Real Estate News on Home Loans

The formation of a new central government brought back a positive momentum in the real estate segment. With plans to increase the LTV ratio as high as 90% by the National Housing Board and discounted interest rates being offered by top lenders ICICI Bank and State Bank of India, the home loan market has witnessed a good month. The Reserve Bank of India kept the repo rates unchanged helping in continuation of home loan interest rates devoid of any hike. Now with the annual budget just a few weeks away, the real estate industry and home loan seekers are bracing for positive announcement in the budget that can bring back the buzz in the home loan segment and the real estate sector as a whole.

RBI keeps repo rates untouched:

In a positive development announced in the beginning of the month of June, the Reserve Bank of India kept key rates unchanged. The repo rate was unchanged at 8% while the reserve repo rate was fixed at 7%. The SLR however was cut by 50 basis points. The announcements were largely as per market expectations and meant little or no change in home loan interest rates for new or existing borrowers.

High expectations from Union Budget 2014-15:

With the new central government likely to present its annual budget on the 10th of July, there are high expectation from both real estate developers and potential buyers. A vast majority of people expect the Narendra Modi government to announce a real estate regulatory or watchdog much on the lines of TRAI for the telecom sector. While developers expect change in laws for easier clearances, home loan borrowers are expecting deduction on home loan interest rates making buying a home more affordable to the common man.

NHB to allow up to 90% LTV:

Earlier the national housing bank NHB announced its plans to increase the LTV ratio for home loans above Rs. 20 Lakhs to 90% of the property value. If approved the NHB plan would allow more users to avail home loans as it would reduce the margin money required by individuals seeking home loans. With the sluggish gains in the real estate sector in the past year, NHB plans to increase LTV ratio is likely to trigger a positive impetus in the domestic housing real estate market. 

ICICI Bank cuts home loan rates:

ICICI Bank, India’s largest private bank and also the biggest home loan provider in the private sector announced a 0.10 percent cut in home loan interest rates. The limited period offer ending on June 30th brings ICICI Bank home loan interest rates at par with the discounted home loan rates of State Bank of India, the country's largest home loan lender. ICICI Bank offers home loans up to Rs. 75 Lakhs 10 10.15% while women borrowers would be given a further 0.05% discount with loans available at 10,10%.

SBI extends discount scheme for women borrowers:

The State Bank of India extended its home loan interest scheme especially designed for women borrowers. The scheme which was originally to expire on March 31, 2014 has been extended for an indefinite period allowing women borrowers a discounted interest rate of 10.10% for home loans above Rs. 75 Lakhs. For home loans above Rs. 75 Lakhs, women borrowers are eligible for home loans at 10.25% compared to 10.30% for other borrowers.

How to Choose the Best Home Loan in India?

There are a number of financial institutions and banks in India that provide varied banking solutions, loans, investment options and many more services according to an individual’s requirement. All banks are competitive in terms of offers, discounts and the interest rates; hence, it becomes worrisome to select the best amongst the hundreds of alternatives.

There are more than a hundred banks in India which provide home loans to all classes of people on the basis of affordability. The main and foremost feature to look in the home loan is the “home loan interest rates” along with the repayment methods. It should be competitive enough with no hidden charges, quick processing time and the transparency throughout the procedure.

Understanding the types of home loan interest rates helps to select the ideal one.

Ø  Secured Home loan: These are loans provided against some kind of security or guarantee, such as a loan against property, any valuable asset, or jewellery or some legal documents. If any default situation arises, then the pledged thing becomes the lending institution’s property. In this case, the interest rates are comparatively less.

Ø  Unsecured Home loan: Loans are issued without any security, but the interest rates are higher as the loan is disbursed under the lender’s risk.

Ø  Variable Interest Rates: The interest rate may increase or decrease depending on the market fluidity.

Ø  Fixed Interest Rate: Here, the rate of interest is fixed throughout the loan tenure.

Ø  Split Loan: Some lending institutions or banks also provide split loans in which half of the loan amount is of variable type and the rest would be of fixed type.

Along with home loan interest rates, there are a few other features to be looked into while going for a home loan.

1. The EMI concept - The Equated Monthly Installments (EMI) are calculated using the home loan EMI calculator, depending on the down payment amount, and the loan amount. The loan amount includes the principal rate and the rate of interest. The more the down payment, the lesser the EMI would be. Calculate and think about the size of EMI you can afford every month till the loan tenure.

