Home loan without income proof

Home Loan with Tax Benefits

Home Loans and their high rate of interest dig a hole in the pocket of homeowners. On top of that the monthly payouts have to be juggled with the regular home expenses which are equally essential if not more. Maintaining a comfortable finance graph without going into further debt is a concern that worries all prospective homeowners making them wary of Home Loans.

While there are many banks and firms offering multiple fiscal plans to these prospective buyers, there is a need for expert advice on Home Loans. It is imperative that you know what the laws of the state are and what the various options available are so as to make your loan journey smooth and easy. Home loan tax benefit also has multiple tax implications and benefits and with the help of expert guidance one can map out a monthly finance plan that will not hinder savings and benefit in the long run.

The specialists work closely with the homeowners to capitalize on Home Loans or liability on lines of credit. With the help of their professional understanding and guidance homeowners can save by lowering the tax liability. The homeowners can score brownie points every month by using the home loans for credit requirements. Banks allow an almost hundred percent deduction on their rate of interest. They bid comparatively lower rate of interest on the home loans than on credit and debit cards issued.

Moreover, the rate of interest on Home loan tax benefit is typically lower than that on the unsecured loans. Therefore, every time a homeowner borrows home loans on home mortgage or mortgage of any other self-owned property. The banks are assured to provide the homeowner with a lower rate of interest with higher resulting in tax deductibles.

Home loans present numerous points of tax benefits and savings. The tax advisors would help getting the tax deductible on property taxes, which is among the most highly applicable cases of tax benefits. However, the fees paid for title searches and appraisals are not deductible under the tax laws. Although the tax benefits can be regularly earned on the home loans on mortgage, the capital reclaimed on cash paid during purchase of the former home is only on the year of buying. The homeowners would get the sum of money based on the value of the property paid at the time of purchase.

The government allows homeowners to obtain tax deductibles due to the interest paid on home loans. If the homeowners have already cleared - off the payment on first mortgage to acquire the home or landed property, they are eligible for secured Home loan tax benefit on the next loans taken on mortgage of the same landed property. In all such cases, the banks and financing agencies provide higher amount of loans at a lower rate of interest to homeowners.

But, it can be valid only under certain conditions. The most important factor that is judged to be qualified for such tax benefits is personal ownership of the residence or property. It either has to be the main home or a second landed property of the borrower. The homeowners are eligible for tax deduction on only one second home or landed property, in case of multiple landed properties. The documents regarding rights of authority over homeownership for buying and selling have to be presented while applying for home loan.

Article Source: http://EzineArticles.com/599859

Housing Finance Companies

Flexibility and Competitive Rates Go Hand in Hand

Personal finance is a generic term for any type of loan that offers the maximum flexibility and can be used for one's own personal interests. These cash advances are often much more specifically defined by what they are used for or how they are used. External monetary assistance is required for most things in life- so getting to know how these finance options work and how to make use of them are two very valuable economic lessons.

The functioning of personal loans in India is based on interest. Interest is a tool lenders use to make profits from the money they invest in the process of lending. Interest is often expressed as a percent and calculated annually. This percent is applied to the total amount of the loan borrowed by the loan applicant and is expected to be paid by the borrower on the mutually agreed time. Obviously, personal finance interest rates should be competitive to offer the ease of easy repayment.

Personal loans India can be studied under two head i.e. secured and unsecured. A secured loan is a type of loan that makes use of the equity of the pledged security. Security is just a simple term used to describe any valuable type of item offered to the lender as guarantee. Common securities in the Indian banking system are vehicle, home, property, or even jewelry. Secured loans make lending money less risky for lenders, and thus, borrowers get better personal finance interest rates. Unsecured loans are the straight opposite of the secured loan plans. They don't make use of any security, and have higher personal finance interest rates or less appealing contractual terms as a result. Unsecured personal loans India are generally for anyone who doesn't have proper security or for loan amount that is too small to really qualify for a secured loan.

