Making Home Loan Work For You

When it comes to choosing a home loan, interest rate is not the only thing to consider. Loan features – like the ability to make extra repayments, a line of credit, an off-set account – are just as important. To help you understand what features you could be offered by your lender, we’ve outlined some of the more popular options.

Making extra repayments

Being able to make extra repayments at any time during the life of your home loan is an important feature. Any extra cash paid into your home loan – like an annual bonus, a windfall, or a tax return – could end up saving you thousands of rupees in interest over the life of your loan.

It goes without saying that the more often you make extra repayments, the better – for example, if your mortgage repayments are calculated monthly, consider paying fortnightly instead as you’ll end up paying an additional month’s worth of repayments each year. And the sooner you’re able to start making extra repayments, the greater the benefit to you in terms of time and money shaved off your overall loan amount.

An off-set account

One of the simplest ways to reduce the interest payable on your home loan, is to set up an off-set account. An off-set account is a bank account linked to your home loan and used as you would any other savings or transaction account. The difference is your balance in this account is off-set against your total mortgage and interest is only charged on the difference.

For example: If you had a mortgage of Rs. 45,00,000 and your off-set account balance was Rs.1,00,000, interest would only be charged on the difference i.e. Rs. 44,00,000.

Some lenders calculate the off-set amount daily while others do this on a monthly basis, so it’s worth comparing lenders if this is something you think would work for you. You can have your salary paid into your off-set account, set up automatic payments to be paid from this account, and use it to make everyday purchases using a debit card.

A line of credit

If you have a large amount of equity in your property, you may be offered a line of credit. This means that your lender approves an amount secured against the equity in your property that you can draw down when you need it – say for home renovations or a family holiday.

Typically, you’ll only pay interest – charged at a variable rate – on the amount you draw down rather than the total approved amount. A line of credit is a useful feature to have, but probably better suited to borrowers who are careful at managing their finances and won’t be tempted into overspending each month.

What features work best for you?

As a Mortgage Management Expert, we understand that navigating through the numerous home loan features on offer by lenders can be complicated. We’d like to help you make an informed decision about which features are most important to you. Get in touch with us if you’d like guidance on your home loan features.

Traps to avoid by New Home Buyers

Buying a home is one of the largest and most complex purchases you’re ever likely to make. And getting it wrong can have a significant impact on both your financial and emotional health. That’s why it’s important to take time to fully research and understand the process and the complexities that go along with home buying. Here are our home buyer traps to avoid.

Not Getting Pre-approved
In this highly competitive property market, getting a pre-approval for a mortgage is absolutely the first step in the home buying process. And while the amount of paperwork involved may put you off, not getting pre-approved before looking for a property will ultimately cost you.

Securing a pre-approval helps define your property search so you know what price range you can realistically afford. It also shows the seller that you’re serious about buying, and it’s an absolute must-have if you’re buying at auction.

Not saving a deposit
At the very least, you need to have saved a 10 per cent deposit of the property value. If you have less than this, you still have a few options: you could ask a family member to gift you part of the deposit, or act as a guarantor on your home loan. Either way, lenders want to see you are capable of saving a deposit.

Not doing your homework
Defining what it is you’re looking for in a home is an essential part of the home buying process. Before you attend an open house, consider what it is that’s important to you in buying a property: for example, living closer to work or schools, a family lifestyle with a large garden, access to public transport.

Research reliable property data to get a realistic idea of property prices and what you can expect to buy for your budget. Remember to factor in the costs associated with buying, like mortgage registration and transfer fees, loan application and establishment fees, and Lenders Mortgage Insurance if you’re borrowing more than 80 per cent of the property value.

Not working with a mortgage broker
Mortgage brokers have access to a far bigger pool of financial resources and can often secure finance for buyers who have been turned down in the past. In many instances, mortgage brokers are able to negotiate sharper interest rates or terms. Most importantly, they’re experienced in dealing with and understanding lending policies of different lenders, so are able to guide you through the home buying process and ensure you make the best decisions.

