Avail the benefits of the Pradhan Mantri Awaz Yojana

In a move to ensure that more and more people can fulfil their life-long dreams of owning a home, the Prime Minister of our country announced the Pradhan Mantri Awas Yojana, in the beginning of this year. This scheme is specially designed for the lower and middle income groups. This is an interest subsidy scheme that has been named as 'Credit Linked Subsidy Scheme for Middle Income Groups - CLSS (MIG)'. As per this new subsidy, middle-income groups with incomes in the eligible range will get a subsidy on their interest rate of three to four percent.
This scheme will ensure that more and more people are eligible for home loans and can fulfil their wishes of owning their own homes. Here’s what you need to know about this CLSS scheme and eligibility.

1. People whose incomes fall in the range of 6 lacs to 18 lacs are eligible for this subsidy under the CLSS.
2. People whose housing loans were approved and those whose home loan application was in review since 1^st January 2017 are eligible for this subsidy.
3. Peoples who have an annual income of 12 lacs are eligible for a subsidy of four percent on their home loan of up to 9 lacs. People who have an annual income of 18 lacs are eligible for a subsidy of three percent on a home loan of 12 lacs according to the Prime Ministers’ address on the eve of New Year.

Here are the income slabs for the CLSS eligibity under the Pradhan Mantri Awas Yojana.

1. People with an annual income of Rs.6 lacs and below can avail of loan of Rs.6 lacs at an interest of 6.5% for tenure of 20 years.
2. People with an annual income of Rs.12 lacs and below can avail of loan of Rs.9 lacs at an interest of 4% for tenure of 20 years.
3. People with an annual income of Rs.18lacs and below can avail of loan of Rs.12 lacs at an interest of 3% for tenure of 20 years.

Here’s how this scheme will affect home loan interest rates.

1. The interest subsidy of four per cent under CLSS (MIG) will bring down EMIs of borrowers by Rs. 2,062 per month and Rs. 2,019 per month on a housing loan of Rs 9 lakh and Rs. 12 lakh respectively.
2. The total interest subsidy accrued on these loan amounts will be paid to the borrowers up front in one go. This in turn will reduce the burden of EMI on the user.
3. The tenure of these loans has been specified as 20 years or as preferred by the borrower, whichever is lower.

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Five Essential Things to do When you Take Loan Against Property

It’s an age old, time test practice to take out a loan against property. Property is said to be the best investment and people have often use their own homes as guarantees or as a mortgage.  Loan against property is preferred by many because this way you can get a higher loan amount with the benefit of lower EMI. Loan against property interest rates are lower than those of personal interest rates. You can also get a longer tenure on your loan against property, than you can get on a personal loan.

Recently, Crisil said in a note that the amount of loans taken against property is set to double to Rs.5 trillion by 2019 and it is expected that the number will grow by 22% annually in the next four years. There are also emerging signs of a build-up in risk as competition intensifies, Crisil noted.

Loan against property has a lot of benefits and for that many people choose to opt for it, so if you’re considering opting for a mortgage loan here are some things you must keep in mind.

1.   Always opt for a short tenure: Loan against property gets you a long tenure of almost 15 years or more to pay back. This one of the benefits of this type of mortgage loan but it also means that you pay more EMIs thereby paying back much more than you owe.  So always opt for short tenure for your loan against property.

2.   Always insure large loans: When you take out a large loan like a loan against property, it’s always advisable to buy insurance so that in case of any unfortunate circumstances at least your family is don’t have to face the burden of loan repayment. Banks offer term insurance along with large loans so that they at least cover the loan amount in case something was to happen to you.

3.   Read and understand: All loans come with a lot of terms and conditions. Read all the documents attached to your loan agreement carefully and sign them only on understanding them thoroughly.

4.  Replace large loans: If you have too many high cost loans you can replace them with loan against property. Loan against property can be used to consolidate all your outstanding loans. It is a good idea to close your costly loans at the earliest.

5.   Make all payments on time: Being late with your EMIs can affect your credit score adversely. Make sure you pay all your EMIs in time to maintain a sound credit score.

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Why you need to opt for an NRI home loan ASAP

One of the best investment opportunities for non-resident Indians (NRIs) is property. And now is perhaps the best time to invest with the Indian real estate market booming. Both the banks and the government are offering a helping hand to NRIs by offering a NRI home loan at the same rates as they apply to resident Indians. But getting home loans for an NRI in India isn’t the easiest thing in the world.  A lot of documentation is required and the government has very strict regulations for when it comes to NRI home loans. However, in recent times the Reserve Bank of India has relaxed some of its policies, thereby making it easier for NRIs to fulfil their dream of buying a home of their own in their country.

If you’ve been wanting to invest in property in your home country, there cannot be a better time to do it. First off, most banks have the same rate of interest on their home loans for NRIs as they do for resident Indians. In a few cases the interest rates may be a little higher, given that these loans have higher risk factors as compared to those given to residents.

The prerequisites for a person applying for an NRI home loan is that she/he should have worked in a foreign country for over a year. In the case of self-employed people or for those who run their own businesses this requirement is extended to three years. The rules for self-employed NRIs are slightly stricter than those for salaried NRIs. It is easier for a salaried person to get an NRI home loan, than it would be for a taxi driver or small business owner.

The main documents that you need to have if you want to apply for an NRI home loan are your passport, proof of residence, education qualifications, your PIO card, work permit, your latest salary slips, appointment letter of your current employer and bank statements of at least six months. These are the basic requirements, banks may ask for added documentation as proof but they are subjective to the banks.