Personal loans India, as stated previously, break down into more specific forms of lending. They can be used for home improvement and in such case they are referred to as a Housing Finance. Likewise, a loan for purchasing a car is called an auto loan. This information typically goes to say that how specific a loan is. The borrower here gets the complete flexibility to use the loan amount according to his wishes the borrower should keep in mind that lenders offer different personal finance interest rates and conditions. This means that going to different lenders and requesting quotes can help consumers find the best personal loans India for their situation. When someone one is doing so, it will also influence many lenders to offer more competitive rates, as they don't want to lose business to competitors.

There are several uses of the personal finance. Whether for obtaining necessary items such a house, or recreational vehicles such as an all-terrain vehicle or a boat- the personal loan can fit the purpose. The personal finance interest rates, loan types, and other factors that go into pricing a loan are important to remember, and as always, try to shop around as much as possible before deciding on one lender makes the loan deal profitable. These loans are also available online. Hence, the borrower may go for Internet facility if he wants to have quick money. Online loans carry a competitive interest rate and have fast accessibility.

[Source: http://ezinearticles.com/?Flexibility-and-Competitive-Rates-Go-Hand-in-Hand&id=1317874]

How to Get a Home Loan with Low Income

Those who have low-income will always face problems when it comes to getting approved for home loans. And it is not only with mortgages, but also with getting approved for credit cards and other type of loans. However, this does not mean that all is completely lost if you have low-income, and you would want to own your own home. There are a few steps you can take to get approved for a mortgage, despite your income status.

So what are these options that will help people with low-income status obtain a mortgage? There are two options in my experience. These are:

(1)The Federal Housing Administration, FHA, Loan program. The program helps those with low income to acquire their own homes. We will discuss how to go about the application process and all that you require to get you approved later in this article.

(2) Using your assets such as a car as collateral to get the mortgage.

(3) Using a co-signer, also known as co-debtor to apply for the mortgage with you.

OK so let's get into the details of each option.

The FHA Loan Program for Those with Low Income Levels

1. The Federal Housing Administration, FHA, Loan program is there to assist people who have low incomes to acquire their own homes. It is specifically called the FHA 203 Loan program.

So how do you qualify? To qualify for the FHA loans program, you need all your personal finance documents available. Also if you have any assets, ensure the documents covering them are also made available.

So what happens when you submit your application for the FHA program? Your income-to-debt ratio is determined. This ratio is simply how much debt you have compared to the amount of income you have, including all your assets. It is worth noting that this test differs from state to state.

The test is conducted to determine if there is the slightest possibility of you being able to pay for the loan that is given to you through the program. So your credit score could be borderline good, you can still qualify for this loan and be able to own your house. There are people with a credit score as low as 580 who have been approved for the Housing Finance and are now homeowners.

2. So how do you make your application? Go to your mortgage officer. Let them know you want to apply for the FHA 203 home loan program so that they can give you the appropriate application forms. Fill the forms out. If there is something you do not understand, let the mortgage broker help you out.

3. One thing you need to understand about the FHA home loans program is that the loans have fixed interest rates and it stay the same unless you decide to refinance. If you application is approved, you will get a confirmation from the FHA office in your state or from the mortgage broker you used to make the application. So this one option of getting a home loan with a low-income status.

Other Options beside the FHA Loan Program

For some reasons, there may be people who will not be able to qualify for the FHA 203 Home loan program. In that case, you can consider these other options to help you get a mortgage if your income status is low.

4. Using your assets as collateral. Although your income status may not be good, it is possible that you have assets you can use collateral to help you a home loan. This asseyour car, bonds and other investments you may have. Talk to your bank about the possibility of using any asset you may have as collateral to help you a home loan.

5. Using a co-signer.

If the two options above do not work out for you, the last option is to consider getting a co-signer to sign the loan application with you. A co-signer is ideally a relative such as a parent, sibling or spouse. They should have an excellent credit score since the banks or financial institution giving you the home loan will make their decision based on the co-signer's credit rating.

[Source: http://ezinearticles.com/?How-to-Get-a-Home-Loan-With-Low-Income&id=7459718]

Banks Give Loans for Your Dream House

Today fulfilling a dream of owning a house is not difficult. In India there are many banks and house financing companies that are willing to come to your doorstep to give you a loan. Even if you apply online for home loans you will find your mailbox full of mail from different banks and house financing companies. All of them will claim to offer the cheapest rates along with other benefits on home loans.

