21 Thumb Rules of Personal Financial Planning.

21 thumb rules of personal financial planning.

1. 30 % of your income must be used for monthly living expenses.

2. 30% of your income must be used for liabilities repayments, if any..

3. 30% of your income must be SAVED and INVESTED for your future LIVING.

4. 10% of your income must be spared for entertainments, vacations

5. 6 months expenses must be available for emergency fund (should be invested in LIQUID FUND, FD Etc)

6. Home loan must be registered and applied on both husband and wife name. (Both can get benefits on Home loan Tax benefits)

7. Buying second house for investment is not advisable ( Survey reports – it will fetch you only around 3% return)

8. After 45 years of age, not supposed to enter into any BIG LIABILITIES (Higher education of children and wedding of children will happen around 45 to 50 only, so plan now for the same.)

9. Have joint account @ Bank savings account.

10. Property must be registered on both Husband and wife name. (As per legal act – after husband first legal heir is wife, after wife it goes to children).

11. Regular check on Nominations at all financial instruments. if  not nominated, do it now..

12. Only in insurance policy, claims payable to Nominee. In other financial instruments legal heirs certificate is must to get back the settlement

13. Must have Term Insurance to financially secure future of your dependants..

14. Don’t take any financial investment decisions EMOTIONALLY, and also Avoid last minute tax saving investment decisions, plan well in advance.

15. MEDICLAIM is must (in spite of Group mediclaim coverage given at office) (After retirement there is no mediclaim coverage, after 50-55 years of age, it’s very tough and costly to enter into mediclaim)

16. For your jewelry LOCKER, Only one lakh is payable by bank, if theft or fire happen at bank. Provided insurance done.

17. Like same way Government guaranteed only one lakh for your FD also. (Fixed deposits with Banks upto Rs. 1 lakh only are backed by deposit insurance)

18. Know all Tax implications. You cannot avoid paying tax. But you can minimize by way of tax planning and investments..

19. All financial documents must be kept safely and keep family members informed of the same.

20. Financial investments must be followed through personal financial planning adviser.

21. Review your portfolio for every six months.

These are general suggestions, but personal financial planning and investment decisions depend upon case to case.

Have a Healthy and Wealthy Financial Year 2017-2018…..

Guide to the Home Loan Process

Buying a home is one of the major decisions a person has to take during his life. It is rare to find someone who pays the entire cost of home at one go. A home loan is an essential part of any home buying endeavor. Taking a home loan is a long journey, which involves many stages. The key to getting your home loan in a smooth way is being familiar with the entire home loan process.

home-loan-process_loanyantra-com
Know the home loan process before-hand
Beginning the home loan process in India

The process of getting a home loan starts with a formal application for the loan. The application form requires certain basic information about you. This will include your personal, residential, income, employment, educational details and details about the property, estimated costs and current means of financing the property. Though the requirements may vary from bank to bank but there are certain things which every bank will ask.

The application form must be supported with valid documents to substantiate the facts. Generally the banks will ask you to submit following documents.

  • Income proof
  • Age proof
  • Identity proof
  • Address proof
  • Employment details
  • Proof of educational qualifications
  • Details about the property if finalized
  • Bank statements

Proof of income : This will need to be backed up by proof such as copies of last three years’ Income Tax returns (along with copies of Computation of Income/Annual accounts, if any), Form 16/Form 16A, last three months’ salary slips, copies of the last 6 months’ statements of all your active bank accounts in which your salary/business income details are reflected, etc. Other documents that you need to provide with your application form include age proof, address proof and identification proof. You may also be asked to give your employment details.

Age proof : Copy of your school leaving certificate/Driving license/Passport/ration card/PAN card/Election Commission’s card/etc.

Identification proof : Same as above, but with photograph. Sometimes, the same document if it contains a photograph, the current residential address and the correct age can be the proof for all 3 things.

Address proof : Similar documents need to be provided to prove that you are actually staying at your current address.

Your employment details: If your company is not well‐known, then a short summary about the nature of the company, its business lines, its main customers, its competitors, number of offices, number of employees, turnover, profit, etc may be needed. Usually, the company profile that is available on the standard website of the company is enough.

Educational qualification : The copy of certificates of your higher educational qualification needs to be submitted.

The purpose of the entire exercise is to ascertain the suitability of an applicant for a home loan. The income documents and bank statements provide vital clues to the bank regarding your financial health.

Processing fees for home loans in India. : An important thing to note about home loans is the processing fee. Banks charge a processing fee for every home loan application. This fees is non refundable. This fees is used by the bank to start and maintain the home loan process including completing the various formalities during the entire period.

Evaluation and verification of home loan applicant : After applying successfully for the home loan and submitting the processing fees, the bank evaluates your application, decides in principal about your home loan and requires a personal meeting with the bank officials. This decision for personal interaction can be taken within 2-3 days of submitting a complete application. The purpose of this personal interaction is to know more about the borrower and his repayment capacity. Being satisfied by your application and personal interaction, the bank proceeds to verify all the facts that you mentioned in your application for home loan. A field investigation process is initiated – to confirm and validate everything stated in the application form. Qualified representatives are sent by the bank to your office and place of residence to ascertain the facts. The references provided in the application are cross checked and verified.