2. Loan Tenure - Loan tenure can be adjusted according to the affordability of the EMI. The increased loan tenure contains the increased rate of interest as well.

3. The Processing and other hidden charges -  There are banks, which believe in serving the people in any way, thus such banks waive off the process fee with an affordable interest rate. Compare the banks for the transparency in the procedure.

4. Ensure the Eligibility criteria and the documentation process - Compare the eligibility criteria, some banks are not stern about the eligibility and also provide a relaxation in the age and income factors. Ensure the facts and ensure a hassle free documentation check process.

5. Prepayment / Foreclosure options - The home loans can be closed anytime after six months of loan disbursal with a small percentage of foreclosure charges of the outstanding principal amount.

Thus, narrow down your search after considering and understanding the features to choose the best home loan, which can be applied either online or at the nearest branches with the required documents. Then the essential verification are done to disburse the home loan in 3-4 days.

Home Loan Delay Bugs Customers

Home loans can easily be termed as the best financial schemes that allow borrowers to build their own dream house. In India, all the major banking institutions are known to offer high quality home loan schemes to customers who are willing to buy a new home. Even though the process of applying for a home loan is simple and straightforward, you might face certain delays due to various reasons. If you feel that home loan bugs customers, then you’d be wrong as by avoiding certain mistakes, you could easily make the process run smoother.

Home loan delay bugs customers who are in search of a quick loan advance; and the best thing that you could do as a borrower is to go through the reasons why you might have to face a delay. This will surely help you in improving your situation and putting the best foot forward.

Applicant’s income

The borrower must have a certain amount of monthly or annual income for being able to apply for a home loan. So, if you don’t submit the right salary slips that show your monthly income, then you might have to face a lot of delay because the bank is going to delve further into the matter before granting you a loan.

Opening cash reserves

Even if you meet all the eligibility requirements, the bank might ask you to open a cash reserve in which you’ll be asked to maintain a certain amount of balance in one of the bank accounts. This amount is kept aside as a security for the bank in case you fail to make further payments.

Credit history

Most of the banking institutions spend a lot of time in conducting a background check. They carefully go through your credit history to determine the fact that you’re a capable borrower who can easily repay the loan. So, it’s advised that you keep your credit history and report clean prior to applying for the loan.

Employment details

It is best to put forward your employment details in front of the bank as and when you submit the application form. If you fail to submit your documents, the bank might spend a lot of time doing a comprehensive check on your employment history which in turn would delay the whole procedure.

Incomplete or missing documents

If you fail to produce any kind of documents or even your photographs on time, then you might face an unwanted delay during the application procedure. A home loan cannot be granted to a borrower unless he has submitted all the documents in the head branch.

Applying on the Closing Day

You could even face some delays if you’re visiting the bank on the closing day. Banks usually don’t deal in any kind of customer services on this day and so you might have to delay the procedure by a day or two. So, you got to plan out your visit beforehand so that you can secure the loan easily.

These are some of the reasons why a home loan delay could bug the customer. Try to create proper strategies for making the home loan acquisition process a smooth and simple one! 

How Profitable is it to Invest in Real Estate?

Since the beginning of time, real estate has been a high paid investment. Not only does it double the value of money, but also keeps it secure. The trend in India for different real estate investments have been on the rise, owing to its immense potential.

How is home loan connected to real estate?

When it comes to real estate, thae first thing that comes into our mind is the amount of money required. With the growing inflation rate, it is not possible for everybody to arrange and accumulate huge sums in a short time. The common man is bounded by different money constraints, which propel him not to think about real estate investment. This is where the concept of home loan comes into the picture.

A home loan gives you the facility of investing in property that will reap benefits in the future. There are many banks, which have initiated different home loan schemes for the common man. Some of them are:

• ICICI: Being one of the pioneers in the banking sector, ICICI bank helps you build your home or invest in a feasible real estate option. With longer tenures, lower EMIs and low home loan interest rates, this bank has been able to fulfill the investment needs of many customers. The simplified documentation and flexible repayment procedure has captured the attention of many people.

• SBI: State Bank of India has been voted “The most preferred home loan provider” in AWAAZ Consumer Awards along with “Most preferred bank award” in a survey conducted by TV 18 in 21 cities across India. With its low home loan interest rates that are calculated on a daily reducing balance, the bank is able to save a lot for the customer. Also, its huge network of branches in the country has enabled many people to opt for home loans from SBI.

