Looking to Switch to a Cheaper Home Loan? Look Closer

It’s commonplace to refer to new home loans in the market just to understand and cross-check if you’ve currently got a good deal on yours. Switching to a new home loan while maintaining the same EMI but a lower rate of interest can reduce tenure of payment. If you are stuck at a high rate of interest, moving to a new home loan could be the perfect option for you. However, switching to a more attractive offer might not be possible because of several reasons:

• Lending norms have changed significantly over the past few years: Banks and NBFC’s are under strict instructions to reduce funding percentage so if you have borrowed 85-90% of the property cost earlier, switching to a loan where 75-80% is allowed will pose a problem. A loan with higher percentage funding could be a major disadvantage.
• Fluctuating real estate prices: If your property is under-construction the market value might have shot up and the 85% funding that you had received stands to be 75% or lesser now! The property will be of no consequence to the new lender unless you have received possession. So, you will fall short if they consider the ‘agreement value’ to take over your loan which is true of most cases.
• Irregular repayment: It goes without saying that if you have a bad track record with your previous lender it won’t help your case. Never mind the reasons for late repayment like change of address or any disputes.
• You are under a fixed rate loan: One isn’t aware that pre-closure penalty ranging from 2-4% and service tax levied by lenders is waived off for home loans however it isn’t applicable for fixed rate loans.
• You have laminated your property’s registered deed: Unfortunately, this could go against you as lenders do not accept laminated deeds for mortgage.
• You have a guarantor in your loan: Having a guarantor could ruin your chances of switching to a new loan as he/she might not oblige again or the new lender may not have a policy of accepting a guarantor.
• You have obtained funding on stamp duty and registration charges: Funding on statutory charges like stamp fee and registration duty isn’t allowed by the RBI anymore and banks might stay away from taking over loans where these costs have been considered.
• The timing is wrong: Switching in the initial years of your home loan will ensure that you get a better deal as you pay higher amount towards the principal part at the end of the loan.
• Change in profession: If your professional status changes from ‘employed’ to ‘self-employed’ then lenders will require at least three years of business community proof and the absence of a regular monthly income could severely hinder your chances of getting a new loan.
• Loss of the original deed: Although a rare occurrence, not having the original deed is a no for most lenders and they might refuse to take your loan on board. 
  Low Interest Rates: State Bank Of India has cut it's interest rate twice this year. So, you can avail SBI Home Loan at lowest interest rates.
  
  

How to Save Money on Home Loans?

Taking a Home Loan is one of the biggest financial decisions in life. It is often the first step towards building your own nest. It is very easy to get carried away and not take into consideration some of the important factors while taking a home loan. If you keep these things in mind then you can save money and also clear your home loan at the earliest possible.

Lets us understand how to pay off home loans faster:

• Re-examine your financial situation: Before taking any measures to pay off your home loan faster, first do a self check of all financial investments. Look at the short, long and medium term investments made and make sure that none of these are getting affected by the loan payment. The surplus amount of earnings left after meeting other financial goals should be directed towards payment of the home loan.

• Change EMI and save interest: Before choosing an Home Loan EMI option that is lower, think twice. Even if you increase your monthly EMIs by a slight amount, there is a chance that you will have to pay a lesser interest. This in the long run will put more liquid funds in the hand and will also help you pay the loan amount in a shorter span of time. You can choose Bankbazaar's Home Loan EMI Calculator to calculate Home Loan EMI for your loan amount.

• Consider partial payments: Whenever you have surplus funds in hands after receiving a bonus or increment, redirect those funds towards payment of the loan. Most banks and financial institutions allow this. This is one of the most convenient methods to clear loans in a speedy manner.

• Budget other expenses: When you have a loan in hand, make it the first priority to clear the debt. If not, the interest rate will keep on adding up and it will become a financial burden that leads to a lot of frustration and emotional stress. This will affect your other financial goals and also make it difficult for family members. So cut down on luxurious spending, expensive holidays and splurging for while and direct those funds towards the loan instead.

• Make a bigger down payment: It is always wiser to choose to make a huge downpayment to cut down on interest rates. The higher the down payment, the lesser the interest rate on the loan availed and vise versa.

• Take a loan for a short term: Though this may sound overwhelming in the beginning, it is always better to take a loan for a shorter duration. This will help  you pay off faster and also help save a considerable amount of money that will otherwise go out of the window as interest.

Apart from all these measures, it is also important to weigh all the pros and cons even before taking a plunge and going for a home loan. Compare all bank interest rates and choose one that is best in the market. Also, if you are a regular and long-term customer of a bank, make sure you negotiate and ask for a lower interest rate. Most banks will offer these kind of discounts to loyal customers.