Verification of repayment capacity : Once the field investigations over, the bank now goes ahead to verify your repayment capacity. This is the most vital part of any home loan process. If the bank finds that you’ll not be able to repay the money back with interest on time, it will simply deny you any home loan offer. On the other hand if the bank finds that all’s well and is convinced by your repayment capacity, it sanctions your home loan. Based on how well the bank is satisfied by your financial conditions and repayment capacity the bank can issue a conditional sanction or unconditional sanction. If the sanction is conditional, you’ll have to fulfill the conditions imposed before the loan is disbursed.

Sanction letter for home loan : The bank then prepares a sanction letter which contains the following detail:

  • The amount of home loan sanctioned
  • The interest rate applicable on your home loan
  • Whether the interest rate is fixed or floating
  • Your home loan tenure
  • The mode of repayment of the home loan
  • If any special scheme applies to the home loan, its details
  • The terms and conditions associated with the home loan

If you find the offer attractive and agree with all the facts mentioned in the sanction letter, you will have to provide an acceptance copy to the bank. This is generally a duplicate of the sanction letter signed by you, provided to the bank for its records. If the bank charges any administrative fee, it will have to be submitted at this stage.

Verification of the property : Now the bank will verify the property in question. The home loan is a secured loan with the property being used as the security or collateral. So, to get the home loan you must submit the original documents of the property to the bank. The title deeds, no-objection certificates and other documents required by the bank are to be submitted in original and the bank keeps them safely until you repay the entire loan amount. After taking the papers, bank conducts a legal check so as to verify that the property has a clear title and the home loan is being disbursed to the right person and for the right reasons. Banks don’t lend for disputed properties and for titles where ownership cannot be easily enforced.

Along with the legal check, banks also send experts to the location of your property to conduct a technical valuation. If the property is under construction, the banks verify the stage of construction, quality of construction, progress of construction, locality etc. and evaluate the property on established parameters. In case where the property is ready or is being resold the bank verifies the ownership, maintenance, age of property, quality of construction, locality and required legal clearances. The banks have qualified valuators, which assess the value of property on various parameters and decide on the amount of loan

The sole purpose of all this exercise is to ensure that the property has a clear title, is technically sound and meets the valuation standards of the bank.

Note: Verification is not necessary if loan is being sanctioned by a tie-up Bank.

The disbursal of home loan : Once the formalities are completed and the bank is satisfied with the legal, technical and financial valuation of the property, the registration process for the home loan begins. The legal documents are to be prepared on stamp papers of required denominations in a format approved by the bank’s lawyer. The home loan agreement is then signed and you need to submit the post dated cheques for the agreed term. After the home loan agreement the loan disbursal process begins. Depending on the home loan purpose, and the agreed type of disbursal (lump sum or in stages), banks disburse the home loan amount.

Income Tax certificate

Every bank issues an income tax certificate that serves as requisite proof to let you avail of tax benefits that accrue on repayment of a home loan. This will typically contain the total amount of interest and capital repaid during the year. This is mandatory to claim the tax benefit in respect of self-occupied property. You will have to file this with your tax returns and submit this to your employer or chartered accountant to calculate your tax liability.

How Loanyantra Works During the Home Loan Process :

It is our work to make you feel at ease during the process. We are here to make you select the best and your favourite bank. We ensure that your process is smooth as we send you alerts and remainders about each step before even the agent comes to you. You can always contact our relationship manager for any queries.

All You Need To Know About Property Tax

If you have been looking into the market of home loan, you might have come across the term ‘property tax’ more than once. Though property tax varies from state to state and depends on the valuation of your home, you must remember that your home loan depends on the property tax. Each home loan has the provision that in case you fail to pay off the property tax in an “event of default”, the lender could even foreclose on your property even when all your mortgage payments have been done in a punctual manner.

Why should you concern yourself with property tax?

In India, property is a source of income for many and hence, it was only but natural that tax would be levied on any property you purchase, be it a humble shop or godown, flat or a proper residential building, provided you are using it to earn money in any form. The amount of property tax that you need to pay would depend on the value of the property that is being taxed in the first place.

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What is property tax?

Why is the property tax being charged at all?

The fact that the local municipal authority is the force behind the property tax being levied must tell you a lot about how the money you pay goes to towards the maintenance of the basic civic services in your city. The property tax in India is only charged on the real estate building and not on the plots of land, which don’t have any establishment in its vicinity.

How is the property tax calculated? What is Annual Value?

The property tax you need to pay is decided on the basis of the annual value of the let out or self occupied property. For the self occupied properties, the annual value is taken to be zero. However, if that property is rented, the property tax is calculated accordingly.

What are the tax benefits of your home loan?

 Under Section 24, you are empowered to claim up to Rs 200000 or the actual amount of repaid interest. However, you can only make the claim when you are in possession of the house.

 Under Section 80C, you can claim the principal up to the maximum limit of Rs 150000 across all the investments made under the section 80C. However, you might be needed to show the lender’s statement showing the not only the interest and principal components but also the repayment for the year.

How can a new homeowner avoid property tax traps?