Banks and financial companies offering home loans, although have their own terms and conditions, the interest rate they charge is more close to each other is more or less similar in number. Banks and housing finance companies ask for property papers for security reasons. In banking terminology it is called Collateral Securities. There are some banks and financial institutions who ask for deposit of lump sum amount for the first time, commonly known as the down payment.

In case of property papers as security banks or Housing Finance Companies scrutinize the papers and find out their real market value, their intrinsic value. After thoroughly checking property papers if they find them right and fair in nature they considered them as Collateral Securities.

Home loans can be taken for a number of purposes like for building a new house, renovation of existing house, for expansion of existing house, etc. Banks have fixed certain parameters for issuing home loan which should be taken care of while applying for home loan.

You can fill the form for a loan and submit it physically or you can also apply online. If you apply online then you will be asked to give some personal details like security number and driving license number. You might be asked to furnish your previous credit history also. The banks and companies giving loan make sure that you have an ability to pay back the loan on time. For this they ask for your income statement.

Usually there are two types of home loan floating and fixed. In floating rate, interest changes with time i.e. the interest is impacted by various other factors like inflation, RBI increasing repo rates and CRR. In fixed, the rate of interest will remain same throughout which was finalized at the time of signing up for loan. In fixed you might pay an extra amount. In case you want to pay a fixed-rate loan off early, you may have to pay extra for breaking the fixed-rate agreement.

Before signing on the dotted lines read the documents and the agreement carefully and make sure you are aware of all various terms, interest rates and installment dates. Take care of hidden charges also.

[Source: http://ezinearticles.com/?Banks-Give-Loans-For-Your-Dream-House&id=1403240]

Housing Finance - A Revolution in the Market

The housing finance in India is growing at a fast pace. The home loans or housing finance is a huge industry in itself. A lot many people are trusting home loans in India to purchase property. This is the best and affordable way of realizing your dream of buying your own home. These finance options are open for all salaried individuals, self-employed individuals, partnerships, and even NRIs. The home loan can be availed for various purposes like loan for building a house, purchasing a piece of land, buying an existing house or apartment, and renovating a house.

The home loan can be availed for all kinds of properties like residential, commercial, and industrial. The loans for industrial and commercial property are of huge size and are normally taken by organizations. People also take home loan for the purpose of investment in property rather than for their own use. These properties are later on sold in the market at good profit.

Apart from a normal housing loan from Housing Finance Ltd one can also get home equity loan, a unique concept wherein the borrower can mortgage his existing property to avail loan that can be used for any kind of purpose as desired by the buyer. Generally, people avail home equity loan facility for the purpose of marriage, education, or to meet medical expenses. The maximum loan amount that banks normally offer is about 60% to 65% of the market value of the property. The home equity loan is generally provided on difference amount of the actual market value of the property and the amount the customer already owes to the bank. At one time this concept of borrowing was not much known but today it has become quite popular as the funds can be put in use as per the wish of the customer.

The housing finance companies follow a very strict process while providing loans to the customers. The loans are disbursed in line with the credit policies of the bank and financial institution. As part of their process, banks verify the credit history of the borrower to ensure safety of the funds. It is important to check whether the customer is a defaulter with some other financial organization or if he has misused any of the banking products.

The housing finance sector is being promoted in a big way in India. The banks and financial institutions are offering home loans at attractive terms. Even people find it advantageous to purchase property by availing home loan as they get tax benefits and easy repayment options. This is the best way to buy a property especially if you belong to service class. 

The banks and housing finance companies are also being professionally managed. They are always ready to assist the customers regarding queries related to the prevailing rate on interest, the various tenures available for repayment, conditions or the eligibility criteria for various categories of customers, the documentation required etc. It will not be wrong to say that housing finance in India has caused a revolution in the market and has motivated purchase of properties.

[Source: http://ezinearticles.com/?Housing-Finance---A-Revolution-In-The-Market&id=397589]

Balance Transfer and Housing Finance

The Indian immovable property has come of ages. Consumer is the King now and gone are the days of monopolistic behavior. And definitely, if you are the one with sound financial background and impeccable credit record you can strike a better deal with the banks in terms of interest rates and other payment conditions and purchase your dream property without any hassle.

