Your guide to choosing the right home loan for you

With the property rates in India touching the skies, the only way for one to own a home is by getting house loans. It’s a practice as old as time to buy property as investment and also to take loans to purchase new property. Years ago, our ancestors would take loans from the wealthy men in the village to expand their businesses and provide for their families. Today, that practice has been polished and now we can take home loans from banks, in a sophisticated, organised and official way.

Most people today, prefer to get their home loan online. This is because, like almost everything else, getting a home loan online is easier, more convenient and you can also explore more option in a one place than is possible for you to do in person. You can also find the best housing loan interest rates online and find the loan that suits your needs the best.

The processes of getting a home loan, housing loan tax benefits and choosing the right home loan can be a very daunting task, especially for someone who is a novice at finance matters, hence here’s a guide that will help you choose the right home loan for you.

1.   Eligibility: To get home loans you need to first check your eligibility. Salaried people usually find it easier to get home loans, but that does not mean that self employed people never get them either. If you can provide enough proof of income to satisfy your loan provider that you will repay the loan then your loan will get sanctioned. Another thing is the amount of loan you’re eligible for, this is based on your income, assets and your repayment capability.

2.  Housing loan interest rates: This is perhaps the most important thing that you should know and understand before you apply for a home loan. Housing loan interest rates are of two types, fixed and floating. A fixed interest rate is where you pay interest at the same rate throughout the term of your house loan. A flexible interest rate is when your interest is subject to market changes and can fluctuate due any change in the market.

3.  CIBIL Score: Your CIBIL or credit score is a very important factor to take into consideration when applying for a home loan. When you borrow or even apply for a loan you bank takes in to consideration the your credit score which includes your credit status, your spending habits and your income.

How the Union Budget has brought relief to Housing Loan Borrowers

The Union Budget for 2018 has been announced and it has brought some relief for those with home loans. This budget has brought with it a number of tax benefits on home loan. This has come as quite a relief for tax payers and has made it a little bit easier for people to become home owners. With financial year winding down, you’re probably wondering how to save income tax. You should also know whether, after paying your Income Tax for the year 2017-2018, it will still be a feasible option to buy that new flat you’ve had your eye the whole year.

Investing in property in India has always been a great way to ensure that you get heavy returns. But with the property rates always soaring, home loans are the only way one can afford property here. Now, the Income Tax Act already has some provisions and tax exemption on Home loans. Like the Section 80C where you can claim upto Rs. 1,00,000 as a deduction for repayment of home loan. But has this year’s Union Budget brought any more relief to home loan borrowers? Let’s find out.

As per this year Union Budget, those who have availed homeloans before April 2016, and are stuck in the older base rate regime, may get cheaper. The RBI has decided to "harmonise the methodology of determining benchmark rates by linking the Base Rate to the MCLR or Marginal Cost of Funds based Lending Rates with effect from April 1, 2018". 

The RBI, in a bid to reduce the burden of home loan interest rates on the borrowers, had introduced a Marginal Cost of Funds-based Lending Rate (MCLR) system with effect from April 1, 2016. This was done due to the limitations of the base rate regime. With the introduction of the MCLR system, it was expected that the existing base rate-linked credit exposures would move to the new system. This effort was taken after huge amounts of funds were deposited into banks during demonetization drive in India. 

Banks and NBFCs have cut their home loan interest rates by as much as 50 basis points. This makes a huge different in the amount of EMIs and the number of EMIs borrowers have to pay. This benefit will mainly affect those who have acquired a home loan after April 2016, but others can avail of its benefits too, by opting for a home loan balance transfer.

If you were waiting for the Union Budget to find out if it offers you any new housing loan tax benefits then you will not be disappointed.

Why you should get a Top-up Loan for you Home Renovations

Buying a new home is a big moment for anyone. But after living in a new home for a while, a new home can seem a little boring. You can always do it up with a little renovations, but to make any changes you need to spend money and that can be difficult when you’re already paying off home loans. To make it easy for you to keep your home as good as new, banks have introduced home renovation loans. 

A home renovation loan can be taken as a top-up to your house loans or can be taken by itself. When you take a home renovation loan as an add-on, the interest is added to your home loan interest rates. This way you don’t need to pay separate EMIs for two loans. This loan is great home finance tool, it can help you keep your home looking as good as new.

If you wish to avail a top-up loan for your home renovations here’s everything you have to know about it.