Every homeowner should go to the pains of confirming the tax rate before signing on the dotted line to save himself from the reassessment and hikes of rate of interest. The estimate of a real estate broker of the approximate tax bill might prove to be helpful but even then you might be required to pay more tax in the subsequent years. You can potentially open up an escrow account in order to set apart the funds that would be drained to provide for the taxes.

e-Filing of Income Tax – Forms, Methods and Types

The below are three options to file Income Tax Returns electronically:

Option 1: e-File without Digital Signature Certificate. In this case an ITR-V Form is generated. The Form should be printed, signed and submitted to CPC, Bangalore, using Ordinary Post or Speed Post ONLY within 120 days from the date of e-Filing. There is no further action needed, if ITR-V Form is submitted.

Option 2: e-File the Income Tax Return (ITR-V) through an e-Return Intermediary (ERI) with or without Digital Signature Certificate (DSC).

Option 3: Use Digital Signature Certificate (DSC) / EVC to e-File. There is no further action needed, if filed with a DSC / EVC.

Note: The Digital Signature Certificate (DSC) used in e-Filing the Income Tax Return/Forms should be registered on e-Filing application.

types_eFiling

Pre-requisite for registration in e-Filing application

A user must register at www.incometaxindiaefiling.gov.in

Pre-requisites to register

1) PAN (Permanent Account Number)

2) TAN (Tax Deduction Account Number)

3) Membership with ICAI – For Chartered Accountant

Registration process

1) Provide PAN / TAN, Password details, Personal details as per PAN / TAN, Contact details and Digital signature (if available and applicable)

2) Submit request

3) On success, Activation link is sent to user through e-mail and a mobile PIN to mobile number. Click on the activation link and provide Mobile PIN to activate e-Filing account.

Once registered, LOGIN using User ID (PAN/TAN), Password, Date of Birth/ Incorporation and Captcha code.

Methods of e-Filing of Income Tax

1) Preparing the Income Tax return off-line using return preparation software, available free of cost at the Income Tax Department e-Filing website and Uploading the Income Tax Return data.

A taxpayer can e-File Income Tax Return from ITR 1 to ITR 7.

2) Submit ITR-1/ITR4S Online– An Individual taxpayer can prepare and submit Income Tax Return- ITR 1/ITR4S-Online.

e-Filing of Income Tax Returns (Offline)

e-Filing_of_Income_Tax_Returns_(Offline)

Steps to download utility and generate XML

Excel Utility – 

1) www.incometaxindiaefiling.gov.in e-Filing Home Page
2) Click on the “ITR” under “Downloads”
3) Click on “Download” link and save the ZIP file (Excel or JAVA utility)
4) Extract the downloaded ZIP File
5) Open the utility, Click on “Import Personal / Tax details from XML” –>Browse and attached the downloaded Prefill XML file to populate the personal information and TDS details.
6)  Enter all the Mandatory Fields –> Validate all the sheets –> Calculate Tax –> Generate XML.
7) Login using e-Filing user credentials
8) Navigate to “e-File” Tab –> Click on“Upload Return”
9) 
Select “ITR Form Name” and “Assessment Year” from the dropdown provided.
10) Browse and attach XML file.
11) Select “Do you want to digitally sign?”–>
12) On successful submit taxpayer will get an option to e-verify return.

JAVA Utility –

1) www.incometaxindiaefiling.gov.in e-Filing Home Page
2) Click on the “ITR” under “Downloads”
3) Click on “Download” link and save the ZIP file (Excel or JAVA utility)
4) Extract the downloaded ZIP File
5) Open the utility, Click on “Prefill” –>Enter “UserId”, Password, “DOB/DOI” and select “Prefill Address”(From PAN Details, From previous ITR Form Filed, None) –> click Prefill
6) Enter all the Mandatory Fields –> Calculate Tax –> save XML.
7) Click on “Submit” –>Enter “Password” and select “Do you want to digitally sign?” –>Submit

Process and Submission of ITR1/ITR 4S Online

The taxpayer has the option of submitting ITR 1/ITR 4S by way of Uploading XML OR by Online submission

e-Filing_of_Income_Tax_Returns_(Offline)2

Steps to e-File Online ITR (ITR 1 and ITR 4S) – 

1)  www.incometaxindiaefiling.gov.in e-Filing Home Page
2) Login using e-Filing user credentials
3) Navigate to “e-File” Tab –> Click on “Prepare and Submit Online ITR”
4) Select “ITR Form Name” from the drop down (ITR-1 or ITR-4S)
5) Select “Assessment Year” –> Select the Radio button “Prefill Address with” to auto populate the address –> Select the Radio button if DSC is applicable –> Click on “Submit”
6) 
Enter the mandatory details in the online form –> Click on “Submit”

Note:
1) 
To e-File using DSC, it should be registered in the e-Filing application.
2) If the Income Tax Return is digitally signed or electronically verified, on generation of “Acknowledgement” the Return Filing process is complete. The return will be further processed and the Assessee will be notified accordingly. Please check your emails on these notifications
3) If the return is not e-Filed with a DSC (digitally signed) or EVC (electronically verified), an ITR-V Form will be generated. This is an Acknowledgement cum Verification form. A duly verified ITR-V form should be signed and submitted to CPC, Post Bag No. 1, Electronic City Post Office, Bangalore – 560100 by Ordinary Post or Speed Post (without Acknowledgment) ONLY, within 120 days from the date of e-Filing.
4) On receipt of the ITR-V at CPC, the return will be further processed and the Assessee will be notified accordingly.

