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.

What is Pre-approved Home Loan?

For owning a home, how you get along with your home loan is an utmost important factor. With the competition among the lenders, home loan search needs the same effort as the search for your dream home. So, the comfort lies with the customer now how fast he can choose the home loan and get his eligibility check done for no further delays after he selects the dream home. This is Pre-approved home loan.

The bank Pre-approves the loan after thoroughly evaluating the credit history, income and expenses of the potential borrowers. Based on this evaluation, the lender decides whether the borrower qualifies for the home loan or not and the maximum amount, the borrower is entitled to. It is basically a green signal given by the lender that the borrower can opt for a home loan for a particular amount.

How are loans Pre-approved?

 The procedure for availing such a loan is shown below: –

1). At the outset the borrower first has to make an application to the bank for a Pre-approved loan

2). Based on the borrowers income capacity, the bank decides the amount of loan the borrower is entitled too. Additionally banks will also check the CIBIL score of the borrower

3). Once the required verifications are checked by the bank, the bank will issue the loan sanction letter to the borrower. The letter will be valid for a certain period of time that will be clearly mentioned in the letter itself, along with the terms and conditions of the loan

4). The bank charges a small processing fee for Pre-approving a loan

5). The borrower should decide a property before the expiry date on the sanction letter to avail the loan

pre-approved home loan
What is pre-approved home loan? Are you eligible?
Benefits of a Pre-approved loan

 1). Plan your finances: Once you have received a pre-approval from the bank, you can plan your finances better. You know how much the bank is lending you, so you can look for a property within that range.

2). Discounted rates on Pre-approved Loans: Many times the banks offer discounts on the rate of interest of loan that is Pre-approved., just as an incentive to go for a Pre-approved loan.

3). Faster Processing: When your loan is Pre-approved, it means that the banks have done a thorough background check on your income and credit history. Unless there is a change in your income, you are sure to receive the loan quickly, with the bank only verifying your property documents, thus reducing the processing time.

It’s always better to get your loan Pre-approved. Once your loan is Pre-approved you can save time by narrowing your searches to the properties that fit your loan amount. It also adds a credible amount of certainty, that you are sure to receive a loan if you find a property within the stipulated time.

Disadvantages of a  Pre-approved home loan

1. Pre-approved home loan is offered at flexible rate of interest but not at the fixed rate of interest. So, prepare your mind as you cannot shift to fixed interest rate once you finalize your property.

2. All the charges applicable to know the eligibility, say processing fees,etc., are not refundable if you don’t go for a loan later.

3. The eligibility and the loan amount is fixed and you cannot change if you wish to. This might make things tough if you want more amount for loan than estimated for or opted for.

4. Don’t apply many a times as it might affect your credit score. Though you haven’t decided on your home, but you had applied for your home loan, this is considered for your credit score.

How Loanyantra can help you with a Pre-approved home loan

Loanyantra, helps you manage your loan from the time you start searching for the best lender. You just have to contact the customer relationship manager, to know your eligibility and to know the best bank for your requirement. And that manager is with you till the end of the loan disbursement. Hence, go stress-free with us on home loans, either Pre-approved Home Loan or Organic home loan.

 

 

Home Buying Tips for Women

Buying a home today takes a certain confidence – in the market and in your own financial strength. A lot of single, female homebuyers are taking that bold step in high heels, with no one at their side.

By educating and empowering themselves, single women have acquired a sense of  home-buying confidence, making the dream of home ownership a reality. It’s a process that doesn’t necessarily begin with love first—unless it’s for her dream house. She just needs a good real estate agent, an educated understanding of navigating the home-buying process, and a happy and pleasant mood to celebrate after signing on the 50,000 dotted lines at closing.

Not just the single woman, a married woman too, apart from being an earning member, also has a complete grasp of the family’s current and future financial abilities. Developers are aware that they play a role in a family’s homwomen tips _ loanyantrae purchase decisions. A woman has a better perspective about what should be included or excluded. Still, buying a home is not just a matter of instincts and good taste, but also one for adequate planning and foresight.

For women who are investigating the market for suitable properties, either for themselves or for their family, here are some points to consider.

  • Be realistic, stay focused

Home ownership is a great move for a woman and a step towards independence in her retirement years. But your first home is not necessarily the only home you will ever buy. Remember that you can always upgrade in the future if required, so there is absolutely no need to buy the biggest-possible flat now. So try not to compromise your current financial viability by buying a needlessly expensive home.

