Loan Against Property

Purchasing a house is an indicator of our financial stability. Experts believe that the pursuit of buying a house ends up restricting the buyer’s financial ability. However, very few experts tell that the house can be utilized in a wise manner. This blog posts try to shed light on how you can use your house to achieve your desired financial goals.

Loan against Property

Loan against Property (LAP) can be defined as a form of secured loan received from a bank or a financial institution by mortgaging one’s existing property. LAP can be used for meeting requirements for such as launching a new business venture, its expansion, pursuing higher education, medical expenses, working capital requirements etc.

LAP, which can be applied individually or jointly with other persons or legal entity, can be taken as term loan with fixed EMI or as an overdraft facility. As an OD, LAP gives the much needed flexibility by helping meet the fluctuating requirements of capital in a business. While LAP has no upper cap on the amount of loan to be applied, the amount is ascertained by the banks as per the market value of property and repayment capacity of the applicant. The loan to value ratio normally tends to vary from 45-90% of the property’s market value and can be availed against residential, industrial and commercial property including a warehouse or a land parcel.

We will show how one can avail a LAP

Eligibility  :   Eligibility for the loan is decided on criteria such as age, income etc. The eligibility can be ascertained by checking the same or by visiting the bank’s website.

Choose the right lender    : One can choose one’s lender by comparing fundamental parameters like interest rates, application fees, processing fees and legal charges of different banks.

Application : On selecting the lender, the applicant has to fill the application form providing information about financial assets and liabilities; property details and other personal and professional details.

Documentation : LAP applicants are mainly for the self-employed segment and necessary documents are needed for income assessment.

Checking CIBIL score : The credit history of the applicant is checked through CIBIL score. The CIBIL score goes a long way in whether the customer receives the loan or not.

Technical and Legal clearance : Before approving the loan, the property documents are legally authenticated as the same acts as the security against the loan. Second is the valuation of the property determining the loan amount to be given as collateral.

Issue of Sanction letter : After the credit appraisal, the sanction letter is issued to borrower giving details like loan tenure, repayment options and rate of interest which has to be duly accepted and sent back to the lender.

Disbursal : At the end of all the above procedures, the loan amount is disbursed with the assurance that the same will be repaid within a stipulated timeframe. Businesses can use this loan instrument to make the most of their respective business ventures.

Tips to get a good home loan

You might be dreading the task of taking a loan if you are planning to buy a house for the first time. Worry not! There are a large number of people like you who are also planning to take a home loan; therefore we will give some pointers that can help you buy your home sweet home in a stress free manner.

Searching your options

If you have decided on the house to buy, then you can proceed with your research. For that, you can look for the variety of options that are available in the market in terms of home loans. Rather than placing blind faith on an agent, you can do your own research by keeping an eye on your future. For more information, you can also discuss with respective banks executive.

EMI Calculation

You can calculate your EMI (Equated Monthly Installments) based on the remaining amount from your monthly income after all expenditures. The remaining amount that you have as spare can be the basis for calculating your EMI. However, it would also be advisable to talk to a professional executive to get a second opinion.

Haggle

Try to haggle for some discount by negotiating with your banker as this could help you few thousands. Despite the ROI (Rate of Interest) being fixed by financial authorities, there is always room for some bargaining.

Credit History

While you might think that you are ready to take home loan but the same feeling might not be shared by your bank. To avoid this, you can keep a record of all your previous credit card payments as that acts as proof of you paying your debts on time. You could bargain to have a lesser ROI with the banks if you have a good CIBIL score.

Documents scrutiny

Read all the offer documents carefully before signing on the dotted line as there might be few clauses that can be forgotten. Don’t just place blind faith on the agent and sign. Scrutinize them before signing.

Home Loan eligibility

Before even looking out for a property, buyers like to know the quantum of home loan they are eligible for. While that’s a good approach, there is always more clarity needed to make the final decision. We have attempted to throw light on some aspects to aid your decision making.

Banks or financial institutions determine the home loan eligibility of an applicant based on the valuation given to them by the evaluators they appoint. Your loan eligibility is also derived on the basis of your income, your regular outgoings and repayment track record. Your overall loan eligibility will be restricted to 80% of the agreement value or the valuation as determined by the bank, whichever is lower. Some banks also offer 90% of the agreement value to lure borrowers.