Register Digital Signature Certificate (DSC):

Follow the below steps to register DSC in e-Filing of income tax

1) www.incometaxindiaefiling.gov.in e-Filing Home Page
2) Login with e-Filing user id and credentials
3) Navigate to “Profile Setting” Tab –> Click on “Register Digital Signature Certificate”
4) 
Download “ITD e-Filing DSC Management Utility” from the link provided in e-Filing website Extract the downloaded DSC Utility –> Open the Executable Jar File (DSC Utility)
5) “Register/Reset Password using DSC” – tab
6) Enter e-Filing User ID, Enter PAN of the DSC, Select the type of DSC
7) DSC using .pfx file
8) Select the Type of DSC .pfx file
9) 
Browse and attach the Keystore file (.pfx File)
10) Enter the password for your private key
11) Click on “Generate Signature file”
12) DSC using USB token
13) Select the Type of DSC (.pfx file or USB token) USB Token
14) Select USB Token Certificate –> Click on “Generate Signature File”
15) Browse and attach the signature file using the browse option –> “Submit”,

Modes of e-Verification

The below are the options provided to electronically verify the returns
Option 1: e-Verification using e-Filing OTP (only available if Total Income is less than or equal to Rupees 5 Lakhs and Refund or Tax payable upto 100 Rupees.
Option 2: e-Verification using NetBanking login
Option 3: e-Verification using Aadhaar OTP validation.
Option 4: e-Verification using Bank ATM (SBI)
Option 5: e-Verification using Bank Account Number (PNB)
Option 6: e-Verification using Demat Account

Note: No Further actions required by the taxpayer post e-Verifying the Return

Upload of Income Tax Form (Other than Income Tax Returns) by Tax Professional

Steps to e-file Audit Form(CA):
1) The taxpayer (Client) has to add a particular CA for upload of particular audit form. Post which, the CA has to login into his account and download required Audit Form. After updating, the CA has to upload the Audit form using CA login.

Add CA functionality:
1) www.incometaxindiaefiling.gov.in
– e-Filing Home Page
2) Login with efiling user credential.
3) Navigate to “My Account” –> “Add CA” –> Enter “Membership Number”, “Name of the CA”, select “Form Name” ,“Assessment Year” –> click “Submit” to add CA.

efiling-of-income-tax_loanyantraE-file Audit Form:
1) www.incometaxindiaefiling.gov.in – e-Filing Home Page
2) Login with CA credential.
3) Navigate to “e-File” –> “Upload Form”
4) 
Enter “PAN/TAN” of the Taxpayer, “PAN of the CA”, Form Name, “Assessment Year”, Filing Type, “Attach the XML” , “Attach Signature File” and click on submit.

A request will be sent to Taxpayer of such upload done by the CA. The taxpayer can view the same under “Work List” option after login with taxpayer’s login credentials.

Approve Audit Form:
1) www.incometaxindiaefiling.gov.in – e-Filing Home Page
2) Login with user Credential.
3) Navigate to “Worklist” –> “For your Action” –> “Click on “Click Here” for view Uploaded Form Details
4) Click on “View Form” –> select “Approve/Reject” –> enter “Rejection comment” –> click on “Submit”

Once assesse approves the audit form it will be considered for processing. In case of rejection, CA has to upload the audit form again after making necessary changes.

Submit Online Form:
1) www.incometaxindiaefiling.gov.in
– e-Filing Home Page
2) Login with e-Filing User credential.
3) Navigate to “e-file” –> “Prepare submit Online Form (Other than ITR)” –> Select the “Form Name” and “Assessment Year”
4) 
Click on “Continue” to proceed further.

Stay digitalised and connected. Happy Tax Saving Month.

Tax Planning On Loans

 

taxsavingtips_loanyantraMake some great tax deals on your loans!

Yes, Tax planning month is here. Take the expert advice for tax planning before you pay the late fees. 

Let us dive in for the perks when you are in different loans.

Tax Planning On Home Loans

Owning a home is a coveted dream. However, the ever-rising real estate prices make it difficult for many to buy a home, or even a piece of land, with just his/her savings. Home loans are meant for bridging this gap. Home loans come with a lot of fringe benefits in the form of tax breaks.

How do you benefit?

Anyone with home loan can avail tax benefits in two ways. The amount paid towards the principal repayment qualifies for deduction from income under Section 80C of Income Tax Act.

Another benefit comes in the form of deduction for the amount paid as interest on the home loan. The maximum amount you can claim as interest deduction from your income for a self occupied property is Rs 2 lakhs.

If you buy more than one property, only one house can be counted as a self-occupied property, and the others are deemed to be let out (even if they are not let out).

