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/}

Why Should You Use EMI Calculator Before Applying For A Loan?

Loans are an integral part of our lives today. They help achieve some important financial goals which would otherwise not be possible. Be it funding your child’s future education or arranging money for marriage, paying for your dream home or that much wanted car. Whatever the need be, there is a loan for every purpose. There are important terminologies associated with every loan. “EMI” is one such common term.

Loans are repaid in Equated Monthly Instalments (EMIs). Every month a stipulated amount is deducted from your monthly salary towards repayment of your debts. EMIs can either be paid through auto-debit instructions set up on salary accounts or the borrower can send cheques every month. In either scenario, the amount to be paid back is the same, month on month, for the entire tenure. This amount is officially referred to as EMI.

How EMI is calculated?

Primarily there are three factors that are taken into account when computing an EMI. They are:

1. Amount of Loan – This the total amount of money borrowed. In some cases, the loan may be sanctioned for a larger limit however; only a part of it is used so the EMI is calculated not on the sanction limit but on the amount of money actually borrowed.
2. Interest Rate – This is the rate of interest that will be charged by the lending institution on the sum lent. The interest is calculated on reducing balance.
3. Loan Tenure – This refers to the entire period for which the loan has been granted. The tenure in months is used for calculation purposes. Alternatively, this can also be called the number of instalments due.

EMI is calculated as below:

EMI =    P * r * (1+r) n/ (1+r) (n-1)

Where,

P = Principal or Amount borrowed

r = rate of interest per annum

n = number of instalments.

Thankfully in this age of technology you do not have to indulge in manual calculations. You can make use of online loan EMI Calculator to instantly arrive at a possible EMI. Given the calculation above, it is aptly clear that EMIs are directly proportional to interest rate and principal amount, while it is inversely proportional to the loan tenure. In simple words, higher the amount borrowed or higher the rate of interest, the EMI will be higher too. However, longer the tenure, smaller will be the EMI.

For example:

For a personal loan of 1, 00,000 at the rate of 12% for 12 months, the EMI would be = 8884/-. For a personal loan of same amount for the same tenure but at rate of 15%, the EMI would be = 9025/-. For a personal loan of 2, 00,000 at the rate of 12% for 12 months would yield an EMI of 17,769/-. Whereas, for a loan of 1, 00,000 at the rate of 12% for 36 months would spell into an EMI of 3321/-.

Thus you can see how your EMI changes with a change in any of the three primary factors.

Why Calculating EMI is so important?

A lot of people are extremely enthusiastic about getting financed. While they plan extensively on what to do with the funds received, they often go underprepared from the debt-repayment perspective. Knowing what your EMI would be before you have applied for a loan would enable you to budget your monthly expenses accordingly.

People who have calculated their EMIs are prepared for what they are getting into, plan for how their lives will be impacted post the EMI and deal better with the burden of debt-repayments than those who don’t plan enough. Goes without saying, the difference of better planning often shows in better credit scores.

Comparing EMIs on loan offers by different lenders guides borrowers to better deals.

EMIs are calculated in such a fashion that with every installment, a part of the principal and a part of the interest is repaid. Interestingly, and contrary to popular customer belief, during the initial phase of the loan tenure, a larger portion of the EMI is allocated towards repayment of interest. Practically after half the tenure has passed, a larger fraction of the EMI is accounted towards principal.

More of this can be made clear through an Amortization Schedule. This is an important table that shows the break-up of your EMI into interest and principal components, month on month. You can either request for an amortization schedule from the bank you apply to or you can calculate the same using online loan interest calculator. This is another important document you must go through before signing any documents.

Why does the EMI change over the tenure?

Incase during the loan tenure, there is a change in any of the three variables that go into the calculation of the EMI, then the EMI might change. Some of the common reasons are:

1. Borrower prepays the loan – this means the principal amount will fall and therefore the interest calculated on the balance amount will change too. This will bring the EMI down.
2. Interest rate change – If your loan is based on flexible rate of interest then the EMI will be adjusted to account for the change in interest rate.
3. Borrower requests for restructuring of loan and an increase in loan tenure. This is will mean a lower EMI.

Summing-Up

Since computation of EMI is made easy with the help of online EMI Calculator, every person hoping to take an advance must make use of it. It helps in calculating your affordability by helping you understand on what will your left over disposable income ultimately. This in turn helps you to avoid poor credit.

EMI varies with loan tenure and interest rate. Amortization schedule helps the borrower see how much outstanding balance is left. It is especially helpful when the loaned wants to foreclose or prepay the loan. The bottom line of any loan is the EMI. Knowing the EMI keeps the borrower from hitting the bottom.

{Source: https://www.creditsudhaar.com/blog/2016/09/26/why-should-you-use-emi-calculator-before-applying-for-a-loan/}

8 Simple steps to apply for home loan.

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

Understanding Home Loan Eligibility.

Building a home incurs significant costs, and for banks to be able to lend to you the required amount for taking house loans, they have to be convinced that you have the capacity to repay what you’ve borrowed with interest within the stipulated time period. A measure of this ability is known as Home Loan Eligibility.

People from different levels of income are eligible for different amounts of loans based on their salaries and expenses. It is calculated on the basis of multiple factors including monthly income, fixed monthly obligation, current age, retirement age etc. Basically your home loan eligibility can also be considered an indicator of your home loan affordability.

You can get a rough idea of your Home Loan eligibility through a home loan eligibility calculator that is available online. By entering the required details, you can find out the amount of loan you are eligible for, the interest that will have to be paid, and the tenure of loan.

These calculators can also be used as a housing loan EMI calculator, as most Home Loan Eligibility Calculators today will tell you the amount of payable EMI as well. Your home loan eligibility can also be helped by having a good CIBIL score. A CIBIL score is a three-digit numeric summary of your credit history derived using the credit history found in the CIR. A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time.

Home Loan Eligibility Criteria:

Different banks have different criteria for deciding an individual’s eligibility for a home loan of a certain value. Hence there is no standard calculator that can give you an all-round eligibility, across all banks or the economy. However, there are certain common factors that decide your eligibility that are common all across.  These include:

1.  Deposit amount
2.  Credit history- This is where your CIBIL score that was mentioned previously comes into play. The  more regular you were, in paying off mortgage of previous loans, the better your loan history is  going to look and hence the better your chances will get in getting your new loan approved.
3.  Income- The amount of loan you can get from a bank is directly proportional to the amount of  monthly or annual income you have, as this directly affects your loan affordability and your ability to  repay said amount. 
4.  Financial stability- The type of employment also plays a factor here. A self-employed individual who would have different earnings in different months would find it more difficult to get a loan. However, this again is dependent on the amount of average monthly income that the borrower earns.
5. Debts- The amount of debts that one has racked up and is pending to be paid off will have a great impact on his/her home loan eligibility. The more the amount of pending debt, the lower the eligibility for another loan.
6. Value of your home (if any)- Every loan requires the borrower to mortgage an asset as collateral, in case he/she is not able to pay back the loan amount with interest. An already existing home can act as a great collateral for a home loan. Hence, the higher the value of said home, the better your eligibility for a home loan.

Getting a house loan requires you to convince your bank that you can afford to repay the amount with interest. If the said parameters work in your favour, getting a home loan is just a matter of paperwork and approval.

{Source: https://www.indiabullshomeloans.com/blog/understanding-home-loan-eligibility/}

Must know factors first time home buyers

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