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.
A home is one of the biggest financial commitments most of us will ever make – so it’s understandable that we might get a little stressed over what seems like a straightforward question:
Should I rent or buy a home?
To try and ease that anxiety, we spoke with a financial expert and a certified financial planner to get their take on when buying a home is in your best interest.
While there’s no universal “right” answer, start your decision process by asking yourself these five questions:
1. Can you afford it?
Having the money for a down payment is only the first step. Next, you need to make sure you can afford to pay your home loan … and costs like utilities, maintenance, furniture, taxes, and inevitable surprise costs like emergency replacement of the broken boiler.
“Understand what you’re getting into,” says certified financial planner. “You have to be able to afford to purchase and maintain the property, and expect that your bills will change on a monthly basis.”
Plus, she points out, you’ll need to be able to pay all of the fees during the buying process. “The best thing you can do is educate yourself,” she advises. “If you don’t do your research, making the wrong decision to buy could really set you back financially.”
Rent if: You don’t have the money saved to buy and carry a home.
Buy if: You’ll have the cash to cover the initial transaction, plus the ongoing costs of home ownership.
2. Are you financially secure?
To be in a financial position that’s secure enough to responsibly to buy a home, you need:
Decent credit (“You don’t need perfect credit or even good credit,” he says, “but generally CIBIL score above 650 you can qualify for a conventional loan.”)
A stable income
Enough cash on hand to cover down payment and closing costs
Liquid assets as financial reserves
When expert says “financial reserves,” he’s talking about an emergency fund. It’s not a good idea to scrounge every paisa from each of your accounts for a down payment, leaving yourself without a safety net for an emergency or hobbling your retirement savings.
“I wouldn’t recommend that someone without an emergency fund buy a house,” cautions most of the experts. “It really sets you up for trouble when you wipe out your savings to reach this goal and don’t have any money set aside.”
Rent if: You can’t check off one or more of the above bullet points, or if buying would completely wipe out your savings.
Buy if: You’re financially secure outside of your home savings.
3. What are your other financial goals?
While buying a home is a major financial accomplishment, it’s unlikely that it’s the only one you ever intend to make. I remember a client and her husband who were “really gung-ho on buying their first home.” But after getting a financial plan and seeing exactly how much money they would need to lay out, they decided to postpone their purchase for another few years in order to finance their other financial goals, like starting a business.
“It’s all about breaking it down into steps, and getting clear on the numbers,” says experts. “If you have any major life transitions coming up, you may want to hold off and see what happens.” How will your home purchase affect your pursuit of your other financial goals?
Rent if: You’re currently prioritizing other financial goals above homeownership.
Buy if: Homeownership is your primary financial goal, and you’re both aware of and comfortable with how the cost will affect your progress towards your other goals.
4. Are you willing to be the super?
This isn’t a financial question, but a lifestyle one: If the sink springs a leak, the yard needs to be mowed, the door handle breaks, who deals with it? It won’t be your landlord or super, experts points out, so either you’ll need to DIY or find the cash to hire someone.
Rent if: You want someone else to step in when things get complicated around the house.
Buy if: You don’t mind dealing with the increased chores that come with being your own landlord.
5. Where do you see yourself in the near future?
Different experts have different estimates, but generally, it’s recommended that a home buyer spend at least four to five years in a home to offset the costs of buying.
But aside from the numbers, “buying a home is as much an emotional decision as it is a financial one,” says experts. “Of course, you must crunch the numbers to determine whether buying makes financial sense, but it’s just as important to feel that you’re in a place in your life where buying just makes sense. It’s no coincidence that most people seriously start considering buying a home when they get married and are comfortable with the idea of settling down and raising a family.”
Rent if: You’re unsure where you’ll be in the near future.
Buy if: You expect to be in the same place for a few years and want to own your home.
Naveen and Neha are a perfect match and an understanding couple. Naveen has a plan for everything in life. Neha is a cheerful and practical woman. Both of them discuss and get things done. So what made their ways apart? I should tell this.
Neha wants to visit a good restaurant and have great food. Naveen says ‘no’.
Neha wants to get away from her daily schedule and go for a vacation. Naveen says ‘no’.
Neha’s birthday time!!, Naveen got a card for her. She is happy, he had given her a card atleast.
