What are the Advantages for Women Applicants in Case of Home Loans?

If you are a woman who is planning to buy a residential property, you’ve got some reasons to cheer. It is a known fact that women in India enjoy certain benefits when it comes to loans, more so in case of home loans. They need to pay lower interest rates as compared to men. It is because there is a general perception that women pay their dues on time and are less likely to default.

The financial sector in India at large provides special benefits and concessions to women whether it is about opening an account, tax exemption or borrowing a home loan.

Home Loan Advantages Enjoyed By Women in India

One of the most crucial factors in case of a home loan is the interest rate at which it is offered. The interest rate helps in determining the financial institution as well. Every small variation in the loan interest rate can make a huge impact on your monthly EMIs (Equated Monthly Installments). Since home loan involves a huge sum of money, having a concession in interest rate can help you save a good amount over the entire loan period.

This is one of the most important benefits that Indian women can have while applying for a home loan. However, a woman can get preferential or lower interest rates only when she becomes a primary applicant or co-applicant for a Home Loan for Women.

Banks Promote Women Empowerment by providing them Loans at Concessional Rates

Banks highly promote loan assistance at concessional rates to the womenfolk. By doing so they encourage financial empowerment and independence of women. Besides, they also believe that women have a lower risk profile as compared to men.

Interest rates have a close relation with the perceived risk profile of the applicant. However, for an applicant with higher risk profile, the home loan interest rates will be higher. Having said that, whether woman or a man, no bank will extend a home loan or any sort of financial assistance to an applicant without a satisfactory credit score as well as necessary documentation.

[Source: http://www.biz2credit.in/blog/2015/09/08/what-are-the-advantages-for-women-applicants-in-case-of-home-loans/]

What Happens after Your Home Loan is approved?

You’ve searched for your dream home. Now you’re looking for a Home Loan? If you’re wondering what happens after your Home Loan is approved, this is your quick guide to the post-application process.

Property assessment

First things first, property assessment! The property that you want to buy, as well as any property that you provide as collateral security will be inspected by a technical officer. If it is an under-construction property, the stage of construction and quality of construction is noted. If it is a completed property, the age of the property, internal and external maintenance, and development of the surrounding area will be noted by the officer.

Scrutiny of documents

The documents pertaining to the property will also be scrutinized by a lawyer. Generally, only the original documents for the property are accepted by the bank. The No Objection Certificates (NOC) need to be submitted to the bank.

Property Registration

You need to go to the sub registrar office for the registration of your property. You also need to pay your stamp duty and registration charges. After this process is complete, you will receive a copy of the Sale Deed and another copy will go to the bank.

Pay Your Part

The bank will ask for proof of your contribution to the loan. This is your down payment. You might need to give your bank statement, with a cheque or net banking details of transferring the money to the builder.

Disbursal of Home Loan

On your acceptance of the loan offer extended by your lender, the assessment is done and documents are scrutinized. The property also gets registered in your name. Once this is completed, you will need to submit the final processing fee to your lender by cheque.

When the processing fee is received by your lender, a cheque for the approved loan amount is prepared and given to you. Your Home Loan repayment schedule will begin one month after the loan is disbursed.

Additional Reading: How A Home Loan EMI Calculator Works

Funding Release

If you purchase an under construction apartment, your bank will release the funds in stages. This will be based on the construction progress. So, until the construction is totally completed, you needn’t pay EMIs for the whole Loan amount. Sounds fair? For a completed apartment or house, the funding will be released in one shot.

ECS Set Up

The Electronic Clearing Service (ECS) or the standing instructions need to be set up for your loan. Here, you need to sign ECS forms so that the EMI gets auto-debited every month. Earlier, this might not have been mandatory. Now, banks are making it mandatory to submit ECS forms for all best home Loan. This way, you don’t have to worry about forgetting the due date of your EMI.

Get Demand Letters

As and when the builder completes the construction of the house or apartment, funds will be released by the bank. You need to get a demand letter from the builder and give it to the bank whenever the funds need to be released. The builder needs to provide a receipt for the same. This receipt should be handed over to your bank.

Additional Reading: All about Home Loan Insurance

Getting a Home Loan is simple, really. If you’re ready to get one step closer to your dream home, why don’t you browse our offers on Home Loans?

Source: https://blog.bankbazaar.com/what-happens-after-your-home-loan-is-approved/

Housing Loans/ Home Loans in India

What is housing Loans?

