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

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.