Finally, Neha asks Naveen. “We earn well. We can spend though not for a luxurious life but for a relaxing and comfortable life. But why do you always say ‘no’ for anything that makes me feel happy?”
Naveen now opens up. He has a dream house and he wants to buy it.
So what is he doing? Yes. Saving saving saving.
Saving, forgoing the comforts and the feel good factors too??
Yes. He wants to save not just for the down payment of the home, but for the whole value of the property. So how does he save?
Let us see how it works without a homeloan
Age : 26 years
Salary : Rs.40,000
Expenditure : Rs.15,000
Savings : Rs.25,000
His dream home value : Rs. 40 lakhs.
On an average per year he saves : Rs. 3 lakhs
No. of years he should save : 14 years.
In the mean time the property’s value increases which means he has to save even he reaches his limit. Ofcourse, his salary increases and he can save more. If you observe in the example, he saves more than half of his salary. Without even fulfilling smallest of his desires. When will he explore life if not at the age of 20s and 30s.
So, Neha asks him to go for a home loan. He rejects. She tries to explain.
So, is it that you should not go for saving at all if you buy a home? No, save for the down payment and for the rest go for a home loan.
Amount saved : Rs. 8 lakhs. (used for down payment)
Home loan amount : Rs. 32 Lakhs
Salary after 2 years : Rs. 60,000
EMI Fixed : Rs. 32,000
Now, at the age of 28 years, he is enjoying in his own dream home. Since, EMI is fixed, he need not think of saving for a home when his salary increases. He can invest and diversify his extra income, where he gets more returns.
Is that the end? No, you rather have to, monitor your homeloan via loanyantra, the synonym for loan management services. This helps you to put an end to your home loan faster.
In the present day, when the cost of living is going up and usually both spouses work, having a home loan co-applicant becomes more of a necessity than a requirement. There is no legal requirement to have a home loan co-applicant.
In order to enhance the loan eligibility, a borrower has an option to resort to by having a home loan co-applicant. This way, the total eligible income for the purpose of computing the housing loan increases, thereby resulting in higher loan eligibility.
Home loan co-applicant is a person who shares the equal responsibility towards the repayment of the home loan. Such type of home loans are called Joint home loans. Whereas a co-owner is the person who has a share in the property and rights on the property too. A co-owner of a property can be the co-applicant in home loan. But it is not necessary that the co-applicant of the home loan is the co-owner of the property.
Who can be a home loan co-applicant
A bank does not permit friends or relatives who are not blood relatives to take a loan jointly. Only if the co-applicant receives income from a regular source will that income be considered for determining the loan eligibility.
In most cases,spouse is the most common and preferred combination.
In case of parents and children , these rules will apply:
Father/ Mother and son
If the applicant is the only son, he can jointly apply with his father with both the incomes being considered. The property should be in their names jointly and it does not matter who the main owner is. This is because in any case the son is the legal heir of the father’s property.
Father/ Mother and sons
In case a person has two or more sons and if he wants to apply jointly with one of them, he should not be the main owner of the property. This is because, on his death, his children should inherit the property jointly and may cause an inheritance dispute.
The father may only be taken as co-applicant and his income may be considered for the loan. He may be a co-owner or not own the property at all. Under no condition should he be the main owner of the property.
Unmarried daughter and Father/ Mother
An unmarried daughter can apply jointly with their father. However, the property should only be in the name of the daughter and the income of the father should not be considered . This is to avoid any legal complications on the subsequent marriage of the applicant .
Where applicant is the owner and has a son and a daughter, an affidavit may be obtained from the daughter that she has no claim on the property.
In case of Brother and brother/sister
Home loan co-applicant approval is subject to certain terms and conditions like address of both should be same which means a joint family and intent to stay together in joint family in future. It is at the sole discretion of the bank.
Who cannot be a home loan co-applicant :
Father / Mother and Married Daughter
Brother and Sister
Sister and Sister
Documents Needed : Documents are needed from both the applicant and co-applicant.
General home loan documents needed are :
A common doubt is – ‘Will the home loan eligibility amount increase if we opt for a joint home loan?’ Yes, it will. Banks will be ready to offer you higher loan amounts if you opt for a joint home loan. The reason for it is that your repayment capacity increases as there are now two people who repay this loan. How much it would increase depends on the income of co-applicant. Apart from income, organization reputation is also considered. Be sure that you compare multiple loan offers before deciding on loan eligibility.