Get in touch with our team today if you need assistance or advice around the home buying process.

Loan to buy a home and rent it

Loan Acquisitions for Buy-to-Let Investors

Being a landlord in India is not for the faint-hearted. The past few years have not been easy for the Indian real estate market thanks to numerous obstacles including new property laws, demonetization, and the Goods and Service Tax. Now, after a prolonged stagnant period, the sector is starting to show improvement and is on a structured path of recovery, giving hope to property investors across the board.  After several home loan interest rate hikes in recent times, however, an increasing number of Indians are opting to live in rental properties. This has created a big opportunity for investors that acquire residential property for the sole purpose of renting it out.  Unfortunately, funds are often tied up in investments and fixed assets in which case a buy-to-let investor will have to apply for a loan to purchase the property of his choice.

Why do landlords need additional finance?

Obtaining a property requires money. The cost of living in India may be in the region of 65% lower than in the USA but a house in a big city such as Mumbai can still cost anywhere between ₹50 and 75 lakh. Even if the sole purpose of the property acquisition is to rent it out, you will still be responsible for mortgage payments even if the house or apartment is vacant. Additional finance is often required to procure a home that can be rented out.

Property improvements don’t come cheap

Vacant properties result in a financial loss which is why it is critical to keep a property well-maintained in order to keep it occupied. Structures such as roofs, gutters, plumbing, walls, and fences lose their integrity over time and can decrease the rental value of a property if not addressed in a timeous manner. With 2.1% of the Indian population believed to be disabled, there is an increased need for accessible homes. A landlord can boost the appeal of his property significantly by making a range of improvements such as wheelchair ramps, wider doorways, lowered counters, and a roll-in shower. As important as regular maintenance is, and as appealing as a state-of-the-art kitchen, bathroom, or a fully-accessible home may be, it all costs a substantial amount of money, often necessitating the investor to take out a loan.

Where can buy-to-let investors seek financial assistance?

Once the need for financial assistance has been identified by a landlord, the next step entails determining which type of financial institution will render the most viable service. Prior to making any pertinent decisions, it is pivotal to conduct some research before applying for a loan from anyone. Depending on your own personal requirements you may opt to make use of a traditional brick-and-mortar institution, an online lender, or an investor-only lender.

Brick-and-mortar lenders

Long before the internet revolutionized the real estate and financial sectors, landlords seeking loans would have to venture into brick-and-mortar institutions such as the State Bank of India or the Canara Bank. These traditional loan providers are ideal for individuals who are seeking finance in a personal capacity from an entity that is very familiar with the Indian real estate market. Banking institutions also often forge close relationships with their high-end clients which results in better service and a speedier application process.

Online lenders

The internet has revolutionized the real estate industry in countless ways.  Making use of the services of online lenders is often far more convenient than dealing with a conventional service provider. An impressive amount of time is saved as there is no need to go into the bank or office of a loan provider to fill in any documentation as the entire application is done from the comfort of your PC or smartphone.  Online loan providers typically benefit first-class lenders the most as they typically have the funds available for the somewhat steep down payment.  Loanyantra is a perfect example of an online home loan provider that prides itself on its sought-after, reputable online presence.

Investor-only lenders

Investor-only lenders specialize in supplying finance to business organizations to allow them to invest in properties of a residential nature. If your organization fits this brief you may benefit substantially from making use this type of lender. Due to the clientele of investor-only lenders being so limited, the application process is streamlined significantly, saving you a hefty chunk of precious time.  An IO lender can be of great benefit to a business who is investing in a number of rental properties through a legal establishment as well as if your long-term plans involve more than straightforward residential properties, including things such as fix & flips and properties with a multi-purpose appeal.

Acquiring a loan with the purpose of investing in a buy-to-rent property is not uncommon and may result in lucrative financial gains. At Loanyantra you can expect not only to find fast and efficient service but also the best repayment rates available that will help you secure the property of your dreams.