Blog #Home Loan

There are certain factors that we need to consider before availing of a loan. 

1. The interest period
2. The flexibility in repayment
3. Customer-friendly service 
4. Experts, knowledgeable people who know what they are doing when you ask them queries. 

Based on this, you can conclude by choosing which bank to take your loan to.

The eligibility criteria for applying for a home loan is: 

1. The applicants for the above-mentioned home loan should be in the age range of 18-70 years. There are some banks that have different minimum ages for salaried and self-employed people.
   
   
2. The net monthly income earned should be more than 25,000 /-
   
   
3. If the net monthly income ranges from 25,000-40,000/-, then the applicant can be eligible for the loan if the EMI of this loan does not exceed 50% of the income.
   
   
4. For people who are having a net monthly income that is greater than 40,000/-, then they would be eligible for loans if the pre-existent and current EMI does not exceed 65% of their income.
   
   
5. For people who are earning a regular salary, timely salary credit is essential for loan eligibility.
   
   
6. The maximum loan tenure for a home loan can be up to 35 years, that is, until the individual turns 70 years at the maturation period. Some institutions offer lower tenure periods as well.
   
   
7. Adding the name of another working family member as the co-applicant can increase the chances of getting the loan. One such bank that offers some of these features is Axis Bank under the Axis Bank Home loan.
   
   
8. Other extended family members or friends cannot be taken into consideration as co-applicants.

How do we get to know or determine if a home loan is good for us?

You can decide which loans work the best for you and meet your needs and expectations, but you also need to check for these factors. They are: 

1. We need to check if it is covering your need to take a loan for your home.
   
   
2. We need to check if you would be able to pay that interest monthly along with your other expenses.
   
   
3. We need to have the required surety to provide to the bank to avail of this loan.
   
   
4. We should have a stable job.

These are some of the factors that need to be considered when it comes to home loan and be kept in mind while applying for any other kind of loan.

How do we know if the home loan that we are applying for is safe for us?There are two basic things that you should cross-check before deciding on availing of a loan for your safety.1) You have to decide first if you want a home or a home loan? What if you need money immediately and it takes time to process the loan? What if the owner of the land wants the money as soon as possible? You need to think about it 2) Are you in a stable job that would be able to handle paying for interest and your other expenses?

Conclusion: 

Home loans are one of the safest and the most secure forms of loans available. It is built on the trust the customer has in the bank and vice-versa. It can do you good if you cross-check the factors and analyse exactly why you need a home loan and how you are going to pay it. If you are clueless and just take a home loan and are suddenly not able to pay it, it works against you.

Also read this: Getting An Online Home Loan 

The rules apply to both lending companies and investors who borrow money to invest. These guidelines are also created by the RBI and are updated on a regular basis based on economic factors.

General guidelines for the borrowers and the lenders: According to RBI guidelines, borrowers who meet the eligibility requirements, have established their repayment capacity, and have a CIBIL or credit score of 750 or higher may apply for a home loan. Borrowers must also provide all necessary documents, including personal and income tax returns, as well as sign a loan repayment agreement.

General guidelines on LTV: The maximum amount a borrower can borrow has been increased by the RBI. Under the new rule, borrowers will be allowed to borrow up to 90% of the property's real value. The overall LTV ratio is 80 percent for loans of more than 30 lakhs but less than 75 lakhs. If an individual wants to take out a home loan to buy a home worth 75 lakhs or more, the maximum LTV is 75 percent. So these are the basic things you need to look after.

Guidelines on prepayment charges: Home loans are long-term assets that can last up to 30 years, and the borrower is solely responsible for paying the interest on the principal amount using any means available. The interest rate can vary from one lender to the next, but if the loan is paid off early, the financial burden may be reduced. In accordance with the most recent home loan laws and regulations, the RBI waived prepayment fees. When interest rates are floating, lenders are barred from enforcing penalties for early repayment of home loans. Prepayment penalties ranging from 2% to 5% have previously been accepted by lenders.

Guidelines on home loan balance transfer: A home loan balance conversion allows a borrower to move from a high-interest loan to a lower-interest loan. As a result, a borrower will default on an existing loan and replace it with a new one that includes the unpaid principal. Borrowers will turn to a new loan without incurring penalties because prepayment fees have been waived. However, this is only true for home loan with variable interest rates. When it comes to fixed home loan interest rates, lenders can charge a prepayment penalty that ranges from 1% to 3%. Individuals thinking about taking out a home loan should consider purchasing home insurance to protect their family's financial future if they pass away before the loan is paid off.

Although the RBI does not need this information, it is advised to ensure that the borrower's dependents are not evicted if the loan is not repaid. If you take out a home loan from a lender like Deutsche Bank Home Loan, for example, you'll want to cover your family in the event that you can't repay the loan, so home loan insurance is a good idea. To meet a short-term financial need, you take out a loan. In fact, no one spends a lot of money these days because everything takes time and money to repair, and a home loan will help you reach your goals while putting less strain on your wallet.

