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/]