Indian Bank slashes housing & auto loan rates

Home loans from Indian Bank will now be available at Rs. 935 per lakh and vehicle loans at Rs. 1658 onwards, the bank said in a press release. The cut ranges between 0.10 per cent and 0.20 per cent.

Effectively therefore, a Home Loan up to Rs.75.00 lakh has decreased by 0.10 per cent from 9.65% to 9.55 per cent, while a home Loan above Rs.75.00 lakh will have a new interest rate of 9.75 per cent as against the present rate of 9.90 per cent. Vehicle Loan for New Cars will now carry an interest rate of 9.95 per cent as against the existing 10.15 per cent, the release added.

The Bank has recently formed a dedicated retail wing for processing of loans and hence it said that loans for purchase of plots, top-up loans, loans for furnishingp; home improvement, loans for repairs and renovation will now be very easily available and processed hassle free for borrowers.

Home Loans for Women

Are you a working woman desirous of owning your dream home? Then you have reasons enough to cheer! In India, women are privileged in terms of the schemes and concessions given to them as borrowers of a loan. Especially in home loans, women enjoy greater benefits as compared to their male counterparts.

The financial sector in India as a whole provides special consideration to women seeking home loans as they are generally perceived to be more sincere in paying their dues and less likely to default. Women are offered home loans at cheaper rate of interest by several banks.

One of the most decisive factors while buying a home loan is the rate of interest. Even a small variation makes a huge impact on the EMI (Equated Monthly Installment) that you pay to the lender. Since a home loan is a large chunk of money, allowances on the interest rate helps one save big in the complete term of the loan period. However, it is important here to know that the woman can enjoy benefits of lower rate of interest only if she becomes the primary applicant or the co-applicant in the borrowing. Again, no bank or financial institution will lend to a woman or a man if the credit track record and documentation is not satisfactory.

Some major banks that offer preferential rate of interest to woman borrowers are State Bank of India and ICICI Bank. While SBI offers Her Ghar loan at 9.85 per cent, HDFC has Woman Power home loan at the same interest rate & lends at 9.90 percent for purchase of a plot. The Terms and conditions are similar for both the banks that require women to be the sole or joint owner and first applicant of the property. Any woman who is a resident of India or non-resident Indian can apply for this loan.

ICICI Bank has two options for woman home loan seekers. First, Floating interest rate, 9.85 percent for loans up to Rs75 lakh. And second, for loans up to Rs30 lakh, fixed rate of 9.85 per cent is charged for 10 years and from the 11th year I-Base + 0.10 per cent. For loans between Rs30 lakh and Rs75 lakh, fixed rate of 9.95 per cent for 10 years and I-Base + 0.20 per cent from 11th year.

Although these schemes and offers are not widely publicized by banks or NBFCs, they are usually enthusiastic about lending to women borrowers. In addition, some states in India also provide some relief to woman owners of properties in stamp duty and registration fees.

Choose the right loan for yourself.

Borrowing from a bank or a financial institution is perhaps one of the longest commitments to keep and a systematic approach to buying a loan is thus imperative. Choosing the right home is important but equally important is deciding upon the best loan for your requirement.

In this post, we have attempted to demystify the types of loans to aid you in decision making. The information outlined here will assist you in seeking the right loan for the right purpose.

A home loan can be availed by consumers for purchasing a house – a ready apartment or under construction property. The amount, the interest and tenor of the loan is decided as per the policies of the lender, price of property and the individual’s annual income. The borrower also stands to benefit from the loan with regards to income tax.

 Land or Plot loan:

Now, building one’s own home is not a dream as one can own a piece of land or a plot as a thoughtful investment. You can shield yourself from the rising prices of property. Special land/plot loans come handy in such scenarios. There are, however, only a handful of institutions that provide loans for financing this kind of purchase.

Home construction loans:

Most Indians prefer to procure a plot and design their own independent homes; loans for construction of houses are therefore becoming quite popular. Home construction loans available in the market are varied in nature, giving consumers a range of choices whether to build a whole new house or to finance the construction of a newly acquired home.

Composite loan:

A unique product where the lender finances both the purchase of a plot as well as the construction of your house. The housing finance company will not only provide you with a loan for the plot you chose to buy, but will also take care of the construction costs.