If you have a high CIBIL score, you might be in a unique position to negotiate loan terms, including the interest rate, because lenders are more likely to accept loan requests from borrowers with high CIBIL scores. As a result, if you want to avoid rejections, keeping track of your credit scores on a monthly basis is important. A home loan is one of the most important loan terms because no one has a large amount of money to put into realizing a dream of owning a home, and it is unrealistic for a middle-class man to build his dream mansion on his own. Keeping track of your CIBIL scores, on the other hand, is a good idea so you know where you stand if you ever need a loan.

Also Read:- How to use a Home Loan as an asset? 

The Indian Overseas Bank, or IOB, was initiated in 1937 to help with overseas and foreign exchange banking. IOB is now one of India's largest public-sector financial institutions. It offers lending services such as home loans at a low-interest rate of 7.45 percent and higher. As a result, when looking to buy or build a flat or home, people can turn to this financial institution. Indian Overseas Bank offers qualifying customers housing loans with interest rates starting at 7.05 percent. It is worth your consideration because it has a maximum loan repayment period of 30 years and a processing fee that begins at 0.50 percent of the loan amount, among other benefits. 

Features

• The interest rate on an Indian Overseas Bank home loan starts at 7.05 percent.
• Processing fees of up to 0.53 percent are charged by Indian Overseas Bank, with a minimum of 8,900 and a maximum of 13,350.
• The term of a home loan will vary from 5 to 30 years.
• The lowest EMI per lakh on a home loan from Indian Overseas Bank is Rs.669 per lakh, with a low interest rate of 7.05 percent and a 30-year loan term.
• On floating rate loans, Indian Overseas Bank allows prepayment of home loans with no penalty.
• Customers who have taken out a home loan with Indian Overseas Bank have given the bank an average rating of 2.5 out of 5.0.

Eligibility Criteria

• Individual applicants must be under the age of 55 at the time of their submission. If the claimant is a legitimate heir and joins as a co-applicant, this condition is extended to 60 years.
• Individuals or members of cooperative societies in a community are eligible.
• Salaried employees should have at least 2 to 3 years of experience in a permanent position.
• Individuals who are self-employed should have worked in the industry for at least three years.

Fees and charges

• A Processing Fee of up to 0.50% of the loan amount is levied.
• Prepayment Charges - 
  • For Individuals: No charges
  • For others: 2% of the prepaid amount
• Documentation Charges - 
  • Up to Rs. 2,00,000: No charge
  • More than Rs.2,00,000/- to Rs.10 lacs: Rs. 500
  • More than Rs.10 lacs to Rs.1 crore: Rs. 750
  • More than Rs.1 crore up to Rs.10 crores: Rs. 2000
  • More than Rs.10 crores: Rs. 5000

EMI calculator

The EMI for a Home loan at the Indian Overseas Bank is calculated using the formula,

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

Where,

• P refers to the principal loan amount
• R refers to the interest rate applicable
• N refers to the tenure length in months

A  IOB home loan EMI calculator is a user-friendly online tool that can help to estimate the EMI value if the loan metrics are entered. The credit number, interest rate, and tenure are the three metrics. A home loan calculator shows an EMI number based on these entries after all three values have been entered.

The interest rate on an IOB home loan varies from 7.05 percent to 7.30 percent. The interest rate on an IOB housing loan varies depending on the loan amount and product selected. The loan application will be subject to an upfront fee for processing. It costs Rs. 263 per lac for loans up to Rs. 5 lacs and Rs. 351 per lac for loans above Rs. 5 lacs. You can check on the status of your home loan application by calling your relationship manager or going online. For getting an Indian Overseas Bank home loan, you can either apply online or visit your nearest branch. A joint IOB home loan can be used to add co-guarantors from your immediate family.

Must Read:- Is Home Loan good for us? 

You will realize your dream of owning a home with the help of a home loan. You don't have to put your savings and assets at risk, nor do you have to put other critical financial goals on holds, such as your children's higher education or retirement. The loan comes with a range of benefits and features.

However, before applying for a home loan, you should consider all factors:

All financial institutions, as well as non-banking financial firms, offer housing loan schemes. You should apply for a home loan after assessing your eligibility to meet your needs.

Housing loans are multi-purpose loans that can be used to buy a new residential flat or building, construct a new home on a plot, renovate an existing home, or extend an existing home.

With the help of a Home Loan balance transfer service, you can refinance your current home loan to another bank that provides better interest rates or loan conditions.

Through a top-up loan, you can borrow additional funds to supplement your existing home loan for personal or business purposes.

Fixed and floating interest rates?

The term "fixed-rate" refers to a mortgage rate that does not change over the life of the loan. The floating interest rate fluctuates over time. Floating interest rates are the best choice. If you take out a 20-year home loan, the interest rate will be higher because you will invest more even though EMIs for short-term home loans are more affordable.