Housing loans are loans allowed by financial institutions, especially banks. Earlier, banks in India were not allowed housing loans to general public, in easy terms and conditions. But, as per instructions from Reserve Bank of India, housing loans became priority sector advances and it is one of the fast selling products in in Indian banks.

Priority sector lending under housing loans, as per budget, for 2012-13 is as follows.

1. Loans up to Rs. 25 lakh, irrespective of location, to individuals for purchase/construction of a dwelling unit per family, excluding loans granted by banks to their own employees.

2. Loans given for repairs to the damaged dwelling units of families up to Rs. 1 lakh in rural and semi-urban areas and up to Rs. 2 lakh in urban and metropolitan areas.

3.Assistance given to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to a ceiling of Rs. 5 lakh of loan amount per dwelling unit.

4.Assistance given to a non-governmental agency approved by the NHB for the purpose of refinance for construction/reconstruction of dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to a ceiling of loan component of Rs. 5 lakh per dwelling unit.

5.Loans granted up to March 31, 2010 to Housing Finance Companies (HFCs), approved by National Housing Bank for the purpose of refinance, for on-lending to individuals for purchase/construction of dwelling units, provided the housing loans granted by HFCs do not exceed Rs.20 lakh per dwelling unit per family.

Whereas, loans up to Rs. 25 lakh to individuals for purchase/construction of dwelling unit per family (excluding loans granted by banks to their own employees) and loans given for repairs to the damaged dwelling units of families up to Rs. 1 lakh in rural and semi-urban areas and up to Rs. 2 lakh in urban and metropolitan areas.

Priority sector loans are, comparatively with smaller rate of Interest. So banks allow housing loans, under priority sector, with a limit as shown above.

General public individuals are eligible for housing loans under non-priority sector also, beyond the above limit, provided that they have enough repaying capacity.

[Source: http://yourhouse4u.blogspot.in/]

The problem with home loans

The latest in Reserve Bank of India’s measures to protect customers with home loans is a proposal to change the way banks determine their `base rate’ – the benchmark for all floating rate loans. The need for a re-look arose because customers have been complaining of a raw deal in pricing.

In recent years RBI has taken a number of measures to provide a better deal for home loan borrowers. The introduction of base rate ensured that banks do not reduce rates only for new customers by playing with the interest spread. In the past banks could play with the spread as they would lend below the prime lending rate (their earlier benchmark) for new customers while old customers continued to pay over the PLR.  This was not possible with the `base rate’ which was also the floor rate for pricing. In June 2012 RBI forbade banks from imposing a penalty on pre-payment of home loans irrespective of whether the loans were being refinanced or repaid. This made it possible for disgruntled borrowers to move away to rivals if their loans were not re-priced when interest rates were falling.

But there are a number of areas RBI could look into as part of its consumer protection initiative. Here are a few.

Compulsory insurance: Banks have an interest in the property mortgaged with them and they need to ensure that it is protected against any eventuality. At the same time banks also gain by selling insurance policies.  But what needs to be insured is the cost of construction and not the cost of land. A 1000 square foot house may cost Rs 2 crore in Mumbai but the cost of construction would be around Rs 20 lakh. So there is no need of buying property insurance for the whole loan amount. Yet many banks insist that the buyer pay 15-year insurance premium upfront based on the market value of the property rather than the construction cost. Also in cities like Mumbai, the property is owned by the cooperative society which is required to insure the property. It is therefore not clear whether the bank’s insurance policy will pay a claim when the housing society is also making a claim for the property damage.

Non-intimation of interest rate changes:  Most home loan borrowers focus on the interest rate at the time of availing home loans. But floating rates are dynamic and vary from time to time. The borrower is not aware of this because while rates vary, the equated monthly installment or EMI does not. Banks merely change the tenure of the loan. So in a rising interest rate regime it is not unusual for borrowers to find that their principal loan amount is unchanged even after years of repayment.  Very rarely does a bank communicate to the borrower changes in interest rates.

Notice of intimation of mortgage: In Maharashtra the government has made it compulsory for all mortgage interests to be registered. This is aimed at preventing fraudulent sale of the property even as a loan is outstanding.  While the objective is laudable, the trouble is with the process. Although the law actually protects the bank’s interest lenders have shifted the onus on the borrower.  Rather than use their institutional clout to facilitate smooth registration, borrowers are forced to approach agents and spend a few thousands to complete this process.