In case the loan is jointly availed between you and your spouse, the deduction of Rs 2 lakhs can be claimed by both of you.

taxplanning_loanyantraIn case of properties that are deemed to be let out or are actually let out, the entire amount (no ceiling of 2lakhs here) paid as interest is admissible as deduction under Section 24B of IT Act, while the rent received gets added to your income. In spite of that, it turns out to be a good bargain.

Tax payable Tax payable when availing home loan Tax payable when availing two home loans
Total income 8,00,000 8,00,000 8,00,000
Rent income Nil Nil     80,000
Deduction under Section 80 C 50,000 50,000 50,000
Principal amt deductible under Section 80 C Nil 15,000 15,000
Deduction under Sec 24B (Interest)    Nil   1,05,000   2,10,000
Total income on which tax  is payable 7,50,000   6,30,000   6,05,000
Tax paid   75,000      51,000       46,000

Tax Planning on Educational Loans

Education loans pave the way to your future.  Education loans could be availed for studying in India or abroad. But to get tax benefits from an education loan, the loan should be availed from any scheduled bank or notified financial institution.

Education loans can also be availed for self, spouse or children.  The legal guardian of any student can also avail this loan. Hence parents or spouses can also claim deduction for payment of interest.

How do you benefit?

Section 80E of Income Tax Act offers tax benefit for those availing educational loans for higher education.

However, as against home loan, only interest paid towards the repayment of loan earns deduction and not the principal. Also, there is no upper limit fixed for interest repayment. 

Tax benefit can be availed for a maximum of 8 years or on the loan repayment term, whichever is applicable. For example, if the entire loan is repaid in 6 years, then the tax benefit is also limited to that term.

Tax Planning On Car Loans

Not many know that car loans come with tax advantages. However, all car loans do not come with tax benefit. A car loan is a good tool for the self-employed to claim some tax deduction. If used right, offsets the interest paid over a depreciating asset.

How do you benefit?

Deductions from payable tax through a car loan can be availed only if you are a business man and declare the profit or capital gains earned from your business.

Another condition attached to this is that the vehicle has to be purchased in the name of your business. In that case, you get exemption on the interest as well as depreciation of the vehicle.

Under these conditions, you can include the interest paid for your car loan for tax exemption.

Besides this, businessmen can avail deductions on personal loans too under certain conditions, like the loan being taken as a business loan or for capital investment in business.

Loans taken wisely and within our limits would save us from a never ending debt spiral, which many fear. While loans affect your monthly as well as annual finances for other expenditures, the beneficial side of it in the form of tax saving, reduces their overall impact considerably.

 

 

 

 

Real time FAQs by Home Loan Customers

Home loan is with us half of our life time. We understand that. We take a little of your time to clear all your doubts.

Here are the FAQs regarding home loan which make you understand the concept better.

questions-regarding-home-loan_loanyantra1. What is KYC?

KYC means “Know Your Customer”. As the name suggests, banks or institutes collect the identity of the customers to know the uniqueness. Usually the financial institutes, collect these only to ensure they don’t give way for the fraud.

2. Why is a co applicant needed? And who can be a co applicant ?

Though a co applicant is not mandatory with any home loan, it is needed to increase the eligibility of the applicant. Anyone with direct blood relation can be a co applicant. For example, spouse, brother, son, daughter, father, mother.

3. How to transfer your property without being in the place in person?

If you are not in a position to do it yourself due to various reasons, you can give the Special powers to the person by making a deed of Special Power of Attorney.

Firstly, you should draft the deed with grantor (your) details, attorney details, reasons for giving power, the act to be performed, date and signatures of grantor and two witnesses.

The deed should be made on a Stamp paper of appropriate value according to the Rules of the State where it is to be registered.

The person to whom you send the deed should get it registered in the appropriate Government office as per the State rules. It can be either the Sub-Registrar office or the Sub -Divisional Magistrate office.

4. Can I send soft copies of my documents ?

Actually, all the documents need to be attested by the applicant and co applicant, if any. So, sending soft copies cannot be a good idea. If NRIs want to apply for home loan without coming to India, then the NRIs need to visit the embassy or notarized authorities to verify the documents and get the stamping done.

5. What is Processing Fee cheque ? Why do we need to pay ?

Processing Fee is paid to the bank before the loan application is approved. Which means, the fee for all the needs to verify the authenticity. Processing fee can be paid by cheque. The processing fee usually covers the legal verification charges, property and document verification charges.

Sometimes, there will be a zero processing fee period by the banks. So, during that period, the legal charges are charged separately.

6. What kinds of verification is carried while processing home loan ?

Initially, when the customer approaches the lender for a loan and provides his information, the lender to check the accuracy of information, conducts FI check. To make FI report, FI agents come to your office, resident and property for the basic confirmation.

After this, the detailed verification continues in two ways. Legal and technical. Legal check involves verifying Title Deeds, No Objection Certificates of authorities and other ownership papers of the lender’s property.

And technical check is important to estimate the market value of the property. So, the technical valuation is done to know the maintenance, the age of property, level of construction, square feet and built up area, quality of construction, required legal clearances, the locality and special comments and the market value of the property.

However, days have changed and the things have become simpler. If your property is listed in the bank’s approved project’s list, then the above process becomes simpler.