Benefits of being a Home Loan Co-Applicant
Increase Home Loan Eligibility :
If you are not the co-owner of property but would like to help your spouse or relative to increase their Home Loan eligibility. In this case, you may consider being home loan co-applicant. It is absolutely necessary that you should be aware of all the risks and legal liabilities.
Taxation Benefits :
From a taxation point of view, a joint home loan is also beneficial as all co-borrowers can claim tax deductions under section 24 (upto Rs. 1.5 lakh) of the Income Tax Act against interest paid and under Section 80C (up to Rs. 1 lakh ) against principal repaid.
The tax benefits that can be claimed would be in proportion of the share that the individuals have in the loan. Dis-advantages of being a Co-applicant
“Another way of repayment could be that the co-borrowers share the number of EMIs between them such that a specific number of cheques can be issued by one borrower and the balance by the other,” says Suvrat Saigal of Barclays Corporate India.
What if Dispute Arises The problem arises when one of the co-borrowers refuses to repay the loan. Be warned that each party would be liable for part of repayment or up to as much as all of the repayments.
Renu Sud Karnad of HDFC says, “It does not matter whether the payment is made in the normal course by only one of the joint borrowers as long as the full EMI is paid as per schedule”.
In the event of default, the lender will proceed with the normal recovery process which may include a legal recourse against all joint borrowers. Solution
Agreement between all Home Loan Applicants –
To avoid any legal dispute in future, it is advisable to all home loan applicants to sign a separate legal liability agreement on a stamp paper. And get the paper notarized. This agreement will clearly segregate the liability of each party.
Online Term insurance Plan –
What if bank insists on a co-applicant. If the bank insists only to hedge risk against home loan repayment, then a simple solution is that the primary borrower can buy an online term insurance plan and can submit a copy of a that policy assuring bank that bank that he is insured against home loan.
Joint home loans are definitely beneficial as compared to normal home loans. In case you are looking for a home loan and you can speak to your blood relatives to get a joint home loan, be sure that the EMIs are paid as per schedule.
Searching for the best home loan is as important as searching for a dream home. You might find the best home loan lender, but the process involves many steps. You have to be patient and careful while dealing with the process. Though applying online has become very easy, reaching the disbursal stage is no cake-walk. If you had chosen a nationalized bank, you have to be even more careful in following each and every step.
Here is the step by step procedure for your SBI home loan disbursal.
Collecting the Property related Documents
Submitting the Application
1.Collecting the Property Related Documents: Firstly, go to the builder and get all the property related legal documents. Get the Legal opinion and Share of agreement and Sanctioned Site plan from the builder.
Collect : Booking Receipt along with the copy of the cheque.
2.Legal Opinion: Go to an Advocate who is in the SBI Panel with the documents in step 1 to get it verified. For the advocate to give the final legal opinion he needs to see the Sales Agreement & Construction Agreement and he needs a photostat copy of it.
Normally if its a builder share following documents need to be collected from the builder :
a. Encumbrance certificate till current date (from some 35 years advocate may ask)
b. Tax Paid receipt till date. Lawyer might ask you for multiple documents, so the maximum delay is expected at this step. Once this step is done, half part is done.
Collect : Legal opinion
3. Property Valuation: Once the Legal valuation is done, go to a property Valuator who is in the SBI Panel with the sales agreement. He valuates the property and gives a letter.
Collect : Valuator statement
4. E-stamping: SBI mandatess the Sales agreement and Construction agreement to be estamped/Franked. Regarding whats the value to which e-stamp, do concern the branch staff. Normally for a ongoing construction flat, there are 2 Agreements a)sales Agreement and b) Construction Agreement. E-stamping and franking are actually the same, e-stamping is the new technology where as franking is the old one where we stamp it, Franking can be done only at register office where as e-stamping can be done at post offices, Syndicate banks, Selected registrar offices, etc.
Note: Make sure you, your wife and builder sign on the e-stamp which you purchase.
Collect : e-stamp and franking on the sales agreement
5. Submitting the Application: Once you get the valuator statement and Legal opinion, go to the SBI with the filled in application forms along with the required documents for loan application. Also attach the legal opinion and the Valuatorstatement.