The home you live in today does not have to be the one you will be living in when you retire. When it comes to real estate, it is always a good thing to upgrade as financial ability improves, but this process can and should be planned out over the entire course of one’s working life. For a woman who is at the outset of her career, nothing is more important than financial stability on every front.

To plan for upgrading to a bigger and better home further down the line, it is advisable to invest (and stay invested) in good mutual funds which deliver more women home buying_loanyantrareturns than savings accounts. Direct stock market speculation into single company stocks and bonds as a potential source of real estate funding should be avoided; as such investments are not sufficiently diversified to offer a safety net in case a company experiences a downturn.

  • Shop aggressively for financing

The home loan market in India is currently very competitive, and banks are falling over themselves to attract customers. Make specific inquiries about special interest rates and other incentives that a bank is offering women borrowers (usually 0.05% lesser than the prevailing interest rate). Never take the first thing that is offered to you — most banks have a considerable margin of flexibility to accommodate borrowers who know what they want and are determined to get it.

Check rates with several mortgage lenders, and don’t simply select a lender based on a recommendation from a friend or a realtor.

  • Don’t stretch your budget too far

First figure out the monthly mortgage and whether they will be able to afford it. Online mortgage calculators can be helpful, but they tell you the value of the principal and associated interests. There are other monthly expenses involved in home ownership, and these include insurances, taxes, maintenance charges and utilities charges.

For working, single women, it is important that all these amounts put together do not exceed 35-40 per cent of their net income. Keep in mind that property is not the only investment you should make towards your ongoing financial security. You should also set aside at least 10 per cent of your monthly income into a retirement plan.

When it comes to home purchase, every financial angle must be examined well in advance. It is advisable to use the services of an experienced financial planner. The process of buying a dream home should not turn into an unexpected nightmare at any point.

Those who are just starting out in their careers should not allow themselves to fall too deep into a credit trap. It is always best to use free and clear capital as far as possible.

Make sure the developer has a strong reputation in the market by doing multiple checks. It is highly advisable to patronise only established developers with a readily verifiable track record for timely completions and 100 per cent adherence to the agreements they make with their customers.

Snippets On Home Loan Tax Benefits!

Must know things about home loan tax benefits!

home loan tax benefits
Home loan tax  benefit classes 🙂
  • Home loan borrowers are entitled to tax benefits under Section 80C and Section 24 of the Income Tax Act. These can be claimed by the property’s owner.
  • In the case of co-owners, all are entitled to tax benefits provided they are co-borrowers for the home loan too. The limit applies to each co-owner.
  • A co-owner, who is not a co-borrower, is not entitled to tax benefits. Similarly, a co-borrower, who is not a co-owner, cannot claim benefits. Which means, to claim tax on property, the person should be both co-borrower and co-owner.
  • The tax benefit is shared by each joint owner in proportion to his share in the home loan. It’s important to establish the share for each co-borrower to claim tax benefits. 
  • The certificate issued by the housing loan company, showing the split between principal and interest for the EMIs paid, is required for claiming tax benefits. 

If You Work for a company –

  • Submit your home loan interest certificate to your employer for him to adjust tax deductions at source accordingly. This document contains information on your ownership share, borrower details and EMI payments split into interest and principal.

If You Are Self-employed and a Freelancer –

  • You don’t have to submit these documents anywhere, not even to the I-T Department. You’ll need them to calculate your advance tax liability for every quarter. You must keep them safely to answer queries that may arise from the I-T Department and for your own records.

If you have another property along with your self-occupied house, and if you let-out that property, you can claim tax deduction for the entire interest amount on the let-out home’s loan. So, the income from that property is calculated from deducting the property tax, standard tax deduction (30%), interest on the let-out property home loan from the annual rental value of the let-out property.

For the first time home buyers, the government provides up to Rs 50,000 tax benefit on loan up to Rs 35 lakh taken for residential house.

There are more tax planning benefits by different investment opportunities. Explore and take expert’s advice for the best decision and for saving more.

No Processing Fees Period

Post demonetization has left the home loan sector in true benefits!!!

After the decrease of interest rates came subsidy for the home loan for the amount 12 lakh. The nationalized banks reduced the home loan interest rates making really competitive and tough to choose from. SBI stands as a pioneer to reduce the interest rates.