Interestingly, the same criteria are equally applicable on those, as well, who have already availed a loan from a bank. Near about all the major public and private sector banks in the Indian banking system are now offering the option of 'Balance Transfer' on housing finance. Often, banks in the housing finance sector tend to increase the interest rates when the benchmark interest rates increase. But, such alacrity is not shown by them in decreasing rates whether the Repo rate comes down or not. In such circumstances, balance transfer help the customer a lot. He can replace the higher rate loan and avail a lower rate one by paying some extra charges. These charges are lower compared to the total payable interest.

What is Balance Transfer and how is it relevant in the housing finance?

There are times you find that the interest rate on your home loan is at a higher level. Take an example. Suppose you were paying at the rate of 10.5 per cent per annum. This rate is quite high in comparison of 9 per cent offered by some other bank. In such cases balance transfer of housing finance comes into rescue. You can trigger off the balance transfer option with your existing bank or lending institution, under which the unpaid portion of your housing finance would get transferred to your desired bank, thereby taking benefit of the difference in the housing loan interest rate.

Things to take care of at the time of balance transfer:

* Tenure of loan amount should be taken care: Ideally, you should consider taking the balance transfer option when the remaining part of your payment period is more than 5-years and in such a case you have the time for speculative gains. There is no profit in transferring the home loan from one bank to another if you end up paying early payment penalty and other processing charges even more than the difference of Housing Finance

 and the amount you had to pay towards interest in the normal condition.

* Early Payment Charges associated with the housing finance scheme: Banks like State Bank of India, IDBI and ICICI offer benefits like exemption of the early payment charges to your existing bank if you transfer the balance. So you must confirm the same with the new lending institution that are they ready to deal with this matter. Otherwise, the deal is not profitable.

* Additional charges involved with the loan amount: You must confirm that the desired amount for your home purchase loan is perfectly at par with the balance you had in your previous bank. It may be the cases that that your new bank pays all early payment penalties and processing charges on your behalf and later add the amount to the principal of your housing loan. So, in such case your total owing remains the same and the transfer is not profitable. In this situation, you have to suffer the impact of debt compounding, which does not favors you in the long run.

Seeking balance transfer as a burden reduction option needs the similar degree of caution and study that you undertake while taking housing finance. Definitely with balance transfer, you can save a considerable amount of interest charges under this option once you strike the right chord!

[Source: http://ezinearticles.com/?Balance-Transfer-and-Housing-Finance&id=1337511]

How to Get a Rural Housing Loan From a Rural

Housing is one of the most basic requirements for the survival of human beings. Housing is especially significant for those who fall under the rural poor category. This is because shelter, in the form of a house, provides them with dignity of life, removes the fear of abandonment and gives them a sense of belonging and security. The housing shortage in India is one of the most important issues faced by us today. According to the 2001 Census, the rural housing shortage figure is at 148 lakhs. Efforts are being made by banks and institutions to solve the economic development problem in the country.

Rural banks are an important component of our country's rural credit structure. The most important purpose for the creation of rural banks in India is to provide credit to those living in rural areas. This is because rural farmers, artisans, labourers and even small entrepreneurs living in these areas are not financially strong enough to support themselves. Certain banks provide rural housing finance to a wide range of clients in rural as well as semi-urban India. These home loans are cost effective as well as flexible. These loans are meant to help customers in the areas of house construction, purchase, extension and general improvement. The main purpose of these loans is to ensure that rural housing is provided to those who need it, as quickly as possible.

Some rural banks also take responsibility for upgrading the numerous non-permanent housing structures in rural India. Most of the houses found in the rural parts of India are made out of mud; they are not firm and are known as 'Kuccha' houses. The aim of these banks is to convert these temporary structures into something more permanent. They do this by converting these mud houses into brick and mortar houses. These brick and mortar houses are known as 'Pukka' houses. These rural banks have also provided funding for various rehabilitative efforts such as removing the rough cement flooring of these rural houses and replacing it with tiles. All these moves have been undertaken by rural banks in an effort to make the housing conditions across rural India more liveable.