Note: Its always good to go for a interiors loan (max up to 3 lakhs) along with the home loan, which might save you the hidden chargeswhen combined. For the interiors loan you need to get a quote from an interior designer and get it valuator sanctioned.
Collect : Application form Valuator Statement
6. Waiting period: Now its time for the waiting period. The waiting period may vary from person to person. Normally in the special home loan branch, it can be as fast as 3 days. Periodically call them to ensure that the process is going forward. Also make sure they inspect the property, because unless and until they inspect, you can’t reach the disbursal stage.
7. Documentation: Once the loan is sanctioned, you get a call from the bank for documentation. Carry all the original documents which you have submitted while applying for the loan.
Loan applicant along with guarantor needs to be present at the bank for the documentation. Builder is normally not required, if its a land lord share, then it is a must for him too to attend.
8. Disbursement: Once we get the Loan Sanction letter go to the builder and get the following documents 1. NOC from the builder stating he hasn’t mortgaged this property to any other bank 2. Tripartite agreement [This is required only if its a ongoing construction.3. Demand Note from the builder[how much money he needs for the particular construction stage]. Note: Please make sure whatever demand note they make is matching with the schedule of payment.
Collect : DD in favor of builders
9. If it is an under-construction property, for partial disbursements and for further payments you can just send a mail to the manager to please disburse the amount XXX and then ask the builder to send a boy to the SBI branch with the original demand note and they can collect the DD from the bank directly. You need not go to bank anymore.
10. Registration : Now its time for registration and the final payment to be made to the builder. You need a DD for Registartion Stamp duty in the name of Sub-registrar and a DD for Mortgage Stamp duty in the name of Sub-registrar
Conclusion. Send an SBI Postal mail form after registration saying you had submitted all the registered documents to SBI.
How Can Loanyantra Help You.
The above process needs a lot of care and patience. More than anything, it needs your valuable time, planning and energy. Once you register with loanyantra, you can relax and fulfill your loan disbursal process. Our relationship manager guides you in each and every step, also assisted home service for all your documents that need to be submitted in the bank. Also, loanyantra’s relationship manager is accessible to you to answer your questionnaire , anytime. All you need to do is just login, as it doesn’t cost you but it only helps you.
Q1. What is home loan insurance? Is home loan insurance and house insurance same?
Home Loan insurance or insurance on home loan supports your family in any unforeseen event by paying the outstanding loan amount. Home loan insurance is an insurance term plan provided on your home loan amount for the same tenure like your home loan. Now in India, home loan insurance is made compulsory by all the lenders while opting for the home loan. Team Loanyantra can suggest you the loan products with low home loan interest rate as well as home loan insurance low premium products.
Before that we should know that house insurance is totally different from home loan insurance. With regard to home loan insurance, you get the home loan insured whereas with house insurance, you get the structure of the house and the contents of the house insured.
Q2. How does Home loan insurance work? Will the home loan insurance cover reduces over the home loan tenure?
“A loan insurance plan covers the balance to be paid in case of the borrower’s death as per the loan schedule decided at the time of taking the policy,” says Rituraj Bhattacharya of Bajaj Allianz Life Insurance.
The home loan insurance offered by the loan cover will progressively come down as the home loan gets repaid. For instance, by the 10th year, if the loan cover would have been to be Rs 13.5 lakh. By the 14th year, it would have been reduced to about Rs 3.5 lakh.
Q3. How to pay the home loan insurance premium ?
To calculate the home loan insurance premium, primarily, the home loan interest rate is taken into account. A few companies or financial lenders also have a different rate for metropolitan and non-metro areas.
The other factors considered are, the age and medical record of the policy holder, the loan amount and the repayment period. The larger the loan amount or the repayment period, the higher the premium.
The home loan insurance premium payment can be paid at once or annually. You can either choose, 3,4,5,7 or 10 year, not exceeding 2/3rd of the loan term. For example, if you have to pay a premium of Rs.50,000 and choose to pay annually, the bank includes that premium into your loan amount and calculates the EMI. So be wise and diversify your funds.
Q4. What are the tax benefits while paying the home loan insurance premium ?
Only, if the premium is paid by you, and not by the lender, you are eligible for tax deduction under Section 80C and Section 10(10D).