No refinancing of existing loans:  Lenders often poach from home loan borrowers of other institutions. But when it comes to their existing customer they do not offer them the benefit of new rates.  If there is a special scheme running in the bank, existing borrowers are not informed of it. Also banks charge customers a processing fee even when their loan is refinanced within by their own bank but under a different scheme.

Complex pricing: Some banks have resorted to complicating the pricing of home loans introducing interest free years in middle of the tenure of the loan. Innovations in financial products are good only as long as they do not obscure pricing. Borrowers need to have the opportunity to compare the home loans rates of one home loan against another.  One way to make the pricing transparent is to disclose the cost in the form of annualized yield to the lender based on prevailing rates.

Document Checklist for Home Loans

Getting a Home Loan is easy these days. As long as you have the necessary documents with you, your Home Loan will get approved and disbursed without any complications. Here is a comprehensive checklist of documents that banks and financial companies require for sanctioning a Home Loan. It’s a fairly lengthy read but so, so important!

Read this. Become very knowledgeable. Buy a home. Simple!

Tip: Check with your Bank or Non-Banking Financial Company to figure out which of the following documents you need to submit, as requirements differ from institution to institution.

The Long List Begins!

The documents mentioned below must be provided when applying for a Home Loan:

Identity proof

— Driving license

— Voter ID

— Passport

— PAN card

— Aadhaar Card

— NREGA Card

Address proof

– Driving license

– Voter ID

– Passport

– Ration card

– Utility bill – telephone, electricity, water, gas, postpaid mobile (less than 2 months old)

– Letter from any recognized Government authority verifying the residence address of the customer

– Letter from your employer (in case no other proof is available)

– Bank Statements/Pass book/ other Government documents such as post office pass book

– Property or Municipal tax receipt

– Pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address

– Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or Mission in India

Age proof

– Driving license

– Passport

– PAN card

– Birth certificate

– 10th standard mark sheet

Income proof

Income proof and property proof vary for salaried individuals and self-employed individuals.

Self Employed/Businessmen

– A brief introduction of your business/profession

– Balance sheet, profit and loss account statement of income, proof of income tax returns for the last 3 years certified by a CA

– Receipts of advance tax payments made (if any)

– A photocopy of Registration Certificate of establishment under Shops and Establishments Act/Factories Act

– Certificate of Practice for professionals such as doctors

– Proof of investments (FD Certificates, Shares, any other fixed asset)

Salaried individuals

– Form 16

– Increment/Promotion letters

– Appointment letter

– Payslip (Last 3 months) with salary account bank statement

– IT returns (for the last three years)

– Investment proof (FD certificates, shares, any fixed asset)

– Documents supporting the financial background of the borrower (liabilities and assets if any)

List of the must-have property documents before applying for a Home Loan:

You must check for current home loan interest rates

Sale Deed (Title deed /Mother deed/Conveyance Deed)

The Sale Deed or Title Deed is the most important legal document required while buying a property. It is evidence of the sale and transfer of ownership of the property to you. It is also an essential document if you plan to sell the property after a few years since it serves as proof of ownership. The Sale Deed has to be registered at the Sub Registrar’s office of property jurisdiction within four months from the sale date. Very, very important.

Joint Development Agreement

A crucial document when opting for a property which is part of a joint venture project; the Joint Development Agreement (JDA) is an agreement between a landowner and a builder wherein the landowner contributes his vacant land and the builder undertakes real estate projects on that land. The JDA lets you know whether the landowner or the builder holds ownership of the property you’re buying.

[Source: https://blog.bankbazaar.com/document-checklist-for-home-loans/]

These are the factors that Impact how much Home Loan you will get

Besides checking an applicant’s eligibility for a home loan, lenders also have certain criteria to ascertain the quantum of home loan that they can grant to the person.

Income

An applicant’s income is the starting point for determining his home loan eligibility. Generally, lenders consider 40% to 50% of your monthly income as available towards servicing the loan. The proportion of income considered for servicing the loan increases, as the income level rises. So, for a person in a higher income slab, the lender may even consider a higher percentage of his monthly income.

However, the percentage that is considered for servicing the Current Home Loan Interest Rates may vary from lender to lender. Moreover, the criteria adopted for salaried persons, is different from that for self-employed borrowers. For self-employed professionals, like doctors, some lenders consider the gross receipts and not the taxable income, for the purpose of home loan eligibility.

Any existing loan

While computing your home loan eligibility, the lender will subtract the EMI on your existing loan, from the amount available for servicing the home loan. Consequently, your home loan eligibility will be based on this reduced amount. Therefore, if you have an existing loan, where the outstanding amount is small, it makes sense for you to prepay the outstanding loan, as this could enhance your home loan eligibility substantially. The incremental home loan eligibility will be much higher than the outstanding amount on the existing loan.