 Loan against property (LAP):

Your property is a valuable asset; you can utilise this property to procure loans for any other important need or emergency like acquiring another asset, business expansion, etc. in this type of loan, the borrower uses the equity of his or her home as collateral. Any residential or commercial property can be kept as collateral for LAP, provided the borrower is the title holder of the said asset.

Home improvement loans:

Bored of seeing the same kitchen, living room, and bathroom or just wish to enhance the aesthetic appeal of your property? Then a Home improvement loan is a clever choice. One can opt for this type of loan for repairs, remodelling of kitchen, bathroom, terrace, installation of energy saving equipment or general improvements on an existing property.

Every lender’s policies on each type of loan vary in terms of eligibility, maximum loan amount, maximum tenure and terms of acquiring the loan. You may be required to do a comprehensive analysis on these aspects before taking the final decision.

Home Loan in 2015

A good price appreciation on your property is undoubtedly the biggest opportunity to gain. Moreover, you can save on taxes, on interest repayments on an ongoing basis. Real estate is among the most complex asset classes and can have an asymmetric payoff during good times. Besides the pride of ownership, purchasing a house is also seen as one of the most effective ways to make money.

After having a dream run for over a decade, residential property prices hit the bottom, almost stagnating in most top cities. This was due to a combination of factors like ample supply, high interest rates on home loans and slow economic growth.

As the price slump continues, a bit of rethinking is advisable. Should you invest or even be holding on to a property? Does it make sense to continue with the existing home loan with a high rate of interest?

In a study of over 5,000 users of BigDecisions.com, Buy or Rent tool across 7 cities in India, between 60% and 80% of them expect a lesser than 10% appreciation per annum in property prices for the predictable future; which is lower than the cost of the loan.
We have listed below, some of the learnings from the above stated study:

• At such kind of expectations of price appreciation, it may take anywhere between 9 & 14 years for a purchase decision to pay off. If the consumer has a shorter time horizon, then it only makes sense to rent the property.
• It may be wise to rent a house in the city one works in (usually one of the larger cities) while buying a home as an asset in a smaller city, where the prices are likely to be lower, making a property easily affordable and the expected appreciation higher. Another way to save is to transfer your home loan to another lender at a reduced interest rate.From the time RBI directed banks to not charge pre payment or foreclosure charges on variable (or floating) interest rate loans, switching to the lender who lends at the lowest cost is a real opportunity for home buyers.

For instance, on an Rs 1-crore loan, you save more than Rs 80,000 per annum if your interest rate is reduced by 1%. This will add up to a total saving worth Rs 16.12 lakh over the entire loan tenure (assuming the loan is for 20 years). How many opportunities to save this kind of money exist today’?
Furthermore, you can top up or borrow the “paid back” amount resulting in the cheapest possible personal or business loan. Considering that your property was valued at Rs. 70 lakh at the time of purchase with a loan of 80% of the value that is – Rs. 56 lakh, after 3 years, it may be worth at least Rs 80 lakh. At this point of time, if you opt for a refinance (loan transfer), considering the outstanding loan amount to be about Rs 53 lakh, the new lender would give you 80% of Rs 80 lakh (existing market price), which is Rs 64 lakh. Even after clearing the outstanding balance (Rs 53 lakh), you would be left with an extra cash of Rs 11 lakh. This money has a cost of 10% annually. Since most business or working capital loans come at rates ranging from 14 to 24%, money at 10% could be extremely helpful.
The ideal approach to save the most is to prepay a certain portion of your loan and reduce the tenure. This will not only reduce the interest burden but continue giving you the same amount of tax benefit. Fundamentally, you can minimise the interest outflow firstly by reducing the amount you owe to the lender and secondly by decreasing the amount of time the money is borrowed for.

However, sometimes, reducing the tenure even at a lower interest rate might increase your EMI but if overall savings is the ultimate objective and you can afford to pay the increased instalment amount, it is totally worth it!

Home loan tips

Contemplating on buying a home on loan? Here are some quick tips before you finalize.

It is certainly tempting to opt for a longer tenure on a home loan as it reduces the EMI amount. However, in a long-term loan, the interest outgo is too high. Let us see how.

Lenders easily offer home loans for 25 – 30 years. According to financial experts, taking a loan is negative compounding. The longer the tenure, the higher is the compound interest that the bank earns from you.