Yet another step by SBI which gave rise to further competition, no processing fees period. LIC Housing, Kotak Mahindra Bank are some of the followers in nullifying the processing fees.

This is the best time to avail the home loan or to opt for a balance transfer. Because, you can skip the charges as they usually go upto a maximum amount of Rs. 10,000.

no-processing-fees_loanyantraHow Does No Processing Fees Work?

Processing fee is charged by the institutes or banks which includes the charges for the document check, legal check and property check.

So, what happens during no processing fees period is, you have to  pay the legal charges separately. Whatever may be the extra cost, it doesn’t reach the usual processing charge limit.

But, always ask for the other additional charges while opting a loan during this season.

How Loanyantra Works on No Processing Fees?

Loanyantra, the first ever online home loan management company, suggests you which option is better. It makes you aware what kind of institute you can opt and what are the hidden charges by them. Be the first to know when there are promotions or offers by your favorite bank or institute.

Know more and avail more cash back offers on home loan. Happy Home loans.

Interest Rate Subsidy on Housing Loans

Interest Rate Subsidy on Home Loans – Know More

The year 2016 ended with the honorable Prime Minister Narendra Modi’s much awaited speech. The speech gave hopes to the poor, women and senior citizens. The housing policy schemes by the P.M., made easy for the poor to have a home of their own. The new policy of home loan interest rates subsidy to the needed, raised hopes in availing a home with the help of home loan. That too for really lower interest rates.

So, here are more details about Pradhan Mantri Awas Yojana and Credit Linked Subsidy Scheme.

Pradhan Mantri Awas Yojana (PMAY)  

  1. This scheme is valid in urban India (towns, cities, metros) for urban poor of income below 6,00,000/ year and age between 21 years to 58 years.
  2. Women play vital role in this scheme. A family comprising of husband, wife and unmarried children. Beneficiary should not own a pucca house either in their name or in the name of any member of their family in any part of India to receive central assistance under the Mission Meeting income criteria defined under the scheme
  3. Credit Linked Subsidy is available for housing loans availed for new construction and addition of rooms, kitchen, toilet etc., to existing dwelling as incremental housing.  The carpet area* of house should be constructed or enhanced under this scheme should be upto 30 sq.meters for EWS(Economically Weaker Section) category and upto 60 square meters for LIG(Lower Income Group) category.
  4. For identification as EWS/LIG beneficiary under the scheme, an individual loan applicant should submit self-attested certificate/affidavit as proof of income.

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Credit Linked Subsidy Scheme(CLSS).

Any citizen of India can enroll for CLSS under the following conditions. The beneficiary, at his/her discretion, can build a house of larger area but interest subvention would be limited to first Rs. 6 lakh only.

This new policy of Credit Linked Subsidy Scheme (CLSS) is applicable for the Lower Income Group (LIG) of household income less than Rs.3,00,000 and the Economically Weaker Section (EWS) of household income less than Rs.6,00,000, not only for limited square feet.

So, now let us go into details of how the CLSS scheme works.

Any eligible applicant who choose a carpet area within  60 sq.m(645 sqft) of a flat/house then the applicant gets an home loan interest rate upto INR 12,00,000/- availed from the bank.

And if any eligible applicant is applying for 2 bhk of 975 sqft super built up area which has 644sq.ft of carpet area* (the real area you can use, source – 99acers.com), then the flat costs Rs. 40,00,000. Now, the applicant can enjoy interest rate subsidy on housing loan for Rs. 12,00,000.

The possible ROI as per Honorable PM speech is 5.5%. The non subsidized interest rate follows the existing market interest rate, which is currently 8.5%.

Example for CLSS Indetail. 

If any qualified applicant having gross salary of Rs.50,000/- per month and age is 30 years, the person is eligible for 37.88 lakh for maximum tenure of 28 years tenure and 30 lakh for 15 years tenure(know more and calculate your eligibility  http://loanyantra.com/Home-Loan-Calculator.aspx ).

So, the applicant, out of Rs. 40,00,000 has to pay down payment of 20% of the market value, which is Rs. 8,00,000. For the rest of Rs. 32,00,000/-, the applicant can go for a home loan. Under Pradhan Mantri Awas Yojana (PMAY)  Credit Linked subsidy scheme(CLSS) Rs. 12,00,000 will be subsidy interest and other Rs. 20,00,000 (Rs. 32 lakhs – Rs. 12 lakhs ) go as a non subsidy which has existing market rate of interest.