Article Source: http://EzineArticles.com/4789814

Points to be Remember While Taking a Home Loan after 45

If your age is 45 years or more in age and are thinking of taking a home loan, chances are that you will need to go for shorter loan tenure up to 15 years as compared to younger home loan borrowers.  Say, you apply for a home loan at the age of 45 and your retirement age is 58 years, then the maximum tenure which the bank may be willing to give you will be 13 years. 

As the tenure is relatively shorter, your Home Loan Eligibility Calculator will be lower for the same EMI or you will have to shell out higher EMI compared to a 30 year old person availing same amount of home loan.

In recent past, increase in the salary levels has brought down the average starting age of most home loan borrowers. People now avail Housing Finance in their late 20’s and early 30’s making it possible for banks to offer longer loan tenures up to even 30 years.

Now, if you happen to be taking a home loan in your 40’s, here are some important points that you need to know:

1. Do in-depth research: In today’s complex world, researching all the available Home Loan Calculator is very important, no matter what your age may be. However, when you make a new long term financial commitment at the age of 45, it becomes more important for you. 

This is because you also have many other expenses to take care of, such as children’s education, their marriage and your own retirement.

Useful links:

Interest Rates on Loan against Property

Loan EMI Calculator

Home Loan Balance Transfer Calculator

Fixed Deposit Rates - FD Rates for Tenure up to 1 Year

2. Increase your down payment or own contribution: At the age of 45, you may have more savings than a 30 year old.  So, it may not be a bad idea for you to use your savings to make higher down payment, thereby opting for a lower loan amount. This will reduce your EMI and your interest outgo.

3. Choose the maximum possible loan tenure available: The loan tenure available to you will be maximum 15 years. So, try and avail that.  In case you have surplus money available, you can always prepay your home loan.

[Source: http://myloancare.blogspot.in/2014/12/points-to-be-remember-while-taking-home.html]

Housing Finance Corporations (HFCs) And Banks: Who Wins?

What is a Housing Finance Corporation? Is it different from a bank? What is National Housing Bank? What is Base Rate and Benchmark Prime Lending Rate? What is my name?

These are some of the questions that normal; non-finance people have when they are first introduced to the concept of Housing Finance Corporations. If explained improperly, it is very difficult to grasp this idea and you might be left with more questions than you began with. The following article exists for the sake of simplifying this concept and preserving your sanity.

Let’s make you an expert in 10 minutes!

Housing Finance Corporations & Banks

Most of us spend our lives believing that home loans are given out by Banks and that the story ends here. It is a simple but inaccurate view of the world because in reality there exists a separate set of entities called Housing Finance Corporations or HFCs. And while HFCs perform the same basic role as Banks, there are many small differences that exists between these two Financial Institutions.

1) Types of loans provided

This is the most fundamental difference between these two types of loan providers. HFCs only provide housing-related loans like home loans, loans against property and construction loans while Banks provide different types of loans like personal loans, auto loans as well as home loans.

2) Where do they get their funds?

Logically, you can lend money only if you have money. The same principle is applicable for loans. Both HFCs and banks need to generate a pool of funds before they can start disbursing loans to customers. The difference lies in the way these funds are generated.

Banks lend loans by using the money deposited in Current and Savings Account (CASA) by their customers. The same money that you deposit in your Current/Savings account is disbursed by the Bank as a loan. This is profitable for Banks because the interest they pay customers on CASA deposits is lower than the interest they receive on loans.

HFCs do not have access to CASA funds and therefore generate funds through different ways. Reputed HFCs like HDFC, LICHFL and DHFL raise funds from the public as well as by borrowing from banks. Smaller HFCs mainly rely on borrowing money from banks. Because they use money borrowed from banks, the cost of generating funds is higher for HFCs than banks. This is one of the reasons why Housing Finance Companies charge a higher rate of interest.

3) Which authority sets the rules?

Financial institutions need an governing authority to make sure that transactions are happening in a fair and systematic manner. HFCs and Banks are governed by two separate authorities – Reserve Bank of India and National Housing Bank respectively. NHB is a part of RBI.

