Home loan is a crucial one when you go for your dream home.
It is always important to beautify your home to add more happiness. For such kind of necessities, you need to work on your financials again after paying the down payment and after you start your EMI for your home loan. Home Improvement Loan is one such loan to fulfill all your needs.
The interiors of your house reflect your personality and to constantly upgrade it in terms of looks and convenience, all the banks and housing finance companies provide Home Improvement Loan.
Home Improvement Loan covers-
Complete renovation of already owned residential property
Repair of your house/flat
External & internal repairs/paint
Water-proofing & roofing
Tiling and flooring
Plumbing & electrical work
False ceiling & woodwork (fixed to the building)
What you should know about Home Improvement Loan :
The rate of interest usually is same as for home loan.
80% of the property value is the maximum amount valid for home improvement loan.
Repayment period is same as for home loan.
You can repay the loan even before the tenure but check for repayment fees.
You can claim tax deduction when you are in home improvement loan. Both the co-borrowers can claim deduction.
Banks do not provide home improvement loan for a property which is older than 35 years.
Pay processing fees.
There is also an extensive range of home loan products like Home Purchase Loans, Home Construction Loans, Home Extension Loans, Home Improvement Loans and Plot Loans.
One will always think of top-up loan when in need of money. Top-up loan is used when there is an immediate financial need. It is always recommended to go for a top-up loan if you are already in a home loan.
Everybody aims for a higher growth. For the steps to go forward in life, you might need a lump-some cash anytime. For such reasons exists, top-up loan on home loan.
Top-up Loan covers :
To repay any other debt
What you should know about top-up loan :
You can avail top-up loan only if you have an existing home loan.
The rate of interest usually is 0.5% – 1.00% more than the home loan interest rate.
80% of the property value is the maximum amount valid for top-up loan.
The eligibility is based on your credibility and other loans.
Repayment period is same as for home loan.
You can repay the loan even before the tenure but check for repayment fees.
You can claim tax deduction when you are in home improvement loan. Both the co-borrowers can claim deduction.
Need to pay processing fees.
Everything is similar when you compare home improvement loan and top-up loan. If you have to choose one, give yourself the ratings for both the loan types based on the interest rate. Also, if you foresee any future financial necessity other than home renovation, it is better go for a home improvement loan when you are in need of any home remodeling.
Loanyantra helps you build the bridge between you and banks/financial institutes. To get a hassle-free guidance and home loan help, we are just a missed call away. Plan your loan well and close it early. Invest more and earn 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)
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.
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
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.
For identification as EWS/LIG beneficiary under the scheme, an individual loan applicant should submit self-attested certificate/affidavit as proof of income.
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.
Your Home Loan EMI starts from the time the Bank has created a disbursement cheque. Some banks start your EMI from the date you picked the first disbursment cheque even before you have
First EMI is called broken period EMI. Which is lesser than your EMI.
What is Broken period EMI?
When you opt for EMI payment, say 5th of every month. Now suppose your disbursment cheque is handed over on 25th of the month. Then Bank would calculate interest for 25th till 5th of next month.. say for 10 days and it would take it on 5th. The next EMI will be as per your EMI schedule.
Again you can go for Pre-EMI or Full EMI. I would suggest if you are capable of paying full EMI then start with Full EMI. Most of the times Banks will keep it to Pre-EMI for under construction properties. Which will not decrease your loan tenure.
Plan your loan well, then only you will close it faster and home will be fully yours.
Interest Rate = Margin Rate + MCLR Rate for specific period or Base Rate
When you avail a loan for 8.50% that would be broken up into
8.50 % = 0.50%(Margin) + 8.00% (1-Year MCLR)
Its confusing right.
When ever you take a loan either Fixed or Floating the margin on that day gets fixed.
In case you loan is floating, then the floating will depend on the MCLR Rate for the specific period. Normally most of the banks give you for 1-year. Meaning every 1-year your rate would change as per that days MCLR for that period.
Say after year 1-year MCLR is 9.75% then your interest rate would be 10.25%.
Last but not the least the Property you are buying & Own contribution to pay 20% of the property
Location , approvals of the property.
Your Salary : You should be earning enough to pay the 80 lac EMI.
Your Age : Based on your age, maximum Loan tenure will be decided. Before you retire i.e 58 years you should be clearing the loan.
Existing Loans : If you have any exiting Loans, you will be paying EMI so you overall eligibility would come down for the next loan.
Credit Score : Banks/NBFC would look at your credit report and based on how you have paid will decide to go if they want to give you loan
Property : When you are asking for Rs 80 lac loan, it would mean at least the property should be Rs 1 crore. Technically the price of the property should support it and you have to pay 20% from your self funding and 80% you can take loan. It should not be like for Rs 10 Lac property you are paying Rs 1 Crore.
Approvals of the property : Based on the Location and type of approvals and amount of deviation while constructing banks would take a call if they will be giving loan or not.
So based on the property you have selected and based on your financial profile you need to select the bank and the loan product. Some not so famous banks will have better products for certain properties.
Plan your loan well, so that you will close faster and home will be fully yours.
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.
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.
Proof of educational qualifications
Details about the property if finalized
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.
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
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.
If you plan it well then the Home Loan is good and you can be loan free faster. If you haven’t plan it well then assert backed by a big liability.
How to plan your Home Loan well ?
First based on your financial needs, you need to opt for minimum loan.
Start with right EMI. If you are capable of paying more toward EMI, always pay more.
Increase your EMI every year by at least 5%. Your 20 years loan will close in 15-years. If you increase by 10% then your 20-years loan will close in 11-years.
When ever you get bonus, make a part-payments.
Very important point, when ever the rates are changing, you need to check if you are paying more. In case you are paying more than get it corrected to new rate. This save 20–30% of loan amount. For example 50-lac loan with 0.50% more interest rate will pay 30-EMIs extra and almost Rs 15 lac more.
It’s like buying a car. If you maintain it well, it will run well. If not you would continue to pay heavy maintenance bills.
LoanYantra | Get Home Loan Online is India’s First Home Loan Management Company which will help the customers find the right home loan and after that help in Managing the Loan. It helps in closing the loan faster.
Debt is not bad when it comes at Home Loan Rate. Home loan is given considering you continue to earn and you are capable of paying it back. So Debt allows you to save and pay the debt.
Real Estate is little tricky. Consider you want to buy a 35 lac home now. But you have only 10 lac now. So for you to buy only option would be going for 25 lac loan or you want to save another 25 lac and delay the purchase. To save 25 lac you would take at least another 5 years. Lets say the price of the apartment appreciates very little to only 50 lac. Now you have to save another 15 lac more. Lets say you take another 2 years to save another 20 lac. Now you go and buy same apartment for 55 lac. When you saw it for the first time it was costing you only 35 lac but now its 55 lac. Also for 7 years you would have stayed in rented house and continued to pay say Rs 10,000 on average. So you would have paid Rs 8.40 lac as rent. And lets not forget the tax benefit the home loan gets you. For last 7 years lets consider you can save a tax of 2 lac.
So in total for delaying the purchase your total cost is
If you have excessive cash then lots banks have a Over Draft Loan products. Where in you can park the excessive cash in the OD Loan account, for the amount of cash you have parked they will not be charging you interest on it. This helps in closing the loan much faster.
Let me give an example. Consider you have taken 50 lac loan. For simplicity lets consider you are paying Rs 55 ,000/- as EMI. Out of which Rs 50,000/- is going toward interest and Rs 5,000/- is going toward principle.
Say you have Rs 10 lac cash which you deposited in the OD Loan account.
Then next month your EMI will still be Rs 55,000/- the way it is distributed is