If it has been paid by the lender and is part of the loan which you will repay through EMIs, it will not be possible to claim deduction.
Infact, the tax benefit is very negligible. The tax limit is Rs. 1,50,000. So, when you choose to pay annually, the premium is spread across your tenure which is added in your EMI. Understand that you don’t lose much.
Q5. What are the other options to insure your home loan?
Usually home loan insurance is compared with insurance term plans. The main advantage with term plans is they cover other financial needs along with the home loan. However, whether you opt for a home loan insurance or choose any other term insurance plan, the premium is calculated accordingly, which can be higher for higher cover.
But now in India, it is mandatory to opt for the insurance for any loan you take. So, you can only opt whether you pay the premium directly or pay the premium through EMIs.
NOTE : Why should you opt for Home loan insurance?
The solution lies with you. But, the best advantage with home loan insurance is, incase of unexpected happening to the borrower, the insurers go to the bank directly to close the loan. The family need not go around the banks or insurance companies. So, for those whose family does not have much exposure about these financial matters, it is a good decision by the lenders to make it mandatory. So, plan smart and choose the best fit.
Applying for Home Loan or Balance Transfer Home Loan NRI / OCI/ PIO
Most of the times, its a dream for NRI to buy a property in his/her home town or clear existing home loan before they return India. We come across NRI/OCI/PIO buying property in India very frequently. There are a lot of doubts which seem to be repeated by most clients.
This blog would give an insight of the process so that one can avoid errors and rework.
Process for Non Residents Indian / Person of Indian origin PIO or Overseas Citizen of India OCI for Home loan application.
HOW TO APPLY FOR NRI BALANCE TRANSFER HOME LOAN ?
First Step is to Decide the Power of Attorney (POA) Holder
The first step for any NRI/OCI/PIO is to decide who would be the POA holder. He/she has to be a blood relation residing in India preferably in a metro like Bangalore,Hyderabad, Mumbai, Mysore, or Pune.
Most of the banks ask for a Co-applicant. Your blood relative in India that is your parents/spouse can be a co applicant. You also need to convey the property ownership details .
In case you are buying in joint name i.e either your spouse / parents, he /she would have to be on the loan as a co applicant.
Please note the POA holder is the person who would be called in case you delay/ default on our loan.
Power of Attorney(POA)
The most crucial document you need to execute is the POA in the format of Bank that you are applying for the home loan. Each Bank has its own format for the Power of Attorney.
Do not execute a generic general power of attorney as most banks refuse to accept the same for the application. Once you have the power of attorney format of the bank that you wish to avail home loan from since you would be executing the POA outside India, you need to visit the Indian Embassy and complete the process.
In case your co applicant is an NRI you would need to execute POA for him/her also. Both POAs can be given to the same relative in India.
Please get the Power of Attorney checked from your banker before notarizing it from the embassy. Any errors can be rectified.
Kindly note that the POA attracts a fee in the embassy as well as here in India. In India you need to affix a Rs 500 stamp paper and get the documents notarized.
Kindly note in case there are any errors / gaps in the POA you waste a lot of time, energy and money because the entire exercise has to be repeated.
For Property Registration
The power of attorney you have executed for the bank can also be used for the registration of the property document. However you need to get the same checked from the developer from whom you are buying property.
All the income and personal documents as per the list have to be self attested by you (signed by you/POA holder) when you despatch the same to India.
Kindly also provide your overseas address proof which can be your employer’s letter in original.
You need to provide following documents attested by Indian Embassy : PAN CARD COPY, PASSPORT COPY and Overseas Residence proof
WHAT TO SUBMIT FOR NRI BALANCE TRANSFER HOME LOAN ?
List of Documents for NRI
Photo of Applicant and co-applicant
Latest 4 months salary slip
Increment letter with salary breakup
Previous work experience letter
Pan card copy & Passport copy
Processing fees cheque from NRE account
Co-applicant photo ID proof and sign Proof ( Pan Card ,Passport, Driving License copy)
Employment contract (English copy if the contract is not in English, attested by the Embassy/Employer).
Latest work permit.
Details of previous employment.
Identity card issued by current employer.
Bank Account Statement For Salary & Saving a/c (six months).NRI,NRO A/C
Pages with visa stamp on the passport.