1.  Eligibility: Top-up loans can be availed only by someone who has an existing house loan. There are other preconditions too that you need to fulfill before you become eligible for such a loan. Here are some of the criteria that are taken into consideration.

•  Minimum period: You need to have started repayment of your housing loan and paid interest for a certain period before you are eligible for your home loan. This period may differ from bank to bank.

•  LTV limit: Loan-to-value (LTV) is the amount you’re allowed to borrow on your existing housing loan. The LTV ratio is fixed at 80-85% of the present value of your property. 

•  Tenure: The tenure of top-up loan runs concurrently with that of your home loan. So if you have 10 years remaining for your home loan repayment, your top-up loan tenure cannot exceed the remaining term. 

2.  Benefits: The first and foremost benefit of a top-up loan for home renovations is that you don’t need to manage multiple loans when you get a top-up. The top-up amount is simply added to your existing loan amount and the top-up loan interest rates are also paid through a single EMI. There are no restrictions on the usage of this amount. You can use it for whatever you want, however you want.

3.  Other uses: If after a few years of paying interest on you house loan you have a big expense coming that is related to your business or family, you can opt for a top-up home loan, instead of going for a personal loan.

Advantages for woman home loan applicants

If you live in India right now or are an Indian citizen, then let us tell you that there couldn’t be a better time for you to invest in property in this country. The real estate market is rife right now and with all the cash inflow that the banks saw during the PM’s demonetisation drive, they have decided to slash interest rates significantly on home loans. But if you’re a woman seeking a home loan in this country then you’ve got an added advantage. There are a lot of schemes and subsidies exclusively available to women seeking home loans. Here are the benefits that women receive on applying for a housing loan.

1.      Lower Interest Rates: Home Loan Interest rates are a huge deciding factor when it comes to choosing a home loan provider. People usually choose their loan provider on the basis of who’s offering them the lowest interest rates. Since a housing loan is a huge amount, even a slight variation in interest rates can make a huge difference. Woman applicants usually get lower interest rates or interest subsidies on their home loans. But these are applicable only when the woman is the sole or primary applicant for the home loan.

2.      Lower Stamp Duty Rates: The stamp duty rates for new property are decide by the state government and differ from state to state. In many states the stamp duty for women is lower than that for men. Women usually receive a concession of one or two percent on stamp duty while purchasing property. This makes a huge difference to loan amount borrowed. For example, it could mean a straight price cut of Rs. 2 lacs for a house that costs Rs. 1 crore.

3.      Higher Approval Chances: Women who are primary applicants for a housing loan are more likely to get their loan sanctioned than men. This does not mean that a bank or NBFC will overlook their other criteria for women. They will still study their eligibility and credit score, but it is a common perception that women are more likely to repay their loan on time and are more reliable and hence their applications are more likely to get approved than those of men.

4.      Special Schemes: Like banks offer special account facilities for women, they also offer special schemes when a woman is the sole or primary applicant for the home loan. In addition to these some developers and builders also provide certain time bound financial schemes for women to encourage them to invest in property. 

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Why Home Loan Application get Rejected

While preparing your home loan application you think about everything. You do your research; you check your credit score, the documents required for home loan. But do you think about why, despite doing all the necessary things, your loan application might still get rejected?

With the disposable income of the working class increasing day by day and property providing a great investment opportunity, the number of people applying for home loans is ever increasing. The A lot of times, despite being in a good credit space, having a good stable monthly income and doing everything else right, your home loan application may still get rejected. 

Here are a few uncommon reasons why that might happen:

1.    Builders today, have tie ups with banks. If the builder you’re seeking a property from, is not in a tie up with your bank or isn’t approved by your bank, your loan may get rejected. It’s a good idea to check with your builder about which banks he has got approvals from.

2.    A builder may figure in a bank's list of approved builders, but a specific project launched by him may not have been approved by the concerned bank. In addition, there are likely to be cases where particular phases of a project may not have bank approval. So before applying for your home loan it’s extremely important to check with your builder about all these approvals.

3.    In the case of resale property, if the buyer and seller mutually decide on a price for a property and the buyer seeks a loan, the bank or loan provider re-evaluate the price of the property and if the value is lower than the price decided by the buyer and seller, the loan stands a chance to be rejected.

4.   Defaulters are blacklisted along with their properties by banks and housing finance providers. If you happen to live in a house that has been blacklisted your application may be rejected.

5.      Your job stability is extremely important when you apply for a loan. Some banks even insist that you need to be employed with a concern for at least three years to be eligible for a loan.