In 1988, National Housing Bank (NHB) was established to regulate HFCs, although some aspects of HFCs are still regulated by the RBI. And so arose different sets of norms for HFCs and Banks to follow. Thus, we come to our 4th point.

4) How is the Rate of Interest calculated?

As mentioned above, HFCs are regulated by NHB and Banks are regulated by RBI. Because of this, there are separate methods for calculating the interest rate on home loans.

Before we get into details, let me introduce you to two sets of terms:

1) Prime Lending Rate (PLR) & Discount

2) Base Rate & Spread

The Prime Lending Rate and Discount are the factors used by HFCs for deciding their interest rate. The PLR is calculated by HFCs based on the cost they incur for raising their funds along with a certain profit margin. The method for calculating PLR is not known. Let’s say an HFC’s PLR is 16%. What it will do now, is discount this rate by a certain amount, say 5%. This Discount is decided by each individual HFC.

Interest Rate = PLR – Discount = 16-5 = 11%.

Banks calculate interest rates in a slightly different way. First, they calculate something called Base Rate. The method of calculating the Base Rate is decided by the RBI. Base Rate is the minimum rate at which that Bank can lend money for any loan and like PLR, it also includes a certain profit margin. Let’s say this Base Rate is 8%. Loans are hardly ever given on the base rate. The interest rate is generally higher than the Base Rate. To calculate the interest rate, Banks add a Spread on top of the Base Rate. If a particular Bank’s Spread is 0.25%, then it’s Interest Rate = Base rate + Spread= 8+0.25 = 8.25%.

Note: According to RBI regulations, once a customer has been given a loan, the bank cannot change that customer’s spread unless there is a change in his/her creditworthiness.

5) Difference in loan amount

HFCs no longer offer a higher loan amount than banks, but many people still think that they do. Allow us to clarify this point for you.

[Source: https://www.switchme.in/blog/2016/03/housing-finance-corporations-hfcs-and-banks-who-wins/]

Effects of Credit score on Your Home Loan Eligibility

High credit score is important

Lenders look at your credit profile before deciding to lend, at what interest rate and loan amount. Similar to recruiters looking at your resume/interviews to offer job Or Not. Your home loan eligibility depends on your credit report. Your credit report is sought after your home loan application.

5 C’s home loan eligibility

1) Credit history

Your credit history determines your credit worthiness and loan repayment capabilities. Banks assign a credit score to each applicant. Credit scores are from 300-900. Usually 750 score is considered Good for home Loan. Click here for the list of factors considered in your credit history.

One should apply for credit score and check details themselves. This will help rooting out pain points of your credit score and present a strong case to Bank. You can also save processing fee and time, if your score is not up to the mark, presently.

2) Capacity

Lenders need to make sure; you will pay up in future. Your credit research is means of determining the as surety of repayments. Your credit score determines home loan eligibility i.e the loan amount banks will sanction to you.

Your debt to income ratio is determining factor for credit capacity.

Your financial capacity determines your Housing Finance eligibility.

3) Collateral

For secured loan product such as home loan, the applicant pledges something that they own. In this case, the property is taken as collateral. The value of collateral is considered for loan amount.

4) Capital

Your assets, investments, savings and other repayment sources are also considered as capital other than primary income source for loan repayment. Capital is helpful in future repayments when primary source of income is not available.

5) Conditions

Present market & economic conditions, government policies, employment growth etc also effect lending practices of banks.

Best practices of keeping good scores

Pay your Dues & On Time

Defaulting on loan repayments reflects negatively on your credit score(CIBIL). Defaulting on credit card payments is also a negative on your credit score. The records of your default are maintained for years.

It is very important that you pay all your Dues in time.

Automate EMI payment

Ask Bank for facility in which you’re EMI will be deducted automatically from your account. If not possible, make a mental note of it. Make a reminder of EMI payments in your smart phone. The reason is not miss the Due date.

Don’t miss EMI due dates

A single day of delay shows up in credit score report.

If for some reason, one could not pay on time. Write an application to your bank branch manager for not reporting it. (for the lack of better words)

NOTE: If the EMI due date is not convenient to you, One may request the bank to change the due date accordingly.