Considering a 10-year loan at 10 per cent, the interest paid is 59 per cent of the borrowed amount. This shoots up to 131 per cent if the tenure is 20 years. For illustration, if you take an Rs 50-lakh loan for 25 years at 10 per cent, you will end up paying Rs 86.3 lakh (or 172 per cent of the loan amount) in interest alone.

Take another case where a young person with lesser income will not be able to borrow adequately if the tenure is short, say 10 years. He will have to necessarily increase the tenure to ensure that the EMI fits his pocket. For such borrowers, the best option is to increase the EMI amount every year aligned with an increase in the income.

Increasing the EMI amount brings down the tenure radically. A bare minimum of 1 per cent hike in the EMI every year can trim off three years from a 20-year repayment term. Supposing that the borrower’s income rises 8 – 10 per cent every year, increasing the EMI in the same proportion should not be very difficult. A 5 per cent increase in the EMI every year will shrink the tenure by more than eight years. A further enhancement of 10 per cent every year would end the loan in just nine years and three months. A little more tightening of   the belt by a 20 per cent increase in EMI every year, will guarantee a debt free life in just seven years!

Loan EMIs

Are you among the people who have been waiting to get the key of their houses from past couple of years? Well Sachin Kala is indeed one such man waiting to start staying in the flat which he had booked nearly 4 years back. According to his builders, he was supposed to get his flat back in December 2013 however looks like the wait might be for more long time. He has already paid about 80% value for worth of the property and this property is nowhere close to completion. The only solace for his is that he is not the only one who is going through this. Most of buyers are going through the same problem across the country. With the builders facing financial problems, properties are not being completed on time leading to huge delay in the completion of the projects. Being cash strapped is causing problems in completing the projects. As per the review of the real estate analytics firm PropEquity, between the years 2011-2014, 3,753 projects were offered for possession in the Mumbai Metropolitan Region and out of these projects nearly 45% of them are still under construction. This problem is severe in the NCR region wherein 856 projects were up for possession and out of these projects, 78% are still incomplete and running behind the deadline. The company saw similar patterns in some of the other cities like Chennai, Bengaluru, Pune, Hyderabad, and Kolkata among others.

Reasons for the delay:

There are many reasons, which can be attributed to the delay in the completion of the housing projects. The reason being, there has been a considerable amount of decline in the demand for residential housing due to constant increasing prices of the property. During the boom period, the developers and builders have highlights so many new launches that they are now facing difficulty to complete these projects. Most of the developers are under financial problems as they have used all the money collected from the new projects towards the projects that are still not completed.

The new hope:

From the buyers’ perspective, they have a new hope in the form of the Real Estate Regulatory Bill. The bill has been targeted towards bringing out balance in the currently chaotic real estate industry and has many clauses favorable to the buyers. For example, the bill has proposed that builders and developers are required to deposit around 50% of the amount that they receive from the customer in a very different escrow account. By this way, they will be able to stop diversion of some of the funds. According to this bill, the buyer will have the complete control over their funds as they will be able to ask the developers to return the complete amount in case of the property not being completed in the promised time. At present approval has been given to the bill and it is ready to be presented in the Parliament.

Influences of delayed projects:

When it comes to a first time property buyer, any kind of delay in the completion of the project and them taking over the flat can cause them to undergo serious financial problems. Most of the times buyers will atleast anticipate a delay of about 10-12 months in the completion of the project however, none would have expected the same to go beyond 2 years. According to the reports on PropEquity, the Mumbai Metropolitan Region has seen an average delay of 25 months in the completion of the projects. The average delay in the NCR region is about 33 months. In simple, the bigger a residential project is, the buyer can anticipate a longer delay in possessing the property. Buyers who took loans to pay for the property and expected the EMIs paid to the bank to replace their monthly rents have now landed into a situation, that requires them to pay all these amounts. According to one of resident from Ghaziabad, it is very difficult to pay both the EMIs as well as monthly rental but they are left with no choice. When it comes to a double-income family, the problem remains the same. The same problem is also for the investors especially the ones who have put money towards their second or third houses. For them investment was about earning through the monthly rentals that would have easily covered up the EMIs they need to pay to the bank. Potential delay in the completion of the project can completely make the entire calculations go downslide. Even though everybody is paying EMIs to the bank, there is no sign on earning the monthly rentals.