Carpet Area*: Area enclosed within the walls, the actual area to lay the carpet. This area does not include the thickness of the inner walls.

NOTE : Under the Mission, beneficiaries can take advantage under one component only.

Housing and Urban Development Corporation(HUDCO)  and National Housing Bank(NHB) have been identified as Central Nodal Agencies (CNAs) to channelize this subsidy to the lending institutions and for monitoring the progress of this component. Ministry may notify other institutions as CNA in future.

How to Enroll and Apply for Credit Linked Subsidized Scheme (CLSS).

Banks have a separate application for this kind of loan. Follow the official link to  download the application. http://www.tn.gov.in/exwel/forms/app5.pdf

If an applicant can qualify under Pradhan Mantri Awas Yojana (PMAY) for Credit Linked subsidy scheme(CLSS), the applicant can apply through http://loanyantra.com partnered banks and get assured lower interest till you close the loan.

 

 

 

Credit Score and Home Loan

All that you should know about credit score

Buying your dream home is a dream come true and home loans have made it very easy for people to buy a home but, as easy it appears, home loan approval involves a series of steps and eligibility criteria which you need to fulfill to get the loan from the bank.

Banks and HFCs take into account a number of factors that define your eligibility for loan approval. One of the key parameters is CIBIL score or credit rating. Credit Score defines your credibility and how good you are in repaying your credit bills and EMIs. In other words, it describes how good is your financial health which in return increases the probability of your loan approval.

Detailed understanding of credit score –

CIBIL stands for Credit Information Bureau India Limited. This organization came into existence in August 2000 and looks after the credit ratings. It collects and maintains credit records of individuals as well as commercial entities. The credit records the borrowing payment relation. This includes all payments and borrowing related to loan or credit card.

On the basis of information collected, CIBIL assigns your credit score or CIBIL rating which banks reviews before approving the home loan. It’s a credit score of three digit numeric summary of your credit history. The credit score varies between 300-900.

Your credit report is available with CIBIL and can be availed by paying a nominal fee.

The credit report includes the following:

  • The history of the credit availed by you
  • Record of all the loans repaid by you and your credit card bill repayments
  • Late payments or penalties on past credit
  • Latest information about loan application and credit application by you
How Credit Score affects home loan eligibility?

Your credit score plays a key role in home loan approval. Once you submit the application for a home loan, bank checks your credit score and reviews your credit history.

Thus, if you have a good credit score, your home loan application will be processed faster, on the other hand, a poor credit history and score might get your application rejected.  Well, there is no universal score, every bank and HFC has different criteria and minimum credit score. But generally, a credit score above 750 is considered good by the majority of financial institutions. The score in the range of 350-750 is considered average or poor. Thus make sure that you check your credit score before applying for a loan.

credit-score-for-homeloan_loanyantraYour credit score reflects the following:

750-900    

  • Good score
  • You are likely to get loans at good interest rate
  • Both secured and unsecured home loans  can be easily availed by you

700-750    

  • Decent score
  • You are likely to get the loan from most of the banks but for unsecured loans, banks might conduct further review

550-700    

  • Low score reflecting delay in payment or irregular payment
  • Banks are usually dicey about approving loan
  • You might get your loan approved by some loan provider but at a higher collateral and low LTV
  • You might have to pay a higher interest rate

300-500

  • Poor score
  • Difficult to get loan especially from an established Bank or HFC
How is a Credit Score Calculated?

By now, we know that credit score plays a key role in home loan processing and approval.  You can check your credit rating on CIBIL’s official website by paying a nominal fee of around Rs. 470.

CIBIL’s Credit Score is calculated based on the following factors:

  • Repayment history of applicant: This accounts for 35% of the score. Hence make sure that you have cleared all your bills and loans. This helps in maintaining a good repayment history.
  • The credit balance:  This accounts for 30% of your credit score. This includes two factors, first how much credit has been sanctioned to you and second how much of that limit you have used. The credit utilization ratio is the balance which is outstanding on your loans and credit cards. If you have used most of the credit limit, you are considered a risky customer.
  • The duration of time for which you have used credit: This accounts for 15 % of the credit score. If you have taken for a long term and have been repaying the EMIS on time, it positively affects your credit score.
  • Application for new credit or availed new credit: This accounts for 10% of the score. Every time you make an application for credit, the lender checks your credit and if there are too many credit inquiries in line it can negatively impact your score.
  • Credit mix: This contributes 10% of the it. You should have a mixed bag of secured and unsecured loans, having a mix of both increases your credit score.
What if my credit score is low, how will I improve it?

