5 essential things you need to know before taking a Loan Against Property

Loan against property is an age-old way for lending and borrowing money. It has been done for centuries. Our ancestors mortgaged their homes and land to borrow money for farming, weddings and to educate their children. With time the system of taking loan against property too has become more sophisticated. You can now approach a bank and get a loan sanctioned by keeping your property as collateral.

A mortgage loan can get you a longer tenure and a higher sum. The amount you can get through mortgage loans depends on the size and valuation of the property you mortgage. The bigger the property, the higher amount of loan you can get.

You could use this loan amount at your own discretion. You can use to fund the education of your children, you can use it to fund their weddings, and you can use it to invest in other property, to invest in your business. You can even use to fund a medical procedure too.

Loan against property is the best way to get a loan. The loan against property eligibility is also minimal. You only need to have a good credit score and a property to mortgage. If you need to take a loan and are considering this kind of loan, then here are a few things you should know.

1.  Loan Against Property can get you a higher loan amount for your business or personal needs with the benefit of lower EMI. With easy documentation, speedy approvals and flexible repayment options, getting a loan is easier than any other time of loan.

2.  Loans can be applied for by individuals, either solely or jointly. Owners of the current property, in respect of which the loan is being sought, will have to be co-applicants. However, the co-applicants need not be co-owners. 

3.  To check your loan against property eligibility the lender will check the market value of your property. Banks and NBFCs give only a percentage of the market value as loan.

4.  Since a mortgage loan is a secured loan it is cheaper than personal loan. Mortgage Loan Interest Rates are way lesser than those of personal loans. Today interest rates for personal loans can range from 12.5% to 21% whereas those for mortgage loans are between 12% to 15%.

5.  The processing charge for this type of loan is 0.50% to 3% of the loan amount plus service tax. Service tax is currently 14% of the amount. The processing fee is usually deducted from the loan amount sanctioned to you.

Housing Loans: Refinance House Loans For Home Improvements

Your housing loans can help you get your dream home. You live there for a few years, while still repaying those loans but after a while your dream home isn’t all that your dreamt about. Dreams change, even dreams about you home can change. A house needs improvements at regular intervals, and renovations to keep it looking as good as new. While you’re still paying your housing loan interest, it can be difficult to fund a home renovation.   

An easy way to fund your home improvements is by opting for a home loan balance transfer. Housing loan interest rates are seeing fluctuations lately. This can be attributed to the demonetization drive. With the huge amounts of funds deposited into banks during demonetization in India, banks have reduced their home loan interest rites a great deal.

By opting for home loan balance transfer, you can save on your interest and those savings can be used by you to fund your home renovations. If you’re considering transferring your home loans then here a few things you should know.

1.      Savings is the main reason for transferring home loans. But make sure that you opt for a home loan balance transfer only if the total savings in interest pay-out is substantially higher than the cost incurred while transferring the loan. Usually, the new lender will charge various fees, such as conversion fee, processing fees and administrative charges during the loan transfer.

2.      Transferring your home loan to a new lender is similar to availing a fresh loan, where the new lender will have its own set of terms and conditions. You can use it to re-set your loan EMI and tenure and top up as well. Opt for a home loan transfer if your existing lender is not allowing you to reset the terms and conditions of your loan.

3.      Usually banks and NBFCs provide top up loans to existing borrowers. These are just like personal loans but their interest rates are lower than a separate personal loan. One may require a top up in case of funds required for an emergency or in case of a home loan for renovations. Transfer your loan only if your current provider is not allowing you a top or if the new provider is offering you a better rate.

Transferring your home loan and saving on your housing loan interest can save you the trouble of getting a personal loan.

Loan against property can serve your immediate fund requirement

Loan against property makes immediate funds accessible to you.

●       It is available for salaried and self-employed employees.

●       You enjoy the benefits of adequate loan amount and long repayment tenure.

●       It is economical than a commercial loan and the funds can be utilized for multiple purposes.

●       You can use a simple mortgage calculator.

●       The processing is easy and requires simple documentation.

●       It can be availed anywhere in India, loan against property Delhi, Mumbai, Bangalore or any other city is a secured loan that is availed by mortgaging a self-owned property with the lender.

●       The property can be residential or commercial.

●       Basically, loan against property gives you access to immediate funds by utilizing your property as collateral. Long repayment term along with low Mortgage Loan Interest Rates makes it a great choice.

Let's understand more about this loan that has emerged as a widely opted funding option for many owing to the host of advantages it has to offer.

HIGH LOAN AMOUNT WITH EXTENDED REPAYMENT TENURE

●       You can use the Loan Against Property EMI Calculator to calculate the details.

●       Varying as per the lender’s policies, you can take a loan up to 60 percent of the market value of the underlying property.

●       Also, you can take advantage of the comparatively long repayment tenure (up to 15 years)

●       This gives flexibility and ensures that the EMI is within your reach.

LOAN CAN BE UTILISED FOR MULTIPLE PURPOSES

●       The lender does not restrict the utility of the amount lent.

●       It can be utilized for various purposes ranging from a wedding expense to financing business plans or meeting any healthcare expenses.

●       You can even buy a property or any asset using this facility, which might not otherwise qualify for a loan in its own capacity.

LOAN FOR ALL

●       This facility is versatile and is not only for the salaried but also for self-employed individuals or businessmen.

SIMPLE DOCUMENTATION AND EASY PROCESSING

●       In comparison to other mortgage loans, Loan Against Property has an advantage of minimal documentation and quick disbursal.

ELIGIBILITY

●       In unsecured loans your present income will determine the loan amount.

●       However, in case of loan against property eligibility for the loan amount is determined by the present property value along with the income.

●       In addition to this, age and past credit history of the applicant can also impact the loan amount and repayment terms.