7. What is Personal Discussion (PD)?

Personal Discussion (PD) is a detailed and personal discussion held for checking the credibility of business officials.

Usually, the credit officer meets the business official in his office to have a detailed discussion about the ways of repayment of loan and methods of repayment by proving his business income.

8. How many days will it take to sanction the loan?

Usually, the loan sanction period varies from lender to lender. Nationalized banks take around a month minimum for disbursal. Whereas the private banks and the financial institutes might take a month maximum.

9. What is a sanction letter?

Once, the loan application is verified, the lender sends a sanction letter, accepting for the loan disbursal. Which shows all the details about the applicant and the loan applied for and for which property and what kind of loan, what is the tenure and the EMI. Suggest a complete check of all the details before the disbursement.

10. What is the validity of the sanction letter?

The validity of the home loan sanction letter varies from three to six months.

Once the sanction letter is expired, the borrower should again start with the initial step for borrowing the loan.

faqs-by-home-loan-customers_loanyantra
11. What is loan documentation?

Loan documentation varies from lender to lender, from property to property and from borrower to borrower. The usual documents required are personal documents say address proof, identity proof, pay slips, bank account statements, passport size photographs. The property documents say property’s title deed, no objection certificate, etc.  With these documents, the verification is processed before the sanction of home loan.

12. What are security cheques?

The security cheques are taken from the customer in the form of blank cheques (without signature on the cheque). The bank takes it and uses it only the EMIs are not payed. And these will be returned to you along with home documents, when you totally payback the loan.

13. What is home loan insurance and how it will cover?

The home loan insurance secures your home loan pay and in case of unseen emergencies the home loan pay is not stopped, instead it is covered and the dream home remains to your family.

The lenders either have exclusive schemes or tie-ups with insurance companies.

Usually, the insurance plans include cover for the home, properties in the home and cover for the life of the borrower too. It depends on the scheme the borrower opts.

14. What is EMI and P-EMI ?

EMI is Equated Monthly Installment.  The repayment of loan every month after the loan amount disbursal is EMI. For under construction properties, the loan amount is partially disbursed according to the construction progress. If the EMI is paid on that loan amount, then it is called PEMI.

Full EMI Vs Pre EMI

15. What is the cycle for EMI or PEMI?

EMIs and PEMIs are paid every month. The date can be fixed by the loan applicant, either the starting days or ending days of month. Usually, bank asks for a date in the first week of the month. This is the cycle for every month and every year till the repayment of loan.

16. How many times I can pay part payments?

Part payments can be paid either quarterly, half-yearly or annually.

17. Is there any penalty for part payments?

No, there is no penalty for part payments.

18. Can I pay part payments through online?

It depends on the bank. But many accept the part payment through NEFT (National Electronic Funds Transfer). In case you want to make part payment on your Home Loan Account through NEFT, you need to visit your bank’s nearest branch.

The Service Request number received during branch visit must be mentioned in the remarks column in the NEFT form while making part prepayment through NEFT.

The transactions with invalid request numbers will be rejected. NEFT is a nation-wide payment system facilitating one-to-one funds transfer. Individuals can electronically transfer funds across the country from one bank to another bank participating in the Scheme.

19. How to get my amortization schedule ?

Visit your nearest branch and ask for amortization schedule. The banks usually charge a minimal amount. Though there are many amortization calculators online, once you should tally the bank’s schedule and the online calculator’s schedule. It is good to know how the amount is divided between the two components interest and principal.

 

State Bank of India cuts the processing fee till 31-March-2017

SBI Home Loans no processing fee for New Home Loans and for Balance Transfer till 31st March 2017.

State Bank of India to boost the volumes of Home Loan business for the last quarter of the 2017 financial year, SBI had launched a special campaign for Home Loans. Under the Home Loan campaign, Processing Fees on all Home Loan proposals(both takeover and new) sanctioned and partially/fully disbursed upto 31-Mar-2017 will be filly waived. The waiver of the processing fee will also be made available to proposals sourced upto 31st March 2017, provided the loans are partially/fully disbursed latest by 30th April 2017.

However , the processing Fee at the applicable rate will be recovered upfront in respect of all Pre-Approved Loans(PAL) and the same will be refunded to the customers by way of credit to the loan account in respect of all PAL proposals source during the campaign period upto 31-Mar-2017 and partly/fully disbursed on or before 30th April 2017

SBI Home Loan
SBI Home Loan

With the decrease in the MCLR for 1-year to 8.00% was itself a big boost to the Home Loan customers. But increase of the margins from 0.10% to 0.60% has added heavy burden to the home loan seekers. Most of the customers are still seeing the fall in the Home Loan rates from 9.10% to 8.60% which is like a mirage which is a short term profit and long term loss compare to the customer who had taken loan in Dec-2016.

Let me explain in detail,  Before I tell you, why customer who had taken home loan in Dec-2016 is better rate then present. I would like to explain, how the interest rate is set. Interest rate consist of 2 components.

 

Interest Rate = 1-Year MCLR  Rate + Margin Rate

Recent announcement was :  1-year MCLR Rate : 8.00 %

Margin Rate  was : 0.60 %

So effectively the Interest rate was set to  8.60 %  = 8.00 % + 0.60 %

What is 1-year MCLR ?