Age and remaining years of service

Home loans are generally available for tenures of up to 20 years. However, your age and remaining years of service could restrict your loan amount. For example, if your age is more than 40 years and your remaining years of service is less than 20 years; your loan eligibility shall accordingly get reduced. For a salaried person, a retirement age of 60 years is taken into account, while for self-employed borrowers, the lenders consider a retirement age of 65 years, for determining the home loan’s tenure.

Availability of co-borrowers

The amount of home loan that you are eligible for will increase, if you are able to add someone, who is acceptable to the lender, as a co-borrower to the home loan application. The lender will pool the income of all the co-borrowers, to determine the amount available for paying the EMIs. Please note that all the joint owners of the property, have to be included as co-borrowers, irrespective of whether they have any separate income. However, a person can also become a co-borrower, even if he is not a co-owner of the property.

Tenure of the home loan

Your home loan eligibility is directly linked to the tenure that you opt for. With the same surplus income, longer home loan tenure will give you higher home loan eligibility. As there is no prepayment penalty on home loans and with lenders mostly offering loans under the floating rate of interest, it makes sense for you to choose a longer home loan tenure, so as to have higher eligibility and better flexibility. You can always prepay your home loan partly or fully at any time, in case you have surplus funds.

[Source: https://housing.com/news/these-are-the-factors-that-impact-how-much-home-loan-you-will-get/]

6 Tips to Follow for a Successful Home Loan

There’s no denying that buying a home is one of the most crucial financial decision you can make in your entire life. This is why you need to know each and every aspect that impacts the approval or rejection of a particular loan application.

In case you are a prospective home buyer looking to get your loan disbursed without much complications, here are 6 essential tips to help you out.

Gauge Your Financial Situation

All the banks that offer a home loan these days intensely scrutinize your capability to repay the amount you apply for. Considering the fact that buying a home in India currently would, at the minimum, cost you INR. 40 lakh, you certainly need to have a proper plan to repay the amount. So whatever income documents you have, take a quick run to analyses them and figure out whether your current income allows you the luxury to get a loan without risking a financial meltdown.

Use the Co-applicant Feature

If you’re already sizing up options and filling up application forms, you must have come across the column that asks for a co-applicant’s’ name. Use this to your advantage. If you have a spouse who is also earning a sizeable income, you can use them as a co-signer. This will improve your chances of getting a better loan amount as banks allow you to club the net income of the signees. This will improve your chances of getting the loan you are looking for.

Maintain Your Credit Score

Important criteria called credit or CIBIL score can make or break your chances of getting a loan. So, if you have any current or previous loans, make sure to pay them on time without any default. As a majority of your application’s future will depend on these scores you should make improving your credit score a priority. Ideally you are expected to have a CIBIL score anywhere above 750 for banks to even consider your request.

Provide the Right Collateral

Whenever a lending institution offers you a loan with proper Home Loan Rates, it runs the risk of not getting the return on investment they were expecting as there’s a likely chance, however small, of your defaulting. Let’s explain this with an example; Mr. X applies for a loan despite having a less than ideal financial history. But he is willing to provide any sort of documentation to avail of the loan. He submits a personal property as collateral for the money he is borrowing, which the bank can foreclose on if he fails to repay. Despite this being a risk lenders offer a loan as they have a guaranteed return on their investment. So, if you feel you have a relatively sketchy financial history, providing the right collateral or guarantor can do the trick for you.

Pay More to Pay Less

Usually, when you apply for a loan, every bank expects you pay at least 10% of the loan amount upfront so that they can get your disbursement process started. So, if you have saved up enough money, you can use it as a down payment because the less you borrow, the less you’ll have to repay.

Choose the Right Property

There have often been instances when several apartment complexes by even reputed builders have landed in a huge trouble due to some illegal dealings. Banks tend to refrain from providing home loans unless the property in question is free from legal hassles of all sorts. So, make sure to research on trusted sites like Common Floor which has a huge inventory of trusted builder with the right credentials. Once done, you can rest assured that you’ll have the loan amount disbursed.

Follow these aforementioned tips to increase your chances of getting the loan you applied for and move one step closer to the property of your dreams!

[Source: http://loanwalle.com/blog/6-tips-to-follow-for-a-successful-home-loan-disbursement/]