DOCUMENTATION

●       Along with the proofs of identity and application form, address, income proof, ownership documents and a property valuation report also has to be submitted.

COSTS AND REPAYMENT

●       The maximum repayment tenure is 15 years.

Depending upon the lender there may be a processing fee, mortgage loan stamp duty and other charges applicable over and above the interest applicable on the loan.

How a Joint Home Loan increases your Savings

If you are planning to buy your own home, under the Pradhan Mantri Awas Yojana (PMAY) scheme, remember that there are only a few months left for you to gather the amount for down payment, select a good builder, a desirable location, and also the home loan lender.

The recently introduced Credit Linked Subsidy Scheme (CLSS) for Middle Income Group (MIG) is applicable only for a period of one year starting 1.01.2017. Let's understand who all are eligible for the MIG category, who all can apply, how does the subsidy impact the loan amount and how much is the subsidy on home loan.

The middle-income earners

●       The MIG category further comprises of two slabs.

●       The Middle Income Group (MIG) - I include households having an annual income between Rs.6,00,001 up to Rs.12,00,000.

●       The Middle Income Group (MIG) - II includes households having an annual income between Rs.12, 00,001 up to Rs.18, 00,000.

  Cost

●       There is no processing charge for eligible housing loan amount as per the income criteria specified in the Scheme.

●       Lenders can charge the normal processing fee for additional loan amounts beyond the eligible loan amounts for interest subsidy.

The impact

●  The Prime minister awas yojana scheme for MIG buyers might not increase the demand for residential housing to a great extent.

●  The benefit of Rs 2.3 lakh/Rs 2.35 lakh probably won't be that appealing keeping in mind the cost of houses in the urban areas.

● There is a possibility that the government might consider doing away with the area restriction of 90/110 sq mt to increase the demand.

How is the subsidy adjusted?

●  The home loan interest rate subsidy will be credited directly to the loan account of the beneficiaries.

●   This would lead to decreased effective housing loan and home loan EMI.

Loans under PMAY

●  You can avail the Pradhan mantri awas yojana benefits if you wish to acquire a new house from the the builder and even for purchasing a house from the secondary market through repurchase.

●  One could also apply for a loan for the construction of the house. You can also apply home loans online.

●  If someone already owning a home wishes to avail pm awas yojana benefit, there's still a possibility.

●  The government has made it clear that the Mission (Housing for All by 2022) also offers enhancements/incremental housing to the existing 'pucca' house under the CLSS scheme component.

It is imperative to keep in mind that even if you are a first-time buyer it is wise to tread carefully and weigh all the options prior to venturing out to explore the affordable housing segment.

4 Things That will help you Pay your Home Loan even During Financial Crisis

What happens if a borrower is unable to pay his/her home loan EMI? This is a question that arises in the mind of every home loan seeker, but they’re too afraid to know the answer. Getting a home loan is a big step in everyone’s life. But what if, due an unforeseeable circumstance you find yourself in the middle of a financial crisis and are unable to pay your home loan EMIs? Will you immediately be termed as a loan defaulter? The answer is no. The process of becoming a defaulter is a long one. If a borrower is unable to pay his or her home loan instalment once, due to an unforeseeable expense or a financial emergency, the bank will not immediately term him or her as a defaulter. If you miss one EMI the most a bank can do is send you a reminder mail regarding the same. The bank may also call the borrower to ask about when the payment will be made.

The trouble begins if a Home Loan borrower fails to pay his EMI three months in a row. The bank will send him/her, a number of reminder mails and finally a legal notice. This is when the borrower is termed as a loan defaulter. The term can severely affect one’s CIBIL score, making it difficult for them to borrow in the future. If the borrower fails to respond to all of these notices and calls and still fails to clear his/her dues, the bank will send an officer to their residence to affix a notice on their door or even print a notice in the newspaper. In three months after this, the bank will declare the property as a non-performing asset. In two months after that, the bank will take possession of the property and if the borrower fails to clear his dues in six months the bank will auction it off.

No one wants to be in this situation, but the future is a tricky thing and the only thing you can do to arm yourself for whatever it throws at you is to be prepared. Here’s how you should handle your Home Loan EMIs while going through a financial crisis.

1.  Get in touch with bank and inform them about your problems, they may be able to give you some leeway or at least wave off the late charges on your EMI.

2.   Re-negotiate your loan by increasing the tenure, so you can pay smaller EMIs.

3.  Get home loan insurance in advance, so you don’t need to worry about your loan repayment.  

4.  Spend wisely, keep track of all your expenses, avoid unnecessary expenses and save up to pay your EMIs.

Why you Should Explore the Home Loan Top-Up Option

Buying a home and taking a home loan is not just a onetime expense. A home needs a lot of care and work. When you purchase a home, you also need to purchase with it all that goes into that space, from electronics to furniture, to lights and fixtures and even the tiles and flooring. These are not small expenses and a lot of times your housing loan alone is not sufficient to fulfil them. Even if you can afford all these things the first time, they can be a recurring expense. A home needs repair and renovations as regular intervals for it to remain nice and sturdy. And these expenses are not small either.

A top-up home loan is an exclusive option given to home loan customers that gives them the option of borrowing an amount additional to their existing loan. This money can be used for home improvement, repairs or any other thing you many need it for.

Here’s what you need to know about a home loan top-up.

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

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•    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. 

1.  Benefits: The first and foremost benefit of a top-up loan 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. Be it renovation work, a new car or for your business or even healthcare.

2.  Best to opt for top-up loan: If upon buying a new home you require more money to purchase additional parking space, do get some renovation work done or to by something for your new home you can opt for a top-up home loan. If after a few years of paying interest on you Housing 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.

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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