Power of attorney For Bank Format
Pan Card Copy, Address proof, Photo for POA holder
Detailed credit report from Equifax / Experian
A credit report is a mandatory document for NRI/OCI/PIO US/UK/European countries, Australia, New Zealand and South Africa.
The credit report is not required for professionals working in the Middle East
Please download a detailed credit report which would clearly state your credit score. Most of the times you would have to pay fee to download the credit report. the credit reports available free of cost do not provide detailed credit history and might not provide the score.
WHERE TO PROCESS FOR NRI BALANCE TRANSFER HOME LOAN ?
We would recommend to process with Bank or institution which is providing Online Access to monitor, manage and allow part payments online. Most of the banks provide online access. So make sure you collect all the required online access details at the end of Loan process. We, at Loanyantra as part of process checklist, make sure our customers get the required online access to the loan process.
WHOM TO APPROACH FOR NRI BALANCE TRANSFER HOME LOAN?
NRI/OCI/PIO Loans if not professionally handled it might be very cumbersome job. It is always good to be ready with all the documents before starting the Home Loan process. In case of additional documents required then it would take extra money to send , extra time it would take to receive and extra efforts by the Power of Attorney(POA) to submit the documents. We would recommend, use services from a prompt loan professional to process it smoothly. Loanyantra.com, India’s first online loan management company, a reliable and perfect source if you are looking for a smooth process.
In a hawk’s eye, Loanyantra provides professional service at free of cost. As our process protocol, we first send entire checklist and have a professional call before we start the process. Once the process starts you get online access on Loanyantra portal which would update the status of the Loan process and it provides a chat facility between you, Loanyantra executive appointed for your process and the Banker. We make over all experience a cake walk.
It’s a new world, the systems of various sectors have changed a lot and people are now having plenty of avenues in fulfilling their dreams, such as; buying of homes, cars, appliances, dresses, gadgets, furnishings etc., which can now be bought with different kinds of financial instrument by banks and financial institutions. Home is a lifetime aspiration of any person and makes the biggest investment, however, the resource mobilization for the same is always been a point of worry until recently, but nowadays there are several banks and financial institution, who used to provide financial support in the form of housing loan, which is considered a great help for any intended buyer of home. Although there are some differences in technicalities and other features, which vary from bank to bank, but some important issues are almost same in all cases.
Home loan and Other Features
Home loan is now one of the strongest tools for commercial banks and other such financial institutions as an important means of revenue generation. Banks are usually having some standard products or packages of home loan, at the same time; they make necessary changes in their existing packages or in the interest rates to woo potential customers. In the earlier times, the client used to visit the bank to discuss the finer details of the available home loans and other issues, but nowadays, due to stiff competition banks are providing a more comfortable way for their clients and their personnel visits the customer’s place to get the business. The advents of the computer and the internet technology have opened up the scopes for the banks, as well as, for the buyer to get all relevant issues through the online mechanism.
While the respective bank’s website provides useful information about the home loan, but usually a potential buyer always tries to compare other probabilities from other banks, which will be helpful for them to select the best loan program, as per their specific requirements. There is another mechanism, known as the online marketplace for home loans and related issues; where one can find multiple offers of various banks, including rates of interest, riders, loan repayment facilities, flexible EMIs, prepayment modalities etc., which are quite helpful for any customer to formulate a comparative idea about the issue.
If a person, after some time, feels that the interest rates and other terms & conditions are not very lucrative, whereas, there are some other banks, who are providing very supportive and beneficial offers, he can opt for the transferring of the existing loan from the present bank to the other bank for better profit. The relevant information, regarding specific issues of balance transfer of the existing loan, can be obtained in the online marketplace, where the person can get the competitive rates and terms, which are of great help in finalizing the decision of the intended transfer. One of the most imperative supports can be attained in the online marketplace of home loans; the eligibility test of the person concerned, which is a real benefit for taking the decision.
Home Loans have become the most popular tool to achieve one’s dream of buying a home. With so many banks and HFCs offering tailored home loan solutions, people are now more inclined towards home buying. Banks and HFCs have home loan eligibility calculator that will help you assess how much loan banks will give you and what will be your EMI.