There is a probability that your credit score might be low and bank rejects your application. However, this can be avoided if you work on the following steps:

  • Check your credit report regularly- Make sure you check your credit report regularly. It intimates you about any kind of defaults or delayed payments so that you can rectify it on time.
  • Timely repayment – The best way to keep your credit score right is repaying your credit on time. Timely and responsible payment affects your credit score positively.
  • Do not consistently apply if your credit has been previously rejected- In case your application has been rejected, give yourself some buffer time and then apply. Too many applications at a time can negatively impact your credit score.
  • credit-score-repair_loanyantra-comEnsure that you have a mixed bag of loans- While applying for loans do check that you have availed both secured and unsecured loans. Secured loans include car loans or home loans and unsecured loans include personal loan and your credit card as well.  Having both kinds of loans impacts your credit score positively.
  • Beware of joint application – In case you become a joint applicant with someone and that person defaults or have a poor credit score it might affect your credit score as well.

Always ensure that you are positive w.r.t Credit Score. Once you are on a safe side, it shows you are eligible for any kind of loan.

Know more tips about credit score and the impact on home loan by signing up with us.

Home Loan Prepayment

I am a 26-year-old man, working in an MNC in Chennai. Last year I decided to buy a home for myself. Buying a home was my biggest dream and thanks to the lofty home loan policies that banks and HFCs are offering these days. I managed to buy a 2 BHK. Well, I succeeded in managing to bag loan from one of the government banks and got it at a reasonable interest rate.

Now, I am a satisfied person and secured that few years down the line, I will own my house. But one thing that always boggled my mind was if I wish to prepay my loan then what is the nitty-gritty associated with it. Since I work in private sector, I don’t have much time to run around the bank to fulfill the formalities and the paperwork.

Then, one of my friends suggested to go through LoanYantra, an online loan management company. Well, my association with LoanYantra proved to be a successful one and they gave great tips which definitely cleared the air that surrounded the idea of home loan prepayment. For many to avoid the hassle of running behind the banks, here I am sharing my knowledge of Home Loan Prepayment.

What is Home Loan Prepayment?

Home Loan Prepayment is paying an additional amount to the outstanding principal of the loan amount while you are in the Home Loan tenure. This additional amount is over and above the regular EMIs. This helps in reducing the principal outstanding which in return helps in reducing your EMIs and/or your home loan tenure.

It might sound easy but there is a slight catch. Banks typically levy a prepayment charge of about 2 – 3% of the outstanding loan amount. This amount is charged if you are repaying above a certain amount or you are switching your bank. Although most of the banks don’t charge extra. Thus, it’s advisable that you enquire while you apply for your home loan about the prepayment charges as well.

What You Should Know About Home Loan Prepayment 

Home Loan Prepayment can be a bit tricky as some lenders include extra fees.  In case of home loan, banks borrow funds based on the commitment for long period, these funds have to be re-assigned through credit channels for which bank has to pay additional cost. Thus, banks discourage the process of prepayment by leving an extra charge on the outstanding loan amount.

To Prepay the Home Loan, it is advisable for the concerned person to attend. If not possible,the authorized person needs to carry a letter which says that the respective person is authorized by the lender to repay the loan.

Note : RBI and the NHB have abolished penalty on home loan prepayment (home loans with flexible interest rate). So banks usually do not levy extra fess. But conditions apply.

Home Loan Prepayment Vs Tenure and EMI.

Home Loan Prepayment reduces the outstanding principal amount. So, this inturn reduces your EMI or tenure. It is always wise to calculate and choose.

Loanyantra’s Tip : It is better to reduce the tenure and keep the EMI constant. When you have an increment in the salary, you can increase the EMI which will reduce the tenure even further.