Loss of tax benefits:

Any delay in the completion of the project means that you will not be able to avail any tax deductions until the project has been completed. Buyers look of tax deduction of about Rs1.5 lakh, which is towards the principal repayment, and a further saving of tax deduction of Rs2 lakh meant for interest on the payment. However, it is important for the buyers to have the possession on the property within 3 years of taking loan to avail benefits under Section 24. In case the buyer is unable to do the same in the span of 3 years they will end up paying tax for about Rs30,000 a year. The buyers however have one option; they can sell out the delayed property and always invest in ready to move in properties. However, they still have the roadblocks in terms of transfer fees and registration charges. People who have taken the property with the intend of renting it out have benefits as the complete interest is tax free even if the project has not been completed in the 3 years of time.

Avoid delayed projects:

Always have enough information pertaining to the construction project as well as the developers. This will avoid any problems later on. Attentiveness among the customers is the key to avoid many problems in the future. Customers can protect themselves from fraud developers and projects. Keeping a track on the record of accomplishment of the developers also avoid lots of problem in these kind of projects. Referring to online forums will help to learn about these developers and it is important to avoid investing and dealing with new groups and developers.

It is important to ensure that the developers have valid license and government’s approval to run the project. There are many instances where in developers have tried to sell out property even before they have ownership of the land. It is important to ensure that the payment of construction is linked with the stages of project completion. Customers need to ensure that they have clauses of delay in the contract and ensure that the developers do not hike the price of the property.  Never fall prey to lure or other offers which talks about big properties for lesser price.  Carefulness is everything today and especially when there is lot of money involved.

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.

Home loan EMI

Borrowing to purchase an under-construction property? Is all you know about home loans confined to simply paying an ‘x’ amount every month till the completion of the tenure?
Some of you feel joy when the lender offers the ‘facility’ of starting EMIs only after you receive the possession of the property. You believe this is an opportunity to save money and consider this as a ‘flexibility’ that will allow you to start the repayment only after you enter your new home. Caution! You haven’t noticed whether your repayment mode is a pre-EMI or EMI.
Before accepting any proposal from the lender, understand things first.
In the following paragraphs, we shall help you get the clarity. Let’s begin with the basics –

What is EMI?
Equated Monthly Installment (EMI) is a repayment option where you pay both interest and principal to the lender in a systematic monthly fixed amount. The interest payable throughout the loan tenure gets computed over a chart called amortisation schedule. This plan portions the interest and principal in a descending and ascending order respectively.
What is Pre-EMI?
Pre-EMI is the simple interest payable on the principal drawn for the number of days of usage payable to the lender on a specific day of every month. Upon drawing down further amount, it keeps increasing since the interest payable on the principal increases accordingly. This mode of payment can be applied only in case of under- construction purchases as the loan disbursement takes place in tranches.
What are the benefits of opting for either EMI or Pre-EMI?
Paying the EMI directly, that is, both principal and interest from the beginning, it helps you reduce the outstanding principal as well as the tenure from the very first month. If you do not have spare money to start the EMI immediately, you may start paying the ‘interest-only’ on the partially disbursed amount i.e. Pre-EMI.
Who should opt for Pre-EMI?
If you are not comfortable starting to pay off the loan principal right away owing to constraint of funds, you may opt for Pre-EMI. However, it does not necessarily require you to wait till you get the possession of the property; you can switch to the EMI option at any time.
Who should opt for EMI?
Do you have stand-by cash to start the monthly EMI with the purchase of the loan? Then you can start the repayment right away. In this mode, the loan principal repayment starts simultaneously at the same time reducing the unexpired loan tenure.

Can the repayment mode be switched from Pre-EMI to EMI in the mid-term prior to possession?
It is advisable not to wait till possession to start the EMI. For example, you have drawn down 95% of the loan and the final 5% is payable on possession, but the project is delayed by 6 months, you end up paying Pre-EMI (simple interest) on almost the complete loan amount for the additional 6 months, which is about the same amount as the EMI itself. While the acquisition cost shoots up there is no repayment of the principal or reduction in the tenure either! So, switching to EMI mode after drawing down 70-75% is recommended. Although not all lenders allow that, those who allow, won’t initiate it for you. It is wise here to opt for a professional advice.
What is beneficial for you as the borrower?
The borrower himself has to decide what suits him. Nonetheless, when choosing the Pre-EMI mode, the following risks need to be kept in mind-

Some lenders do not allow the borrower to part-reclose the loan under Pre-EMI stage. They ask you to pay installments to the builder instead for a few tranches & won’t let you reduce the loan amount.

