documents. But it is very important to note that any financial institution does not give loan on the full amount of the house. Available rules in that area and the individual financial institution whether private or government bank has certain fixed percentage of loan amount offered. It is never the total amount but mostly many institutions offer amount up to 80% of the total cost of the house.
Some private institutions can offer high amounts of loans on keeping of property or other security assets which have a higher value than the loan amount applied for. One can also go in for other types of small loans which can be got without any paper work on reference with the already existing account in the respective bank or credit card, thus accumulating a higher total amount for purchasing a home.The down payment has to be paid and this also comes to a substantial amount.
Hence before going in for a purchase of a dream home and the applying for a home loan one must realize that it is only a certain percentage of amounts that can be available as loan and the rest has to be given by the client as down payment and other processing fees.