Benefits of real estate investments

There are many benefits of investing in real estate. Some of them are:

Ø  Ability to enhance value: When it comes to real estate, an investor can build or rebuild his or her asset in order to raise its value in the market. Being a tangible asset, property investment gives you more control over your investment compared to other forms.

Ø  Yield: The main reason why you should invest in real estate is the high yield value. Your investment portfolio would have some investments, which do not have regular or healthy returns. Invest in property compensates for losses incurred in stocks or bonds.

Ø  Effect of inflation: The real estate business does not get influenced by the inflationary conditions in the economy. You will find many rent leases that get renewed with new rent rates. Being directly linked to the rents paid by the tenants, the returns keep on increasing during inflation.

Ø  Diversification: When making your investment portfolio, always look into diversification in order to ensure better asset allocation. Real estate returns are not at all co-related to any other investment in your portfolio. This not only diversifies your investments, but also take care of the risk involves in it.

You should have investments that will reap benefits and monetary gains in the future. To ensure the proper circulation of the hard earned money, real estate is the safest option for any investor.

Why you must thank RBI for ending penalties on pre-paying home loans

The Reserve Bank of India has given millions of loan borrowers respite from pre-payment penalties.It had done away with pre-payment penalty on home loans long ago. This time, the apex bank has instructed all banks to abolishpre-payment penalty on all floating interest loans. The ruling applies to home loans, corporate, vehicle and personal loans, auto loans, personal and education loans that are repaid with a floating rate of interest.

RBI’s new regulations, especially on prepayment penalties, have brought a lot of cheer for the common man.In its first bi-monthly monetary policy statement for 2014-15, the RBI has directed banks to consider allowing their borrowers the facility of prepaying floating rate term loans without any penalty."...it is advised that banks will not be permitted to charge foreclosure charges or pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect," RBI said in its notification.

Prepayment penalty has been a demotivating factor to all loan customers, whenever they are in a position to pre-pay their loans. Especially, home loans are usually in lakhs and even a pre-payment penalty of 2 per cent of the total loan amount causes a big dent on your pockets – on a 20 lakh loan, it would comet Rs 40,000. Thanks to the RBI, you don't have to pay such huge sums of money to repay your loan. 

Many of you tend to go for pre-payment of loans when you find that interest rates show a continuous upward movement. Some of the customers opt for switch-over of their loans with existing banks to the lenders offering lower interest rates on loans.

Banks and other lending institutions have been very reluctant to part with the extra interest charge on the pre-payment charges on loans as it is their main source of income. The expansion plans of these institutions usually hinge upon their income on loan repayments. So, if you pre-repay your loan, in part or in totality, they lose a lot of their future income. So, customers are discouraged by banks to close off loans by way of levying-these penalties with considerable monetary implications.

As the prepayment penalties now-stand annulled, lending institutions would have to explore channels of raising their funds from alternative resources. But it is not that much of your concern as borrower.

As mentioned earlier, the RBI had forbidden foreclosure charges or pre-payment penalties on home loans on floating interest rate basis. The move aimed at ending the discrimination between existing and new borrowers and bringing uniformity across the banking system in the home loan segment, which was a logical course. Now the benefit same has been extended to floating rate term loans, which will help small and medium enterprises as well. Banks will no more be allowed to deny the benefit of lower loan liability to all their customers.

So, you have every reason to profusely thank the RBI for ending penalties on pre-paying all debts taken on floating interest rates, including home loans.

What are the eligibility conditions for a home loan?

Home Loans are generally given to three categories of individuals by banks - salaried individuals, self employed professionals and self employed non professionals. The eligibility conditions vary for these three categories in most banks. The repayment capacity and eligibility of the borrower is determined based on several factors like age, tenure of loan, income, employment type and status, spouse's income, stability and continuity of occupation etc.

Let’s look at the main eligibility conditions:

Age of Borrower: Banks prescribe a minimum and maximum age of the borrower. The minimum age is usually 21 years of age. The age of the co-applicant is also specified by banks. The maximum age is given in terms of the age of the borrower at the time the loan ends. So while ICICI specifies this to be 65 years of age or retirement age, Axis Bank is more stringent for salaried borrowers at 60 years on loan maturity. Self employed individuals and professionals in Axis Bank have the maximum age at loan expiry criteria to be 65 years. Some banks like HSBC give different age limits for salaried individuals in private companies, government companies and self employed individuals.