Things to Consider Before Transferring Home Loan

If you are a home loan borrower, you must have seen other banks asking you to transfer your loan to them to gain benefits such as Longer Tenure, Lower Home Loan EMI, lower Home Loan Interest Rates etc. Transferring home loans means that the pending loan amount that you have with one bank will be transferred to another bank. In this case, you will be repaying the pending amount and continuing your loan with the new bank.

Transferring home loan from one bank to another is not a bad idea, but borrowers must be aware of all the pros and cons related to it. Home loan borrowers should take into consideration different factors before they decide to transfer their loan to another lender.

Things to Consider:

• Total Outflow – You should calculate the total loan amount that you have to pay back to the bank before you decide to transfer your home loan. Calculating the total outflow will help you compare the difference between the repayment amounts of your current and new banks. The new bank may reduce your EMI by increasing the tenure, but you must remember that in this case interest will keep adding on your outstanding amount. It is advisable to increase your EMI amount and clear off your loan sooner to save money on interest. If you are already paying a higher EMI to your current bank and are not struggling for cash, then you might not want to transfer your loan.

• Charges – If you take a home loan, you will have to pay various charges besides interest such as processing fee, legal charges, stamp duty, etc., to your lender. Before deciding to transfer your home loan to another lender, you must take into consideration all the charges (including interest) of the new lender and compare them with the charges of your current lender. Some banks charge a percentage of the loan amount as processing fee, some have a fixed amount while there are others whose processing fees is dependent on the occupation of the applicants. Also, if your current bank finds out that you are transferring your loan to another bank, it might increase the closure charges.

• Collateral Security – If you had provided a collateral security to your current bank while taking the home loan and have already repaid a huge part of your loan, then do not offer the complete collateral again to the new bank. It does not make sense to offer a collateral, the value of which is double your pending loan amount. You should offer a lower amount as collateral or ask the new bank to lower down the interest rate.

• Loan Terms and Conditions – Before you sign any loan agreement, you must read the terms and conditions of that particular loan. In case of loan transfer, you should read and compare the terms of both the banks to understand the pros and cons.

• Allied Account – Banks generally ask their borrowers to open a savings account with them when they apply for a loan. If the bank to which you wish to transfer your loan asks you to open a new account with it, then you should first find out the benefits and charges of that account. Also, if you use the current account of your current lender for all your banking needs, then you would be their premium customer. Premium customers enjoy extra benefits and services are provided to them quickly by banks. You should think carefully if you really want to lose this comfort and switch your loan to a new bank or stay with your current bank.

• Other Offers – Some banks try to attract customers by offering them extra benefits along with home loans such as credit card, insurance, etc. Before agreeing to transfer your Home Loan to another bank to avail such offers, you must consider if you even need them or not. Also, you must read the terms and conditions of such offers before accepting them.

These are some of the things that you must consider before transferring your home loan to another bank. Do not get attracted by offers such as low interest rate, free credit cards, insurance, etc., easily. Research well and choose wisely.

Insurance While Refinancing a Home Loan

Home loans are possibly the biggest liabilities to a family. The Equated Monthly Instalments (EMIs) on these home loans are one of the biggest constant expenses to a family’s income. Therefore, many families look at ways to reduce this expense and one of the most popular ways to do so is by refinancing a home loan, also known as, home loan takeover. A home loan takeover is a situation in which a bank takes over a loan, possibly at a lower interest rate. The main reason for refinancing a home loan is to get a lower interest rate. There are many changes that come about as a result of refinancing a home loan and as most banks provide home loan insurance with your home loan it is imperative that you understand what changes take place to the insurance policy in case of a loan takeover.

Insurance on Home Loan During Refinancing of an Existing Home Loan

Home loan takeovers can give you a lower interest rate or a higher loan amount. Let us analyse what happens to the insurance on the home loan in both of these scenarios.

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Scenario 1.

A homebuyer, after taking a home loan and after paying the EMIs for a few months decides to change the bank that is financing the loan. The new bank will take over the loan from the former bank after receiving a sanction letter from the former bank. The new bank will assess the property and value it, if the value of the property remains unchanged the bank will finance the outstanding amount of the loan. The insurance required, therefore, will remain the same. The homebuyer can choose to continue with the same insurance policy as the insurance company of the previous bank is a separate legal entity to the bank, the bank is an agent for the insurance company. The homebuyer will just need to inform the insurance company about the change in the financier. However, if the homebuyer would like to change the insurance policy he/she is free to do so.

