Thursday, 31 December 2015
ADVANTAGES OF TAKING A HOUSING LOAN IN BANGALORE
Buying a house is a big step. It is a source of anxiety, frustration and a huge sense of accomplishment. With the zooming property rates, it is difficult a buy a house through our savings entirely. Almost all of us have a to avail a house loan. Usually, a housing loan is one of the biggest liabilities. Considering the huge amount and the long tenure involved, however your house loan also offers you some benefits. The below write-up highlights the advantages of taking a housing loan.
Sense of accomplishment
Buying a house is one of the biggest financial investments you may make in your lifetime and that's not just because of the sentimental value. The sum that most of us sink into our house does make it the largest component of our investment portfolio.
Capital Appreciation
For each one of us who has seen property prices boom over the last five years, the prospect of mouth watering capital appreciation is the biggest argument for buying a house. Construction costs alone, which account for more than 70 per cent of the flat's cost, have risen at 15 per cent annually in the past decade. Rents too seem to keep up with inflation making a house one of the few investments can shield you from inflation for the long term.
Low interest rate
Buying a house is a long-term decision of over a 10-year period the interest rates may go through several up and down cycles. Therefore, you can be sure that you will benefit from falling rates at some point in the cycle.There could also be situations in which the interest rates fall, allowing you to prepay your loan and own your house. For instance, those who bought property in 1995, at an interest rate of 18 per cent, not only saw interest rates fall dramatically over the next decade, to bottom out at about 7.5 per cent, property prices too appreciated steeply. This works as a double boost to wealth.The best way to manage borrowing costs is by actively managing your housing loans.That’s not as difficult as it is sounds. Banks and housing loan lenders often give new borrowers much better rates than existing borrowers. During the uptick of the interest rate cycle, if your cost of borrowing increases by more than 2 percentage points, pay 0.5 per cent of the loan outstanding as processing fee (conversion charge) to your lender to avail the rates offered to the new borrowers.
Tax Benefit: Interest paid
As per Section 24(b) of the Income Tax Act, 1961 a deduction up to Rs. 1.5 lakhs towards the total interest payable on the house loan towards purchase / construction of house property can be claimed while computing the income from house property. (The deduction stands reduced to Rs. 30,000 in case of loans taken prior to March 01, 1999).The interest payable for the pre-acquisition or pre-construction period would be deductible in five equal annual installments commencing from the year in which the house has been acquired or constructed.
Tax Benefit: Principal Repayment
As per the newly introduced Sections 80C read with section 80CCE of the Income Tax Act, 1961 the principal repayment up to Rs. 1 lakh on your house loan will be allowed as a deduction from the gross total income subject to fulfilment of prescribed conditions.
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Wednesday, 30 December 2015
FIVE PARTS THAT IMPACT YOUR FINANCE SCORE
Finance score plays one of the most important roles in the banks decision to approve or reject your finance card or loan application. Below are the top 5 factors that impact your finance score and how you can manage them to ensure you have a healthy finance history.
Repayment history of existing loans
How regularly you have been paying the due amounts and EMI on your existing loans and finance cards has the maximum bearing on your finance score. A clean payment track record is a sign that you are managing your debt well and will help move your score higher up. On the other hand, any default or miss of payment dues can severely damage your score.
Utilization of existing finance limits
Finance utilization is calculated as the ratio of the amount you owe on your finance cards against the total finance limit that has been sanctioned to you. A high finance utilization rate often indicates that the person is under financial stress and has to lean heavily on his finance lines to meet his requirements. Its is advisable to keep the utilization ratio under 40%. Which is to say on a finance limit of 1 lakh, try and keep the outstanding lower than 40,000.
Enquiries made for loans or finance cards
The no. of new products that you have applied for in the recent past also has a bearing on your finance score. Every time a bank makes a CIBIL enquiry, it is taken as a sign of the customer applying for a new product. Too many such enquries indicate that the customer is under financial stress. This brings down your finance score and hence the chance of getting a loan on further enquries.
Length of finance history
The time duration since you first started using finance also has a bearing on your finance score. The longer the duration with a clean track record the higher your score is likely to be.
Type of finance
The type of loans taken also impacts the score. It is best to have a healthy mix of unsecured loans like finance card and personal loan and secured loan like home loan, auto loan etc.