What is the eligibility for joint owners of a property and its tax implications?

To avoid Title issues later, it is a good idea to buy a property in joint name. The joint owner must become a co-borrower when applying for loan. In case the second applicant is also employed, it helps to improve your eligibility in terms of the loan amount. If the loan is taken in joint names and the property is self-occupied, both applicants can claim deduction under Section 24 (B) up to the limit of Rs 2 lakh each as well as claim deduction u/s 80 (C) for repayment of principal portion of the home loan.

 What is the time allowed between plot purchase and construction in case of composite home loan?

While Different banks have different clauses for starting construction on a plot, most banks permit a period of one to two years, within which, the construction must begin. If you construct the house within a year from purchase of the plot, the bank may give you home loan including cost of plot of the land. No tax benefits are available in respect of loan to buy a bare plot or in any year during which the construction is not complete.

 Can you get two home loans on a single property?

It is not possible to get two separate home loans on the security of the same property. However, you can avail a joint loan with a co-applicant if your incomes can justify the higher quantum of loan. You can get the tax benefits on the loan repayments provided you are an owner or a co-owner in the said property.

home loan tips

These days it’s pretty easy to deal in the things which cost more than your income and saving as there are many public and private sector banks as well as financial institutions which are ready to offer you financial support in the form of loan. Personal loan, education loan, home loan, auto loan and business loan are the few most common loans, which banks and financial institutions are distributing among the customers with certain limitations and terms and conditions as well. For each and every loan eligibility criteria and terms and conditions are different however; when it comes to home loan, so you should understand that its totally different ball game. In home loan eligibility is a complicated process because as a lender banks and financial institutions consider your current income, liabilities and assets.

After liberalization in our country’s economy, home loans and other loan have become the norm to own luxury, home and other facilities. These days for home loans demand are rising, but to get your home loan you need to be eligible for that. In the home loan procedure if your mortgage requirement is marginal high than what you are eligible for small changes so you need to increase your eligibility for home loan. Here are the seven golden rules which can help you to increase your eligibility for home loan;

1. Clear other Existing Loans:

Look out and search for personal loans, credit card loans and other loans which you have took in last two or three years and still you are paying that. It could drop you in the red zone when your lender will try to assess your eligibility for loan or credit score. Clear the previous loans, close the loan accounts and collect the loan closure certification and it will keep you safe and ensure that it is updated in your CIBIL credit score.

2. Variable Pay:

Make sure that your income records are displaying that how much variable perks or pay you are earning as the apart of your income in your job. These records will help your prospective lenders to consider your eligibility while calculating your home loan eligibility.

3. Rental Income:

If you have house in your hometown and you are earning rental from that house, so it could add pints in your credit score, however; if your home is sitting idle, so try to lease it as soon as possible. The rental which you are earning from your home is the additional source of income and it can enhance your home loan eligibility.

4. Increase Tenure of Loan:

To increase your eligibility for home loan, you can increase your home loan tenure, but make sure that banks or financial institutions are not increasing it beyond 25 years.

5. Spouse Earning:

If you are married and your spouse is also earning, so it could be added advantage for you and it’s recommended to ass it in your home loan application because it will automatically increases the home loan eligibility. It will be meant that you both are liable to pay the home loan.

6. Take your Time:

Before applying for any home loan, pull out your CIBIL score and look for errors. if you think that there is any negative feedback or error or any mistake in it, so raise a dispute and have a clean CIBIL report. In an attempt to get home loan more quickly never apply home loan with 10 different lenders, first do the market research about home loan eligibility, criteria, term and conditions and last but not least interest rate because there are many lenders which are offering  miscellaneous benefits to their customers.

If you have good CIBIL score than easily you can find lenders who can offer you home loan at competitive rates, for more details you can talk to existing customer of the bank before proceeding with final application. Its better settle with lender which is offering you competent interest rates with easy repayment schedule and good customer’s service. 

7. Consider Step-up Loan:

Step-up loans are the best tool to enhance eligibility for home loan, especially for those professionals who are struggle hard in their initial career, in these loans the possibility of higher rewards are more once they establish themselves as doctor or a chartered accountant. In step-up loans, banks and other financial institutions offer the lower EMI in initial years an once browsers get settle in career, so banks gradually increase the EMI as per their paying capacity.

With right step at right time in your career, you can get your dream home easily.