When we avail a loan with 1-year MCLR,  it’s 1-year Fixed loan. Which means any changes in  MCLR during that 12 months, your home loan will not be affected. For example if you availed home loan in Dec-2016 your interest rate change will be only in Dec-2017. So any change , decrease of MCLR or increase of MCLR, your home loan rate will not change during this 12 months. In Dec-2017 your home loan rate will get updated based on the 1-year MCLR during Dec-2017. Again next change will be next year Dec-2018 and this would continue till closure.

What is the Margin Rate ?

Margin Rate is what Banks take as the operational costs. It gets fixed when you have taken.  For example if you had availed home loan in Dec-2017 your home loan should have been 9.00% (8.90 + 0.10) your margin should be only 0.10 %. So your Interest rate would be 1-year MCLR + 0.10% for ever.

Now let’s compare your home loan with the new rates

Year 1-Year MCLR Customer who had taken in Dec-2016 time frame. Customer who had taken in Jan-2017 time frame.
Dec-2016 8.90 % 9.00 % (8.90+0.10)
Jan-2017 8.00 % 8.60 % (8.00+0.60)
Jan-2018 If 7.50 % in Dec & Jan 7.60 %(7.50 + 0.10) 8.30 %(7.70 +0.60)
Jan-2019 If 8.60 % in Dec & Jan 8.70% (8.60 + 0.20) 9.05% (8.60 + 0.45)
Sep-2019 If 9.25 % in Sep & Jan 9.35 %(9.25 + 0.10) 9.85%(9.25 + 0.60)

It would continue till the closure of the loan.  What we are seeing right now is, Short term profit and long term loss. People who convert to new rate without the long calculation they would start to pay every year 0.50% more than December rate.

1-year-MCLR had decreased drastically only due to demonetisation. Hopefully we need not stand in long Queues every year. Mostly its once in lifetime event.

Instead of banks making profits due to demonetisation drive they should have passed on the benefits to the end customers.

Hope to see cut in the Margins in coming days. Happy home Loans.

This complex calculations and to understand what is long term profit & short term loss versus short term profit with long term loss is better to be left to the professionals. http://loanyantra.com is best at this. We will wait for the margins to come down, then we would recommend the right change that would ensure you save the most on your home loans…

Happy Home Loaning…

Team

Loanyantra.com

Home Loan Glossary

Home Loan commonly used words while processing Home Loan.

  1. Home Loan – Amount borrowed to buy a home from a lending institution.
  2. PF – Processing Fees.
  3. Sanction – Approval of loan amount.
  4. Disbursal – Release of the sanctioned amount.
  5. PreApproval – Credit Approval of loan amount.
  6. PreEMI – Interest served before commencement of the EMI.
  7. EMI – Equated Monthly Installment.
  8. Amortization – Breakup of the principal and interest component in an EMI.
  9. PrePayment – Advance Principal repayment.
  10. BT – Balance Transfer or Refinance.
  11. Reimbursement – Loan Payment to be reimbursed in favour of the borrower.
  12. Balloon/Bullet payment – One shot principal repayment.
  13. Alternate Collateral –
  14. Additional Collateral – A full term secondary security taken along with the primary.
  15. Interim Collateral – A short duration additional security.
  16. Penalty or PPC – Pre Payment Charges, levied on advance principal repayment.
  17. ECS – Electronic Clearing System.
  18. IT Certificate – Income Tax Certificate for claiming tax benefits.
  19. SOA – Statement of Account.
  20. RTR – Repayment Track Record.
  21. LAP – Loan against Property.
  22. PLR – Prime Lending Rate.
  23. Spread or Margin – A constant on which a floating rate floats.
  24. Floating or ARM – Adjustable Rate Mortgage.
  25. Fixed Rate – Mortgage on fixed rate.
  26. MMC – Money Market Condition.
  27. Credit Report – An independent summary of an individuals credit history.
  28. RCU – Risk Control Unit.
  29. FI – Field Investigation.
  30. PD – Personal Discussion
  31. MCLR – Marginal Cost of Funds based Lending Rate

Why I don’t drive to office instead choose Ola Share and Uber Pool ?

These days most of my friends are travelling to office by Uber Pool or Ola Share rather than driving there own cars. One gets a luxury of not driving in the traffic, utilising the travel time and travelling at cheapest cost.

Why I choose Uber Pool and Ola Share over riding my own car is for a very different reason that you will surely fail to guess.

Firstly, I get a chance to spend 30 Minutes to 1-Hour with a most of the young hardworking entrepreneurs who have put there car in online car portals.  All of them by profession might be same but every one has a story, every one working hard on the road to generate more money. A journey that gives me a good way to start a day and end a day as an entrepreneur.

Secondly, revealing one of our secret sauce of lead generation is, Uber Pool and Ola Share are the cheapest source of lead generation for us. During the travel, I get to speak with at least 2 co-passengers about Loanyantra and give tips. Fortunately or Unfortunately they don’t have no other option but listen or be part of the discussion. Where else can you get 100% engagement of the customer for so long. Normally I keep it very interactive and tell about how we started it and how startups work. Once I introduce my self as one of the founder of the startup of Loanyantra, mostly my co-passengers get into the conversation. Till today everyone had dropped there mobile number or have taken my visiting card for the Home Loan correction.