Multiple credit cards

Your credit history is because of credit cards, online transactions and previous bank loans. Having more than 2 credit cards is negatively viewed by bank’s credit team. If you have more than 2 credit cards, make payments and close unwanted credit cards.

Any credit card defaults and remaining balances will show up in your credit report.

Note: Make sure and take confirmations that your unwanted credit cards are indeed properly closed.

Don’t exceed credit limits

Your credit transactions should not monthly exceed 35% of your net monthly income. Maxing Out credit cards, every second month shows very properly and reflects poor financial planning. The risk to lend is more.

Timely credit card EMI repayments

If you default in any loan repayments of any bank, it shows up negatively in your credit history. Banks are skeptic of defaulting applicants. Provide good reasons for any defaults that show up in your credit inquiry. Cheque bounce is also common problem with loan applicants.

[Source: https://loaneasy.in/effects-credit-score-on-home-loan-eligibility/]

6 Options You May Not Think of While Taking a Home Loan

Ignorance is bliss, but not for loan buyers. Many home buyers are unaware of the several options available when it comes to a home loan. Call it “research fatigue” or the lets-get-this-out-of-the-way syndrome, majority of home loan borrowers look only for interest rates. Here are six options you are likely to ignore when finalizing a home loan deal.

Bridge loan: If you are looking to purchase a new property after selling off an existing one, bridge loans are for you. A bridge home loan provides funds for down payment to buy the new property until your current house doesn’t get sold. This is a better option than an expensive personal loan, and comes with tenure of one to three years. You can dispose of your property within that period and pay it back.

Through Housing Finance Company If you are unable to sell off your property within the stipulated time period, you can get your bridge loan converted to a mortgage loan albeit with a slightly higher rate of interest.

Note: Approach the bank for a bridge loan only after you have shortlisted a buyer for your property as bridge loans in most cases are facilitated only after you enter into a formal agreement for sale with a prospective buyer.

Flexi Loan: Flexi loans, as the name suggests are smart payment options, where your loan account is linked to a current account which functions like an overdraft account. You can withdraw amount from a home loan account as per the sanctioned limit. And whenever you have excess money, it can be diligently parked in the account and the principal outstanding of the loan is adjusted for the balance kept in the account by taking a weighted average.

The biggest advantage of a flexi home loan is that you withdraw money only as per your requirement and save on interest outgo for the loan.

Note: It is important to note that the interest rate for flexi loan is usually higher than that of a traditional home loan. Opt for it if you are likely to get surplus money which can be parked in the loan account regularly. Borrowers who have taken loans against under-construction property can also benefit from it.

Teaser loan: With the uncertainty over interest rate fluctuations of loans during the past few years, banks have introduced teaser loans to offer some respite. Teaser loans are fixed loans for a pre-determined period of two to three years. After that it changes to floating rate loan as per the prevailing base rate at that time.

Tranche EMI Home Loan: Many loan takers fail to calculate the huge amount they are losing as Pre-EMI. Home loans taken against under construction properties often call for a good sum to be paid as Pre-EMI, as the loan disbursement is linked to the level of construction, and the actual EMI starts only after the full disbursement. And until the actual EMI doesn’t commence, borrowers end up paying interest for the disbursed amount. The situation worsens if the project gets delayed.

Opt for a Tranche based EMI payment option here. Under this, you can start making EMI payments soon as the first installment of the loan is disbursed. Here you are repaying for the undisbursed amount, but the total output remains the same, and it saves you from Pre-EMI.

Note: If you think that you are paying additional amount under Tranche EMI option, you are wrong. The only difference is that unlike regular EMIs that start only after full disbursement, here you are starting it early.

Proportionate release: Imagine that you have shortlisted a flat that costs 70 lakhs, but your loan eligibility is only 50 lakhs. You may get the loan amount only after paying off the down payment, i.e., Rs.20 lakhs, but you are finding it difficult to raise that amount now.

You can talk to your bank about a proportionate release option. Under this option you can make the down payment in installments and the loan amount will also get disbursed proportionally to meet the builder’s payment due dates. This allows you to have more flexibility to manage your finances.

[Source: https://blog.bankbazaar.com/6-options-you-may-not-think-of-while-taking-a-home-loan/]