The minimum income for the applicant to be eligible for an NRI home loan is different for different banks but the on an average, one must have an income of 30,000 USD or 35,000 DHM (for people residing in the UAE).

If you’re an NRI, this is perhaps the best time for you to invest in your country. So what are you waiting for? 

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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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Everything you need to know about the Pradhan Mantri Awas Yojana

In his much-awaited address to the nation on the eve of the New Year, the Prime Minister of our country announced the Pradhan Mantri Awas Yojana for the middle-income groups. This is an interest subsidy scheme that has been named as 'Credit Linked Subsidy Scheme for Middle Income Groups - CLSS(MIG)'. As per this new subsidy, middle-income groups with incomes in the eligible range will get a subsidy on their interest rate of three to four percent.

The Pradhan Mantri Awas Yojana is mainly focused on home loans for the middle-income groups. Here’s who is eligible for the subsidy under this scheme:

1. People whose incomes falls in the range of 6 lacs to 18 lacs are eligible for this subsidy under the CLSS.

2. People whose housing loans were approved and those whose home loan application was in review since 1st January 2017 are eligible for this subsidy.

3. Peoples who have an annual income of 12 lacs are eligible for a subsidy of four percent on their home loan of up to 9 lacs. People who have an annual income of 18 lacs are eligible for a subsidy of three percent on a home loan of 12 lacs according to the Prime Ministers’ address on the eve of New Year.

Here’s is how home loan EMIs and interest rates will be affected under the new scheme:

1. The interest subsidy of four per cent under CLSS(MIG) will bring down EMIs of borrowers by Rs 2,062 per month on a housing loan of Rs 9 lakh and interest subsidy of three per cent would lower the EMI by Rs 2,019 on a loan of Rs 12 lakh, if the normal housing loan interest rate is taken as 8.65 per cent.

2. The total interest subsidy accrued on these loan amounts will be paid to the borrowers up front in one go. This in turn will reduce the burden of EMI on the user.

3. The tenure of these home loans has been specified as 20 years or as preferred by the borrower, whichever is lower.

Under the guidelines of this scheme, preference will be given to women. Widows, single working-women, persons belonging to scheduled castes and scheduled tribes, backward classes, differently abled and transgender people will be given more preference.

Non-banking finance companies and micro finance institutions are also recognised under this scheme in order to ensure that maximum number of people can benefit from it.  

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How to calculate your Home Loan EMI

A big part of getting a home loan is the EMIs that you have to pay for years and years afterwards. Equated Monthly Installment, also known as EMI is the part payment that you have to make to your lender bank every month. Your EMI consists of a part of the principal amount, plus the agreed rate of interest on your loan. The bank gives you a statement, stating the amount to be paid as your EMI; a lot of people do not know how to calculate EMI on their loans. There is no special home loan EMI calculator that tells you how much you have to pay every month. As a result they often feel that their banks are overcharging them.

If you’re one of those people then don’t worry, we’re here to tell you how to calculate your EMI with ease. Let’s take the example of Mr.X, who took a house loan for Rs. 5 lacs for a period of ten years, at the rate of 10.5%. He pays a monthly EMI of Rs 6,747. The bank calculates this EMI for him, and he feels he’s cheated. Here is an easy way for Mr.X to calculate his EMI.

The easiest way is to use a mathematical formula that has been derived to calculate EMIs. The formula reads, EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. The P stands for the principal amount of your loan, R is the interest rate per month and N is the number of monthly installments to be paid.

Another way to calculate home loan EMI is with the help of Microsoft Excel Sheets. The formula used here is called the PMT. For this formula you need three variables, the rate of interest, the number of periods (nper) and the value of the loan. This formula is used universally for this purpose and when in doubt you can use it to calculate your own EMI. There isn’t any scope for error since it’s all done by a computer, which acts as your home loan EMI calculator.

So the next time you have to make an EMI payment, just use these formulas and you should be sorted.  

Fixed Interest Rates v/s Floating Interest Rates

Buying a new home can be a tedious process. You have to first select your dream home, put your finances in order, and then approach a bank or NBFC for a housing loan. If you’re lucky and your CIBIL score is good enough your loan can get sanctioned within days, but before that happens you need to agree upon an interest rate for your loan. Home loan interest rates are of two types, fixed rates and floating rates. Since home loan is usually a long term commitment, choosing between fixed and floating interest rates is usually a tough decision for most applicants.

Let us simplify this process for you, by explaining what both these interest rates actually mean and what they entail.

Banks and non banking financial companies offer both fixed and floating interest rates. Since interest rates are the most important aspect of any loan, getting it right is the key to repay without any financial stress or default over time.

Fixed rate of interest on a loan would mean that the equated monthly instalments or EMIs would remain constant over the tenure of the loan. On the other hand for floating interest rates, the EMIs would fluctuate as per the market dynamics as interest rate increases or decreases.

Fixed interest rates are always set higher than floating interest rates, by 1 to 2.5% at the time of the sanction of the loan. This is can be both and advantage and a disadvantage. Since these rates remain constant you don’t have to worry if there is a hike in the housing loan interest rates due to the passing of a bill or implementation of a new rule, but at the same time if the rates see a dip, there is no benefit to you.

Floating interest rates are usually lower than fixed interest rates although parameters like inflation and current account deficit are used in calculation of base rate by RBI which can mean an uncertainty and different EMI for each repayment or installment for the home loan. This can be difficult to keep track of as each installment may be different.

Both these rates have their own advantages and disadvantages.  Before choosing one, a borrower needs to do proper research as to which one best suits him. 

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