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Tuesday, 29 December 2015
YOU MUST KNOW 10 HOMELOAN TERMS IN BANGALORE
1) Margin
When you take a loan, the home loan company will not put up the entire amount. It will only put up around 80% to 90% of the cost of your home. You will have to put in the balance 20% or 10%. Even if they go up to 95%, you will still have to put in the balance 5%. This amount is called the down payment or the margin.
2) Resale
This is the term used when you are buying a home from someone who already owns it and is selling it. Hence it is referred to as a resale. It indicates you are not buying a brand new home straight from the builder or buying one currently under construction.
3) Credit appraisal
The home loan company will take a look at a number of parameters before a loan is sanctioned. Your savings, income, age, qualifications, nature of work and work experience are some of them. They will also look into how many loans you are currently servicing. Taking all these issues into account, they will determine whether or not you are eligible for a loan and what the sanctioned amount should be. This process is known as a credit appraisal.
4) Pre-approved property
Many builders get their properties pre-approved by home finance companies. Generally, if a builder gets pre-approved by a number of players, it speaks well of the builder. The home finance company will examine all the legal documentation and approvals. If everything is in order, the builder will get a stamp of approval. Also, the home loan player will view the builder's ability and track record to complete the construction in time. However, this does not mean the home finance company is going to take any action or waive any charges if the construction is delayed. All it means is that the property falls within the legal purview and the builder has a good track record.
5) Equated Monthly Installments
An EMI is the amount of money you will have to pay every month in order to repay your loan. An EMI is an unequal combination of your loan amount (principal) and the rate of interest. The EMI remains constant throughout the repayment period. Let's say you have a five-year loan with an EMI of Rs 4,400. You will have to pay this amount for the next 60 months to the home loan company. To arrive at the EMI, the home loan financier will look at The principal (the actual loan amount). The repayment period (the number of years you will take to repay the loan). The rate of interest. How the rate of interest is computed (monthly reducing, quarterly reducing or annual reducing basis).
6) Disbursement
Full disbursement
A full disbursement is when the entire cost is paid at one go; the home loan company hands over the entire payment to the seller. The cheque is disbursed (it is never in cash) only when you have submitted all the documents required and have made the downpayment. If this is a resale, then the cheque is made out in the seller's name. If you are purchasing your home from a builder, then it is in the builder's name.
Partial disbursement
A partial disbursement is made in stages (not at one go as in the case of full disbursement). When purchasing an apartment from a builder and it is under construction, the home loan company will not release all the payment at one go. The money will be released in stages. For instance, after the completion of the first floor, 20% of the payment will be made. After the completion of the last floor, 40% and so on and so forth. Hence payment is construction linked and disbursed accordingly.
7) Advance Disbursement Facility
If the house is still under construction, then a partial disbursement is made. However, in some cases, the home loan company may be willing to make the entire payment even if the construction is not complete. This is known as an advance disbursement and will occur only in both these instances: i. If the buyer requests the home loan company to do so. ii. If the home loan company is fairly convinced the builder will complete the construction on time.
8) Pre-EMI
When you buy a home that is under construction, the home loan company will not pay the entire amount to the builder. Payment will be made in stages. As construction is completed, payment is released. This is known as partial disbursement. You start paying your EMIs only after the final disbursement. Till then you pay the home loan company a rate of interest on the amount partially disbursed. This interest is called pre-EMI. If your home loan is going to cost you 8%, you will be charged 8% simple interest on payments made till date. This will go on till the final payment (disbursement) is made and your EMIs start. So the longer your builder takes to complete construction, the more you end up paying.
9) Offer Letter
Once the loan is sanctioned, you will get an offer letter stating a number of details. Loan amount ,Rate of interest ,Fixed/ flexible rate of interest ,Tenure of the loan ,EMI amount ,If offered under a special scheme, details of the scheme ,Any other conditions of the loan ,This letter does not mean the loan is yours. It only means the home loan company has agreed to consider you as one of its customers. It will then look into the various property and legal documents as well as value the property you are buying. The loan will only be disbursed once these formalities are complete.
10) PDCs
Post-dated cheques are dated ahead of time and cannot be processed till the date indicated. Generally, the home loan company will ask for a year's supply of cheques or maybe even two or three years. At the end, you will have to replenish the supply for the following years. These cheques will be addressed to the home loan company, signed by you and will state the exact EMI to be paid.
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Monday, 28 December 2015
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