HOME LOAN: No, it’s just not a house loan!!

Home loan is the loan which is given to people who wish to purchase or construct a home. The property for which loan for home has been taken is mortgage to the bank as a security deposit till the loan is paid. Since it’s not a desirable ride as it’s quite thorny and for initial years it’s hard to feel at home. If a ” picture perfect home” is your next call then be geared up to face the harsh realities of the financial world out there :

Preliminary rejection trouble

Many of the loans for home applications do not even sail through the preliminary verification process because of the incompatibility between the borrower’s qualifications and lender’s requirements. Non-compliance of some of the standards facilitates rejection of your application; there are a number of criteria to be taken care of like income criteria, age criteria, lack of proper documents.

Cost of applying: Is it Refundable or Not?

Yes along with every application for home loan you are asked to shell out around 0.25% to 1% of the loan amount as demanded by the respective bank which is generally “not refundable “.

To obtain the certainty about the refund you need to get that in writing from the authorities concerned, which can be a tiresome job again.

Desirable loan may still be a myth.

Even though you get through all the verification process and your application fees is even intact

The bank hardly works to provide you a desirable sanction.

The amount that can be financed typically depends on the status of the borrower (resident/non-resident), type of loan for home (renovation, property purchase, property extension) and the financial institute. It is generally offered for up to 80-85% of the cost of the property.

The amount of loan sanctioned is subject to the repayment capacity of the borrower. Several factors are clubbed together ranging from your monthly income, financial history, credit card usage history, bounced checks (if any) to nature of your employment to define your credibility. In case your eligibility falls short than the required then you are left with three options, one of forgetting about the loan for home or wearing your convincing shoes and ask people to be your co- borrower or just bid off your NSC’s , provident fund, LIC policies ,funding home renovation etc as collateral.

The common fix about the interest rate regime?

The two famous loan regimes of the financial world are” simply puzzling”. Every borrower has an option of either going for a fixed rate or floating interest rate. Moreover after deciding on the regime the underlying meaning of the contract may create undesired havoc.

Moreover the fixed rate regime is not a safe bet, it pitches you against a fixed rate that can be changed in every 2 years. So ironically you can call it ” the volatile -fixed rate” because all the catches lie in the fine prints of these contracts.

Bridging the gap

The banking experts evaluate the value of the property according to their predetermined standards. The amount evaluated by them may lag behind the actual market price that pushes you to eventually shell the difference from your own pocket.

Dread of the down payment.

Already the processing fee and evaluation difference might have created a whole in your pocket but that’s not the end, because an initial down payment formality still awaits you. For a loan for home of 10 lakh this could mean anything between 1-2 lakh, ready availability of this amount is a prerequisite for a smooth sanction.

{Source: https://www.loanadda.com/article/home-loan/home-loan-more-than-house-loan-a-dream}

All You Need to Know About Home Loan.

Are you exploring options for home loans to buy a house of your dreams? In recent years, the banks have become more liberal in extending a helping hand to the people who are buying a home of their own. With the availability of several banks and varied interest rates, the home buying has become an easy option for the people. With several banks now eager to lend home loans for your needs and with an easy home loan procedure, Home loans are a great aspect in buying process.

However, one must keep in mind, that the Home loans is one of the most important decision a person can take and has effects on his financial planning for next 15-20 years. Hence it must be done with proper research and analysis. Home loans are considered to be useful tool which fulfill your dream of owning a home. At the same time, it can get you in trouble, if you do not analyze all your future expenses and your income, etc. Here are some facts and figures (an indicative one), which can help you in making a better decision over the Home loans and get yourself introduced with various aspects of Home Loans.

Interest Rates on Home Loans

The home loan interest rate at various lenders varies from 9.40% to 16%, while the same goes down slightly in case, the lender is a woman. While, there are many private and public sector players in this field, the rate of interest may vary slightly and you can see interest rates ranging from as low as 9.4% (with some conditions applied) in case of State Bank of India to 9.55% in case of ICICI Bank.

The mentioning of rates of interest is just not as simple as it may sound to be. The rate of interest varies with the schemes and loan amount. While, there are two different types of rate of interests applicable on home loans in the form of fixed rates of interest, the other is a floating rate of interest. Fixed rates of interest are the one, which remains fixed through the entire duration of the loan tenure, while floating rate of interest is the one, which keeps on changing with changing market conditions. In such cases, EMI is not fixed and varies as per rates of interest at that particular moment of time.

The loan amount is another factor, which decides the rates of interest. Generally, it has been seen that the more you require as the loan amount, the more you will be charged.

Tenure of Home Loans

The Home Loan tenure can be anything from 1 year to 30 years. There are even some lenders in the market, whose loan tenure can be a little shorter with the maximum tenure being fixed at 25 years. Some are having a minimum loan tenure of around 10 years and other such, which can be seen mostly in non-banking financial corporations. Thus, the loan tenure is a range varies from 1 year to 30 years in most of the cases.