Thirdly,as the famous Bangalore local quote, “If you throw in stone a street, it will either hit a Dog or a Software engineer. “. In both the cities Hyderabad & Bangalore lot of the young software engineers are using Uber Pool or Ola Share to travel. What would be better place it can be to interview few bright faces while on travel. Still not fortunate in hiring due to different skills. I forward few of the bright CV to my friends startups in T-Hub.

Last but not the least, when the world is moving towards digital the common interaction with the strange has reduced drastically. Here I get to meet new friends get to know what they are doing. Sometimes new insights. One occasion I got to meet one of the top bank Customer Relation Manager who is handling business loan portfolio of Rs 2000 Cr. His insights into the business and process was one of the best interaction I had in the travel. Hope to have more of such great interactions.

Loanyantra Uber Pool Ola Share
Why Loanyantra Co-Founder & CEO uses Uber Share & Ola Share instead of driving his own car.

Happy travelling and happy pooling and happy sharing… My journey continues… Hope to see you as one of the co-passenger soon… 🙂

 

Demonetisation effect on Home Loans

Demonetisation effect on Home Loans was seen from Jan-1st-2017, when SBI made a announcement of it’s forth-Night MCLR rate coming down to 8.00% from 8.90% and Home Loan rate from 9.00% to 8.50% itself shows demonetisation effect was positive on Home Loan rate. But, did you miss something, I am sure you have missed it.

MCLR had reduced from : 8.90% to 8.00%  :  reduced by 0.90%

Where as Home Loan rate has reduced by only 0.50% (9.00% – 8.50%) where did the remaining 0.40% go.

Who is taking that extra 0.40% , when its not passed on to the new home loan rate ?

What most of the banks have done is they have increased there margins from 0.10% to 0.60%.

Now let me go into more details about, was demonetisation a benefit or loss to new Home Loan Seekers and existing customers.

Demonetisation effect on Home Loans

Let me explain in detail,  Before I tell you, why customer who had taken home loan in Dec-2016 is better rate then post demonetisation. First I would recommend how MCLR is calculated  to understand why MCLR had reduced due to demonetisation and now I would like to explain, how the home interest rate is set by banks.

Interest rate consist of 2 components.

Interest Rate = 1-Year MCLR  Rate + Margin Rate

Recent announcement was :  1-year MCLR Rate : 8.00 %

Margin Rate  was : 0.60 %

So effectively the Interest rate was set to  8.60 %  = 8.00 % + 0.60 %

Prior demonetisation was 9.00% = 8.90%(1-year MCLR) + 0.10% (Margin Rate)

What is 1-year MCLR ?

When we avail a loan with 1-year MCLR,  it’s 1-year Fixed loan. Which means any changes in  MCLR during that 12 months, your home loan will not be affected. For example if you availed home loan in Dec-2016 your interest rate change will be only in Dec-2017. So any change , decrease of MCLR or increase of MCLR, your home loan rate will not change during this 12 months. In Dec-2017 your home loan rate will get updated based on the 1-year MCLR during Dec-2017. Again next change will be next year Dec-2018 and this would continue till closure.

What is the Margin Rate ?

Margin Rate is what Banks take as the operational costs. It gets fixed when you have taken.  For example if you had availed home loan in Dec-2017 your home loan should have been 9.00% (8.90 + 0.10) your margin should be only 0.10 %. So your Interest rate would be 1-year MCLR + 0.10% for ever.

Now let’s compare your home loan with the new rates

Year 1-Year MCLR Customer who had taken in Dec-2016 time frame. Customer who had taken in Jan-2017 time frame.
Dec-2016 8.90 % 9.00 % (8.90+0.10)
Jan-2017 8.00 % 8.60 % (8.00+0.60)
Jan-2018 If 7.50 % in Dec & Jan 7.60 %(7.50 + 0.10) 8.30 %(7.70 +0.60)
Jan-2019 If 8.60 % in Dec & Jan 8.70% (8.60 + 0.20) 9.05% (8.60 + 0.45)
Sep-2019 If 9.25 % in Sep & Jan 9.35 %(9.25 + 0.10) 9.85%(9.25 + 0.60)

It would continue till the closure of the loan.  What we are seeing right now is, Short term profit and long term loss. People who convert to new rate without the long calculation they would start to pay every year 0.50% more than December rate.

1-year-MCLR had decreased drastically only due to demonetisation. Hopefully we need not stand in long Queues every year. Mostly its once in lifetime event.

Instead of banks making profits due to demonetisation drive they should have passed on the benefits to the end customers.

Hope to see cut in the Margins in coming days. Happy home Loans.

This complex calculations and to understand what is long term profit & short term loss Vs short term profit with long term loss . Which one is better, to be left to the professionals. http://loanyantra.com is best at this. We will wait for the margins to come down, then we would recommend the right change that would ensure you save the most on your home loans…

Happy Home Loaning…

Team

Loanyantra.com