Home Loan Transfer
Balance transfer, home loan refinancing are interchangeably used with Home Loan Transfer. It helps the borrower to avoid higher interest rates by transferring to another lender which offers lower interest rates. Borrowers usually prefer this option to reduce the burden of interest rate and EMI. The good news is that all the banks and many HFCs in India offer the facility of home loan transfer.
Do You Know!
Although Home Loan Transfer appears to be a lucrative scheme yet one needs to try cost-benefit analysis before opting for a balance transfer.
Firstly, to avail the option of Home Loan Transfer, you need to be in the good books of the bank, make sure that you pay your EMIs regularly.
Secondly, balance transfer decision depends on the difference between interest rate offered by the two banks (one from where you have taken the loan and second from the bank where you wish to transfer your home loan).
Last but not the least, the outstanding amount of the home loan and the tenure left is also an important factor to consider before going for a Home Loan Transfer. Because, it is not a good deal if unpaid loan amount and tenure both are low. Though there are no prepayment charges levied, but while transferring the loan, calculate for the processing fees. It is calculated on the outstanding loan amount, usually, the maximum is Rs. 8,000.
Calculate Before You Go For A Home Loan Transfer
Always calculate. For example, if 50 lac is outstanding loan amount and your bank charges interest rate of 12 % then you have to pay a total of Rs 58, 01,513 as interest and you choose home loan transfer option to another bank offering interest rate of 11.5% for a time period of 15 years then the interest that you have to pay comes to be 55, 13,708 which means you save 2.87 lac.
This is a substantial amount and even if your bank levies a processing fee for home loan transfer, your saving is on a higher side. So,you can go ahead with balance transfer option.
An important note which banks consider before lending is your credit score. Always check your credit score before applying for a balance transfer. It is important that your credit health score is good and you have all your bills cleared.
Banks usually charge 0.5% of the loan amount or flat fees of Rs. 5000-10,000 as processing fee for home loan transfer.
How does home loan balance transfer help you?
Advantages of balance transfer includes the following :
It lowers the monthly installment
You can save on your interest and use for an important reason.
Makes your home loan more affordable
Banks and HFCs also offer customized solution that will match your requirement
Home Loan Transfer Process
Submit a request form to your current bank. The application also asks for the name of the new bank where you will be transferring the loan.
After this, the bank will look into your application and will issue an NOC (No Objection Certificate) that mentions outstanding loan amount.
This NOC is then submitted to the new lender and the new bank will study your credit history.
CIBIL score should be 700 points to get a loan. Once bank approves your application, all the property documents and other documents like ID proof, ITR etc. are transferred to the new bank.
Voila!!! You now have your home loan at a better interest rate and you are ready to smile even bigger now.
Our Role: LoanYantra is an unbiased platform where we offer you the best options pertaining to a home loan. Our home loan transfer service will help you find the right financial institution which will lessen your burden of home loan repayment. Moreover, we have up-to-the-minute information related to lenders and interest rate changes in particular.
Not only availing home loan transfer through loanyantra will make the process easier, but also we will keep a track of your interest rate till you close the loan and help you reduce it whenever possible which helps in saving on the home loan.
Talk to us and let us know your requirement about home loan transfer to serve you better.
If answered accurately, they will help you take a more informed decision
No loans to repay, modest aspirations and not a very ambitious retirement target. For Mumbai-based bank executive Alpesh Mehta and his schoolteacher wife Deepali, saving for their child’s education and marriage, as well as their own retirement, will be a breeze. But this could change if they go ahead with their plan to buy a house.In Mumbai, the minimum price of a 800-1,000 sq ft house is `1 crore. They will have to liquidate all their existing investments to raise about `20 lakh for the downpayment. The balance `80 lakh, if borrowed at 10% for 20 years, will mean an EMI of `77,200, which is roughly 60% of their combined monthly income of `1.3 lakh. Either the Mehtas will have to stop saving for their child’s goals or their retirement will have to be pushed back.The Mehtas are not the only ones entering this minefield. Across the country , a number of people are firming up plans to buy a new house. The New Home Index of Zyfin Research, an indicator of home buying plans of 3,000 households across 11 cities, has inched up in the past 12 months (see graphic).Though it is still in pessimistic territory, buyers are less pessimistic now than they were in May 2014. “The decline in pessimism has more to do with increased optimism about future income and job security than lower borrowing costs,“ says Debopam Chaudhuri, Chief Economist and VP-Research, ZyFin Research.