Scenario 2.

A homebuyer decides to refinance an existing home loan via a different bank because it is offering a lower interest rate, but after valuation of the property the bank concludes that a higher loan amount is required, therefore, the previous insurance coverage will be considered insufficient. The bank will request the homebuyer to get a higher insurance cover for the home loan. The homebuyer still has the choice to continue with his previous insurance policy, but will need to increase the amount of cover he/she has on it. The homebuyer will need to inform the insurance company about the change in financier. The homebuyer is free to change the insurance policy if there is a better suited policy for the home loan.

Scenario 3.

A homebuyer decides to refinance an existing home loan because he/she has found a bank that is providing a lower interest rate. But the existing home loan has the insurance premium added to the EMIs. In such cases banks will request the homebuyer to change the insurance policy on the home loan.

Image Source: BankBazaar

Other Important Pointers.

•Homebuyers should look into the real differential rate while refinancing a loan. Sometimes banks have a refinancing fee, documentation charges, etc. for refinancing loans. For a small drop in the interest rate, these expenses might actually increase the total expense of the refinanced home loan.

•Homebuyers should try to pay the insurance premium separate to the home loan amount, as it is easier to track EMIs on the loan.

•Keep an eye out for refinancing options as banks continuously have different offers on various different products offered by them.

•Homebuyers should try to negotiate the interest rates with their existing loan banks so as to avoid the paperwork and other formalities of refinancing a home loan.

4 points to consider while taking a home loan

The amount of home loans taken against property right now is valued at Rs.2.5 trillion, and that amount is on its way to becoming Rs.5 trillion by 2019, with a 22% projected growth in the next 4 years. If you’re planning on taking one of these, here’s four things you should know:

Interest rates and tenures. Home loans and loans against property are secured loans. This means you have to mortgage your property with the lender in order to get one, thus considerably reducing the risk level of the bank or NBFC that’s giving it to you. A reduced risk means lower interest rates, of between 9% - 15%, depending on a lot of factors including your current employer, income, CIBIL score and market value of the property pledged. You can have tenures as low as 5 years and up to even 30 years depending on your earning potential, loan amount required, stability and patience.

Loan amount. Banks and NBFCs typically only give you between 50% - 65% of the market value of your property as a loan. Lenders consider your repaying capacity as the difference between your income and current EMIs, and decide how much you can pay back on a monthly basis after interest and in the tenure you choose. Loans can be sanctioned from Rs.2,00,000 to a few crores depending on your ability to repay and the tenure you want.

                                           Image Source: https://goo.gl/Jl4hKV

Charges. Lenders take a sizeable chunk under what’s called a “one-time processing charge” which can range from 0.50% to 5% (in addition to a 14% Service Tax) and can be entirely avoided depending on your negotiating and offer-leveraging skills. Processing charges are sometimes deducted from your sanctioned loan amount. Another common charge is the “pre-payment” charge, which is levied if you wish to clear off your loan before the tenure ends. There are also charges in the form of penalties which will be charged if you don’t make payments on time or default on your loan, which vary between lenders but are generally in the range of around 3% - 8%. These penalties hurt you in multiple ways, as they will also negatively impact your CIBIL score. Stamp duties and other charges are levied as per state laws.

  Documents required. When applying for a home loan or a loan against property, you’ll need the following documents: Photo proof of identity. Proof of residence. Proof of income through salary slips (for the last 6 months) or bank statements. Form 16. Income tax returns. Profit and loss account statement (for self-employed persons). Taking a home loan is as dangerous as taking any other kind of loan. If you miss payments and become a defaulter, the bank will take your property and levy crippling charges and penalties on you. Choose wisely, and ensure you have a regular income and sufficient funds to repay your loan EMIs as and when they become due. Shop around, better deals are around the corner. Try the eligibility calculator and home loan comparison tool on BankBazaar.com to find the best deal for you.

Deepika Padukone Signs On as Axis Bank’s Brand Ambassador

Out of 18 private sector banks in India, Axis Bank ranks third (with ICICI and HDFC a few steps ahead). With a huge trade track of around 12,000 ATMs and 2,400 branches in the country, it witnessed a phenomenal growth in a span of 20 years. This is certainly inspiring. Popular media houses like Economic Times and The Brand Equity have awarded Axis with the ‘Most Trusted Brands’ and ‘Most trusted private sector bank’ respectively. Never one to shy away from experimenting, Axis bank has roped in Deepika Padukone (no introduction necessary!), to whip up a special cocktail, which would bring in that pep factor.

Why Deepika?