Do’s ad Don’t’s of Home Loan Prepayment:

  • Carry your ID proof (Aadhar is the most preferred one).
  • Carry your chequebook in case you need extra.
  • Also remember to mention your name, account number, home loan account number behind the cheque when you issue.
  • Collect all your previous cheques if you wish to change your EMI.
  • A proof of source of funds for your Home Loan Prepayment.
  • Make sure that you update your CIBIL database after home loan prepayment as it helps in reducing the outstanding balance and also helps in improving your credit score.
Home Loan Prepayment charges of some of the popular banks and HFCs
Banks and HFCs associated with Loan Yantra Home Loan Prepayment Charges
SBI ZERO
ICICI ZERO
IDBI Not more than one prepayment in a month
DHFL 3% + Service Tax
Indiabulls ZERO
Axis Floating Rate Loan: Nil

Fixed Rate Loan: 2% of outstanding principal/amount prepaid

CITI ZERO

Words of Wisdom –

LoanYantra is committed to making a difference in the approach towards availing home loan and paying it back. We are known fro absolute customer satisfaction and we work on it continuously. Stay connected with us on www.loanyantra.com and get a planned calender, timely alerts and valuable suggestions on Prepayment of your Home Loan.

Demonetisation and Home Loan Interest Rates

To understand the relation between demonetisation and the effect it will have on the home loan interest rates, let us dive into the issue in 7 simple questions.

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1. Why Is Demonetisation now in India is really a success-driven?

In India now, along with the rupee cancellation, there is a withdrawal limit which is making the demonetisation, a real strike.

2. What happens if there is a withdrawal limit?

With the ban on the 500s and 1000s, and with no further issuance of 1000s, people started depositing their hidden money in the bank accounts. Deposits happen in the form of new income mixed old income. But when you want to withdraw, there is a limit. This results in low cash in hand.

3.What happens when there are more deposits.

Already, 80% of the cash in hand with the people is deposited in the banks. And the RBI is soon reaching its limit of having cash with itself. More deposits with banks result in more money circulation among banks.

4. What if more money circulation with banks?

Before demonetisation, there was 60% of unaccounted money circulation among people. Now that money reached banks and no doubt there will be double circulation of money. If banks are rich, RBI soon cuts the repo rate (the rate at which RBI lends money to the commercial banks) and also there will be a perfect management of CRR (the amount banks have to deposit with RBI for control of the economy).

5. What happens if the repo rate is reduced?

The repo rate and home loan interest rate are directly related. So, the reduction in repo rate automatically reduces the fixed deposit interest rates and also the loans interest rates.

6. How will the home loans be affected in near future?

After Raghuram Rajan’s expert financial management on our economy, the home loan interest rates have already come down from 13% to 9.5%. Now, with the enough deposits with banks, the home loan interest rates will be much lesser, might be as less as 7%. No wonder even if it goes much lesser.

7. Which type of interest rate to opt?

To be really brisk, flexible interest rate is the best opt one now, from the day one of your loan. Immediate and constant measures to control deflation by the government will surely control the psycological deflation and stabilise the economy. Infact, giving way for the growth of the economy in true way. This always keeps the flexible interest rate low when compared to the fixed interest rate.

Loanyantra’s Tip : Low cash in hand gives the psycological feeling, even for the better earned person, of no money to spend. This is momentary. Keep dreaming about your sweet home and continue your process of home search. If you can dream, we can get it real by our low interest rates.

Home Loan – Apply online; know the present interest rates! – Loanyantra

Now-a-days, competition for home loans has outgrown competition for homes. This rose a requirement of applying online for a home loan.

When you can search for your home online, then why not search for a home loan online. So after searching and applying online, we take our services a step forward. This idea is in action only to take the home loan and the related services to our customers customized. 

Loanyantra

What makes us different from others.

As we are, our service starts where many others’ end.

Once you apply online, we take you through the process, which is simple and transparent. Check your eligibility and we guide you to the customized interest rates. If you find us your true beneficiary, associate with us. You will get a call within no time. Get home loan approval from the required bank.

So now, you experience our efforts. Retire from your home loan thoughts. You are into our loan rate shield process. We send you alerts on changing interest rates and suggest you for a balance transfer when needed. 

Infact, we are managing your loan. Each step, from the time you enter your details, apply online, getting customized rates, getting required bank approvals, and timely alerts, we try to save your valuable time, make it economical and most important keep you away from stress.

For details, visit, Loanyantra .