Despite the surge in buyer sentiment, real estate is still not a good investment in most parts of the country .Property price are still very high and despite the recent interest rate cuts, the cost of borrowing has not come down significantly. Before they take the plunge, potential borrowers need to ask themselves 10 questions. Your answers will tell you whether you should save more for a bigger down payment, buy a smaller house, invest in a cheaper city or not buy at all.
1. Can you afford the home loan EMI?
It might sound a no-brainer, but many home buyers get this wrong and bite off more than they can chew. The home loan EMI should be around 40% of your net household income. But that is if you don’t have other loans. A high EMI outgo can put your house-hold budget under pressure. If the home loan EMI accounts for more than 50% of the net household income, other goals will have to be downsized or junked altogether.Don’t be fooled into thinking that the recent cut in home loan rates have made property a viable investment. It will have a marginal im-pact on the total EMI. A 25 basis point cut will reduce the EMI of a `50 lakh loan for 20 years by `826.
It’s easy to get ambitious and go for a bigger loan if you are expecting generous increments in the coming years. Don’t make the mistake of leveraging on future income. While your income would certainly rise, but so would your expenses and financial commitments.
2. Have you factored in the other costs?
The advertised price is usually the base price of the property . The add-ons are usually kept hidden till you sit down with your cheque book. Many builders will slip in charges for facilities that you thought were free with the property. Others will keep certain charges hidden from the buyer by tucking them away in the fine print. These apart, there are other big-ticket add-ons such as the legal costs. The stamp duty and registration charges payable to the authorities add up a neat 7-8% to the overall price of the property. In all, these charges can push up the property price by 20-25%. Make sure you have factored in these additional costs.
3. Have you considered renting?
The high property prices means that renting is a better option in most cities.A 2-BHK house in Mumbai will cost close to `1.2 crore. If a buyer puts in `40 lakh as downpayment and takes a loan of `80 lakh, the EMI for 20 years comes to about `76,500. He also loses around `23,500 in interest that the `40 lakh downpayment could have potentially earned. The total cost per month comes to `1 lakh while he can easily get a similar house on rent in Mumbai for about `40,000-45,000 a month.
Don’t go by hypothetical examples.Instead, use an online rent-or-buy calculator to find which is is better for you.The one developed by Bigdecisions.com is a sophisticated online tool that takes into account several things, including the cost of the house, the amount of downpayment, the rate of interest of the home loan, the expected appreciation in the house price, the rent payable for a similar accommodation in the area and even the expected hike in the rent every year.
4. Will house value rise faster than the interest on loan?
In the early 2000s, when home loans were available at 6-7% and property prices were galloping at 20-25%, it made eminent sense to invest in an upcoming apartment project. Now, property prices are appreciating at a slower pace. In some markets, such as Noida and Greater Noida in the NCR, prices have even come down in the past 12-18 months.
If you are buying property as an investment with a loan, first assess whether its price will appreciate at a rate higher than what you are paying on the loan. “If you are payings 10% on the loan and the property price is expected to appreciate by 5-6%, then it is a bad buy,“ says Manish Shah, Cofounder and Chief Executive of Bigdecisions.com. Shah says the expected rate of appreciation is the single biggest determinant in their rent-or-buy calculator. “It makes the biggest difference in the decisions,“ he says.
5. Will this purchase force you to postpone other major goals?
Stagnant property prices and high EMIs are not the only problems that potential home buyers should be wary of. Their home buying plans can have serious implications on other financial goals, such as saving for their children’s education and marriage and their retirement. If the home loan EMI is too big, it will push other goals out of the financial plan. Worse, buyers like the Mehtas might have to liquidate existing investments to raise money for the downpayment. Though parents are unlikely to surrender child insurance plans and education related investments, retirement planning is easily sacrificed. “Younger people tend to think that retirement is an old age problem and defer the investment,“ says Shah of Bigdecisions.com. It is easy for investors to raid their retirement savings to fund their real estate dreams.You can take loans from the Provident Fund or the NPS for buying a house.Buy a house only if the purchase will not impact other goals. Otherwise, be ready for an asset-rich but cash poor retirement. Or not having enough money to send your child to a good college.