Employment: Generally, all borrowers are expected to be either salaried with private or government companies, self employed professionals or self employed non professionals. As a home loan is a large liability, banks would want to make sure of the stability and continuity of employment while granting the loan. It is for this reason that in some cases, the eligible loan amount is lower, as the job may be viewed to be more risky compared to others.

Income criteria: Banks determine eligibility criteria based on the income of the individual. Although many public sector and private sector banks do not specify this amount in black and white, some banks like HSBC do so. For example, HSBC has minimum net income criteria of Rs. 5 lakhs per annum for salaried borrowers and Rs. 7.5 lakhs per annum for self employed borrowers. Some banks look at income on gross basis, while others consider the net take home salary for determining eligibility.

Spouse’s income: Most often, borrowers take a joint home loan along with the spouse to enhance loan eligibility. Banks also suggest this option. In this case, both the applicants’ incomes are considered. As the income base is increased, the repayment capacity is higher and therefore the amount of loan you are eligible to borrow increases.

Other loan commitments: When you borrow a home loan, the repayment capacity is of paramount concern for the bank. Therefore, the loan eligibility is worked out by calculating backwards on the Equated Monthly Installment (EMI) amount. This is compared with your monthly outflows, most important of which are payment of other loan commitments like car loan, education loan, etc. and the ability to pay is determined. This is a major determinant of the loan eligibility.

Other factors: Banks have internal stipulations on minimum and maximum loan amount, maximum tenure etc. Although these do not determine your eligibility directly, they have an indirect effect. For instance, the tenure you choose will determine your EMI, which in turn will be checked to determine the repayment capacity and hence the eligible loan amount.

BankBazaar.com online eligibility calculator can be used to check the eligibility for a home loan. This calculator would ask for details such as the monthly income, current loan obligations, loan tenure, interest rate, age of borrower and employment type, based on which the borrower’s loan eligibility is calculated and given instantly.

Documents List for HDFC Housing Loan

The evolution of home loan market in recent times has meant that a large number of people have been able to relive their dream of owning a house. If it was not for easy availability of home loans, the rising real estate prices would have meant, buying a home out of bounds for the average Indian citizen with limited income. A number of public banks, private sector banks and non banking financial companies offer home loans subject to minimum eligibility criteria. Any individual with a well oriented financial health capable of repaying his or her home loan obligation can avail the advantage of housing loans.

Let us take a look at home loan eligibility criteria and documents required for home loans from HDFC home finance limited.

Home Loans from HDFC Home Finance: 

HDFC home finance limited is a leading non banking financial company offering home loans to a large number of projects across the country. HDFC limited offers housing loans for existing freehold properties as well as on flats, bungalows and row houses from developers including properties in existing or proposed co-operative housing societies. HDFC home finance is one of the most popular non banking financial companies for housing loans offering easy repayment options. HDFC home finance limited has collaborated with Bankbazaar.com offering lucrative interest rates for housing loans with instant approval and quick online submission.

Home Loan Eligibility:  

Home loans from HDFC home finance limited and Bankbazaar.com are available for both salaried and self employed individuals having a decent loan repayment capacity. Housing loans are available for both Indian citizens as well as NRIs between the ages of 21 years to 65 years. The individual filling for a housing loan must have a good credit score from CIBIL. BankBazaar.com offers a housing loan eligibility calculator tool allowing users to check for their eligibility criteria for home loans.  The amount of home loan that can be availed depends on the cost of the property. HDFC home finance offers a home loan to the tune of 80% of property value in case of loans less than Rs. 20 Lakhs and up to 85% of the property value in case of loans higher than Rs. 20 Lakhs.

Documents Required for HDFC Home Loan: 

HDFC home finance requires basic documentation check before housing loan approval. The documents required for HDFC home loans include the following:

·         Duly application form with latest photograph,

·         Address and identity proof,

·         Latest salary slip for salaried individuals

·         Proof of business for self employed individuals.

·         Salaried persons also need to submit form 16 with their latest salary slip.

·         Self employed individuals must submit their business profile for housing loan approval.

·         Self-employed individuals would be required to submit income tax returns both for self and business for the last three years.

·         Both salaried and self employed home loan borrowers need to submit their last six months bank statement. 

·         Self employed individuals must attach bank statement for both self and business.

·         Processing fee is taken through cheque that must be submitted along with the home loan application form.