Some lenders give automatic Pre-EMI option without confirmation. This is very risky. In the loan application, there is no provision to opt for it and while loan agreement signing either you forget to check or the lender overlooks it.

You get no tax benefit by paying interest-only to the lender; some don’t even issue the interest certificate. If you are paying the EMI from the beginning, you can claim all the interest paid during the under-construction stage in a spread of 5 years, after taking possession. This cannot be done for payment of Pre-EMI in under-construction stage.

Your repayment starts only upon getting the possession. Hence, whatever sum you have paid so far neither reduced your principal nor tenure. If you had opted for a 20 year loan term 5 years ago and paid Pre-EMI for 5 years, then you pay 5+20 years. Some lenders consider this 5 year Pre-EMI term included in the 20 year and amortise your repayment in 15 years, making the EMI amount higher!

Delay in possession bleeds you bad. Meaning if the loan amount was 1 crore and 95% of that is drawn, you pay interest only on Rs 95 Lakh for all the months of delay without a single rupee repayment, for which the EMI could be lesser than Rs 1 Lakh a month, wherein you pay Rs 95,000/- of Pre-EMI unreasonably.

HDFC cuts its Home Loan Rate

HDFC, which is one of the largest home loan provider and private sector bank in India, it cuts home loan rate by 0.20 per cent to 9.9 per cent, as per the reports of Press Trust of India. However the revised rate are applicable for new as well as old or existing both customers. It is expected hat in near future more banks will follow the same path and in result the EMI (equated monthly installments) will come down, where as this is the time of joy for the home loan customers of HDFC.

The home loan rate cut is the wakeup call for several other big banks such as; SBI, ICICI Bank, Axis, and other banks who are major player in home loan industry as they are cutting their minimum lending rate or base rates for the comfort of customers. However, Raghuram Rajan, Governor of RBI urged to all banks to pass the benefits of its repo rate cut to customers.

Whereas; the central bank keep its rate unchanged.

Housing for all by 2022

Mega housing scheme is in the process, which will offer the affordable houses to more than 5 crore subscribers of retirement fund body Employees’ Provident Fund Organization (EPFO). According to The labour ministry it will support the government’s mission ‘Housing for all by 2022′. The ministry is collaborating with housing finance companies, state-owned construction firms such as; NBCC, PSU banks and authorities like PUDA, HUDA, DDA to build affordable houses at a price to be fixed by the Central Government.

According to sources, “In present Labour ministry is preparing such schemes through affordable houses will be provided to the Employees’ Provident Fund Organization (EPFO) subscribers, especially to those who are in the low or middle bracket”. As per the records currently, there are more than 70 per cent EPFO subscribers, who are below the basic wage, which is Rs 15,000 per month. In the note from the Prime Minister’s office, He asked EPFO to promote affordable housing to only its subscribers and use its funds for that specific purpose. As per calculation EPFO can generate 70,000 crore to create 3.5 lakh additional in low cost, if EPFO will deploy 15 per cent of its funds for low cost housing.

Currently EPFO is managing the corpus of Rs 6.5 lakh crore with the annual incremental deposit of Rs 70,000 crore. The labour ministry is so much interested on a scheme under which EPFO subscribers can withdraw their PF deposits to make part-payment of the total cost of the house. Currently, EPFO subscribers can withdraw any amount of money from their PF accounts to buy houses only after contributing for a period of five years in the schemes run by the body. Ministry is also planning to provide subsidy to the EPFO subscribers who are in low-income bracket and this subsidy will help them to avail benefits of other low-cost housing schemes of the central and state government.

According to sources of Financial Institutions, “The housing loan at low interest rates will fall under priority sector lending for construction of affordable houses, whereas; these schemes will be optional for EPFO subscribers because there is no need to provide affordable houses to those who already own one home”. Under the housing schemes, there are three different income categories such as; high income, middle income and low income. Houses and other financial incentives under the upcoming scheme will be offered on the basis of the income of that particular subscriber.

The subscribers will be free to pay the equated monthly installments of their home loan through their provident fund account. As per the sources, under this scheme EPFO may use can use its funds to create a corpus for providing affordable housing loan at low interest rate to its subscribers.