This question can be answered with only another question. Why not? A popular face, an envied career graph with only blockbusters to her credit and the exuding coolness – perfectly in sync with the bank’s energy and their brand slogan of ‘Badhti Ka Naam Zindagi’ or ‘Progress On...’. The actress who has amazed everyone with her jaw-dropping performances is indeed the perfect choice to endorse Axis bank home loans . She said that role of a bank in any individual’s progress cannot be ignored and it is a great honour to be associated with a bank as reputed as Axis.

Campaign Design

Axis bank’s home loan endorsement is designed by Lowe Lintas + Partners, which is one of country’s biggest, incomparable and most sought-after marketing company. The philosophy of progress, according to them, should be multidimensional and universal. They maintain that progress is futile if it is not holistic. And this is why all the related ads highlight Axis’ legacy as a consumer centric bank. Yes, definition of progress differs from person to person. In fact success and all that excess all come down to happiness one derives out of it. Axis ad campaigns capture this spirit beautifully.

Overall mood of the Ads are kept pleasant and relatable. Goes to show that a good ad needn’t ram the brand name down the viewer’s throat, yet it leaves a lasting impression.   

Gauri Shinde, the woman behind (ahead!)

As a reputed ad and movie maker of the time, Gauri Shinde is known to have explored the idea of progress from unconventional angles in all her previous works (English Vinglish, Tanishq Ad). A dab of emotion that comes with success is carefully etched in. And this is what makes her Axis bank ads too exemplary.

Axis bank home loans

They say ‘Home is where the heart is’. Thanks to the mounting property prices, owning a house (albeit small) is becoming a distant dream for many. Even if one manages to build a house, the life-sapping interest rates prevents him/her from sleeping peacefully in their ‘own’ house until all the mortgages are paid off, which can take years.

Axis Bank offers their customers reasonable yet flexible house loans with competitive interest rates and nominal processing fee. ‘Accommodating’ every budget, requirement and taste, one can easily find the most suitable home loan, be it at a fixed or floating rate.

Comparison of HDFC and ICICI home loans

A home of one’s own’ remains one of the few aspirations of every Indian customer and very often than not, a home loan offers them an easy way to finance this inspirational purchase.

When it comes to home loans, there are many banks and housing finance companies that offer loans on easy interest rates and repayment tenures.

HDFC Home Loans:

HDFC, being an early entrant to the area of home finance is by far the largest housing finance company, having helped finance 4.9 million homes over the last three and half decades. They have 366 offices servicing about 2400 cities and towns of India.

HDFC offers a range of housing loan ranging from purchase/construction of new/resale homes, plot loans, home extension to premises for working professionals. They also offer loans to non-resident Indians.

Being a company dedicated exclusively to housing finance, HDFC scores by charging a reasonable rate of interest and a flat processing fee. They also offer a faster processing time for their home loans.

HDFC offers the facility of pre-approved loans which lets the customer knows his eligibility prior to selecting a property to purchase. 

ICICI Home Loans:

ICICI Bank is India's largest private sector bank with total assets of Rs. 5,946.42 billion at March 31, 2014 and profit after tax Rs 98.10 billion for the year ended March 31, 2014. ICICI Bank currently has a pan-India network of 3,845 Branches and 12,012 ATMs.

Entering the home loan segment in early-2000s, the bank has made tremendous strides in advancing home loans. This year, the bank’s home loan grew by 25%over last year.

ICICI bank offers preferential rates of 10.10% to its women borrowers whereas for men it is 10.15%. The bank also doesn’t charge any legal verification fees from its customer if the project is pre-approved.

ICICI Bank also provides insurance cover on its home loans.

In addition to home loans, both the lenders also provide loan against property which allows customers to unlock the value of their immovable assets like houses, plots and buildings.

Both the lenders provide the option of fixed and floating interest rates to their customers and the option to switch from one to another against payment of some fees.

Both lenders also offer the facility to customers to pre-pay the home loans.

Tax Savings on Home Loans:

Indian home loan customers can save tax under various provisions of the Income Tax Act by availing home loans. If both spouses are working and are co-applicants, they may gain from such tax deductions.

A customer can save up to Rs 1 lakh on the principal and Rs 150,000 on the interest of the home loan by way of taxes.

Both HDFC and ICICI facilitate such tax savings by readily issuing home loan statements to their customers and building tax calculators on home loan components in their marketing materials/websites.

Conclusion:

Though both banks offer reasonable interest rates, easy documentation and faster processing time for home loans, ICICI bank may be slightly advantageous for women customers with its preferential interest rate offer of 10.10%right now.