Documents required for Home Loans

The Home loan requires some important documents, without which a home loan cannot be approved. The needs of documents vary depending upon whether the person is a salaried, self employed professional or self employed non professional. Please find below mentioned list of necessary documents:

For Salaried Professionals:

• Application form with photograph, duly signed
• Identity, residence and age proof
• Last 6 months bank statements
• Last 3 months Salary-slips
• Processing fee cheque
• Form 16 / Income Tax Returns

For Self Employed Professionals:

• Application form with photograph duly signed
• Identity, residence and age proof
• Last 6 months bank statements
• Last 3 months Salary-slips
• Processing fee cheque
• Form 16 / Income Tax Returns
• Education qualification certificate and proof of business existence
• Last 3 years Income Tax Returns with computation of Income
• Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account

For Self Employed Non Professionals:

Both, the documents are required in case of salaried professionals and self employed professionals.

While the process of various banks may differ slightly, the documents required in most of the cases with all banks is almost the same as mentioned above.

Processing Charges of Home Loans

Various banks charge a nominal percentage as a home loan processing charge. The processing charge varies, generally 0.5% to 1% at max. There is a certain ceiling amount which is being fixed at a maximum of around Rs. 10000 in most cases.

Other Factors Associated with Home Loans

There are several other factors which determine the home loans eligibility and interest rates as concerned with a person. The factors like Income, Credit Score, location of property, legal issue connected with the property, employment type, loan amount and other factors are the contributing factors which decide the home loans eligibility and interest rates.

One must always keep in mind, that while opting for home loans, one can negotiate rate of interest for your home loans and always keep in mind that the longer is the loan tenure, the greater is the total payment. Thus, always try to minimize the loan amount and try to quickly close your loans, if some money comes to as bonus. There is no prepayment penalty in floating rates and thus, one can easily pay off their loans much before the actual loan tenure completion.

With the loans, you are also provided an option of switching the lenders. Taking a loan from a particular bank, doesn’t mean you are now bound to the same lender forever. In an effort to get a better deal, or in some other conditions, you can switch lenders if you want to.

{Source: http://www.home-loan.in/need-know-home-loan/}

RBI guidelines for Home Loan.

RBI Guidelines for Home Loan:

From a borrower’s perspective taking a loan involves meeting the eligibility criteria, submitting the required documents and then adhering to the repayment rules as laid down by the lender in the loan agreement. T

Guidelines Related to Prepayment Charges:

• As we know home loans come with a huge interest cost as they are usually big ticket and are taken for durations ranging from 10 to 25 years. This cost can be reduced if the borrower is able to prepay a loan fully or partially thus reducing the principal amount or the tenure. Prior to the RBI’s changed guidelines banks and NBFCs charged a fee ranging from 2% to 5% of the unpaid principal amount as prepayment charges if the borrower chose to make a partial/full prepayment. Now as per the RBI guidelines lenders are not allowed to charge anything for a prepayment on floating interest loans. This decision impacts home loan balance transfer process too.

• Home loan balance transfer is an option that allows you to switch from an expensive loan that you availed some years back to a lower interest loan. We have helped many customers save huge amounts by helping them switch to less expensive loans. You can read about the home loan balance transfer process in detail on our blog on the same topic.   The balance transfer option essentially involves foreclosing the existing loan and taking a new loan for the unpaid principal amount. With the charges on foreclosure of floating rate loans waived borrowers can switch to a new loan without having to bear the burden of these charges.  However, banks may charge pre-payment penalty on fixed rate loans varying from 1% to 3%.

Guidelines Related to LTV Ratio:

There was a change announced by RBI in October 2015 that impacts the amount of loan available to the borrower. The RBI, as per the changed policy, allows a borrower to avail a loan up to 90% of the property value if the value of the property in question is less than or equal to Rs. 30 lakhs. For loans that are above Rs. 30 lakhs and up to Rs. 75 lakhs LTV Ratio is 80%. Loans above Rs. 75 lakhs have a LTV ratio of 75%. We have covered this change announced by the RBI in the LTV ratio in detail in an earlier post.

Guidelines Related to Home Loan Insurance:

• Owning a house offers a great sense of security to the house owners. However, if the house is bought with the help of a loan and God forbid the primary bread winner and the person who pays the EMIs passes away this security could be snatched from the dependents. Thus it is advisable for the borrower to get home loan insurance as a safety net against such an eventuality or other unfortunate events like loss of income or disability etc. Even though getting an insurance cover is in the best interest of the borrower, whether the borrower wants it or not is his/her choice. The type insurance policy he/she chooses and from where he/she intends to buy it also the borrower’s prerogative.

• Sometimes banks may insist that the borrower take the insurance from them or they may bundle it with the loan without the knowledge of the borrower. This may be done by the bank due to the high commission they receive for selling the insurance product and also to safeguard their own interest. However, no RBI guideline makes it mandatory for a borrower to buy insurance at all or buy it from the lender. If the bank insists so it amounts to mis-selling. The lender can insist that the borrower takes an insurance cover but the borrower is free to choose the policy type and the insurer.

The above are a few important RBI rules for home loan in India. These rules impact your decision about taking a loan and as well as repaying it; hence they are important.

{Source: https://www.switchme.in/blog/2017/02/rbi-guidelines-home-loan/}

EMI Calculator - Easy to Know your monthly loan payment.

There are times when you need financial help for which you can’t totally rely on your relatives or friends for the financial help because they have their own needs to meet. It can be your dream vacation or a medical emergency, which require a good amount of money and to get the aid quickly, you can possibly opt for loans because it’s one of the fastest ways to get the help. Loans are the financial help which you get from banks and no matter how much amount you need, loans can be veracious.

As they say nothing comes easy, loan is the amount you borrow form bank which means you need to pay it back with interest. Bank charge you an interest rate on the loan amount you borrow, which you have to pay along with the repayment of your loan. Interest Rate varies from bank to bank and it also depends on the type of loans you apply.

Loans are divided into several types to make it easy for you to get the help according to your need. Personal loans are the unsecured loans, which you can use for any legal purpose but the interest rate is little higher because there isn’t any collateral involved, which bank can have as a security. On the other hand, Home loan, Auto Loan and Loan against property are all secured loans because the property or vehicle work as the security and that’s why these loans come with less interest rate.

Nowadays, ecommerce has surely made everything reachable to the people, including the financial help. You don’t have to visit the bank anymore, to apply for the loan or to enquire anything regarding loans. You can do all the calculations and the comparison of CURRENT LOAN RATES IN INDIA, right at the comfort of your home. Now wouldn’t it better to know how much payment you’ll be paying monthly, before you actually take the loan, that too without going anywhere? Well, with the help of LOAN CALCULATORS IN INDIA you can calculate how much monthly EMIs you’ll be liable to pay. You just have to visit the online portals and everything will be right in front of you, whether you want to compare the interest rates or you want to calculate the EMIs.

How to use EMI Calculator?

Almost every financial online service provider offers this beneficial tool of EMI Calculator to its customers and it’s very easy to us. Just mention the loan amount, interest rate and loan tenure, it’ll show you exactly how much monthly payment you’ll be paying. If you want more specific results, then you can pick it according to the loan type, like to calculate EMIs on personal loan, home loan or auto loan. So take a smart move and check everything before you actually take the step.

{Source: https://www.creditnation.in/creditwisdom/emi-calculator-easy-to-know-your-monthly-loan-payment}

5 steps to follow when your home loan is rejected.

Are you one amongst the many in India whose home loan has been rejected? Well, there’s no reason to be dejected as it is not going to help matters. When your home loan application reads as “no”, you need to read it as “try again”. There is no reason to feel dejected as you are just an approval away from purchasing your dream home. Below are 5 crucial steps that can help you get that dream home after your home loan lender has said no.

Dig into the details

Usually, the letter sent by the home loan lender conveying the rejection is a generic one. Do not let the cloud of disappointment blur your thinking. Instead, you must try to learn the reason for your home loan being rejected. If the letter does not specify the reason, call the concerned officials and try to understand the precise reason for the lender rejecting your loan application. This is very important as it helps you prepare better when reapplying for the loan.

Reduce the loan amount

While assessing your loan eligibility, a strong possibility of the lender rejecting your loan application is because your monthly income is not sufficient to support the required home loan amount. In such cases, it is recommended to rework the loan amount so that the debt servicing ratio can be corrected, which feel make the lender feel more confident in your loan repayment ability.

Pay off existing debts

If you already have multiple loans, the chances of your current payment obligations getting in the way of the home loan are high. This is because it leads to a higher debt to income ratio. Simply put, this means that your debt obligations and repayment commitments are higher than your existing income. And the lender feels that more debt obligations will increase the chances of your defaulting on the payment. The best alternative here is to pay off a few of the existing debts to rectify the situation.

Work on your CIBIL score

Lenders rely on CIBIL score and CIBIL report, as it helps them understand your credit behaviour and credit history. A delay in repayments and defaults result in negative impact on the CIBIL score and a poor score is most often the main reason for home loan rejection. In such cases, obtain a copy of your CIBIL score and seek professional advice on how you can improve it. Remember, it takes time for the revised scores to reflect, so the better you begin to improve your CIBIL score, the more favourable are your chances of getting a home loan approved.

Adjust to make it work

The home loan amount, rate of interest and loan tenure are the main factors considered when it comes to home loans approval. Your EMI is calculated on these factors. Now, for the EMI to be worked out for your income; either the home loan can be decreased or the loan tenure can be increased. Consider all available alternatives too such as another property that is more affordable or other home loans that offer better interest rates.

When applying for a home loan, the key lies in understanding the home loan lender’s requirements and working towards meeting it. A little bit of patience, financial discipline and determination is all it takes to get your home loan sanctioned with minimal effort.

{Source: https://www.indiabullshomeloans.com/blog/5-steps-to-follow-when-your-home-loan-is-rejected/}

Personal Loan EMI Calculator.

Use the interactive home loan EMI Calculator to calculate your home loan EMI. Get all details on interest payable and tenure using the home loan calculator.