One of the most significant points in the home loan process is choosing a lender. It would be best if you had a lender who can protect you from mishaps and headaches.

When selecting a choice, keep the following points in mind:

1. The interest rate on offer.

2. Home loan processing fee.

3. Additional programs.

4. Policies on prepayment.

5. Testimonials from customers and a background check.

Contact several banks and lending institutions to see if they can fulfil the home loan eligibility requirements and provide less exhausting services.

Financial Documentation: If you apply for a bank loan, such as an SBI Home Loan, you will be asked to submit paperwork for verification. When submitting documentation for a home loan, you must be truthful. KYC records, ITRs, paychecks, and bank statements are all necessary pieces of paper.

Making a Down Payment: It would be best if you made the down payment on time. The cumulative amount of the down payment is either 10% or 20% of the total loan amount. Your home loan application will be denied if you do not make a down payment. To prevent any hassle, have your down payment sum ready.

If you've mastered the fundamentals, you'll need to be ready with the required documentation and specifications for your home application to be approved. It is preferable to seize the opportunity to obtain the highest possible prices. When you finance your home, you must be compliant with your home loan payments; otherwise, mistakes will cause problems, and you can face difficulties in the future.

What Is Your Credit Score?

You must be knowledgeable about your credit or CIBIL ratings. If you are applying for a home loan, this CIBIL score will help you determine whether you are eligible or not. If your credit score is above 700, your home loan application will be accepted faster. Otherwise, if it is less than 700, you can focus on improving your credit score. You may apply as a co-applicant if your credit score is low. On your credit score, timely payments will help you build trust and improve your credit score.

Insurance for Home Loans: Insurance is similar to a safety net or a safety net scheme. If the owner, or the person who borrowed money for a house, dies during the loan term, his or her family members have to pay the unpaid debts. Through purchasing home loan insurance, you can alleviate the financial strain on your family in the event of an unfavorable circumstance.

Also Read:- Home loan for Unemployed 

The different kinds of loans are personal loans, home loans, education loans, gold loans, vehicle loans, agricultural loans, overdrafts, loans against property, loans against insurance policies and mutual funds, cash credits, etc. 

1. Personal loan: is considered one of the most expensive forms of loans because of its interest rates being slightly higher than the others. However, it can be used for various personal reasons and can easily be availed if the necessary documents have been produced.

2. Home loan: is the most flexible form of loan because it has lower interest rates and is extremely affordable. It helps people in putting a step forward towards reaching their goal to their dream house. They operate under a home loan EMI system. Several banks offer various products under the home loan.

3. Education loan: Many children have aspirations and dreams of going outside their homes; they would want to explore the world, they would want to go to universities at one corner of the world and study. What is stopping them? But an education loan helps these students reach new heights in life.

There are 2 ways in which one can avail of a home loan. Those are:

1. Online method
2. Offline method

However, the basic process of applying for a home loan is:

Step 1: You have to go to your nearest bank or fill in the application form for the required loan and the bank of your choice. You have to make sure that whatever information you are filling in your application form is accurate and there are sufficient documents. You would have to pay a Home Loan Processing fee.

Step 2: CIBIL Score Check. After going through your application form, it is the bank’s duty to assess your credit score, which is also known as the CIBIL score. If you have a decent CIBIL score of 700 and above, you are eligible to apply for the loan.

Step 3: Submitting the documents asked for. These include bank statements, tax returns if the applicant is self-employed, identity proofs- aadhar card, PAN card, etc. and passport size photographs.

Step4: After the submission of all these documents and forms. The bank assesses the applicant’s background thoroughly before approving the loan. If they feel the applicant meets the eligibility criteria set by the bank.

How do we decide on whom to borrow the money or from whom to take the home loan? The answer is quite simple. There are a few factors that need to be considered before deciding on who your lender is going to be. 

Offering lower interest rates- If they offer low-interest rates when compared to everyone else in the market offering the same product, then this could be the right choice of a lender that you are going to make. If you want to check affordable loans, you could check out Axis Bank Home loan. 

Lower processing fees- so some banks or lending institutions have a minimum payment that you are required to pay for them to process your application form for the loan. Faster services- At the end of the day, we just want our work done first and as soon as possible. So one of the most important factors that should be looked at when looking for a lender for your loan should be fast services.

Conclusion: These are everything that one needs to know before thinking about applying for a home loan and in general need to know about a home loan.

Once you take the route of a home loan, it becomes a long-term obligation extending up to 25 or 30 years, during which the instalments (loan amount plus interest rate) need to be paid. Since this is such a long period and with life's uncertainty, it is expected that the family is concerned about the transfer of responsibility for the loan because of any unforeseen and unfortunate event like the death of the borrower or financial inability to repay the amount due to unemployment or loss in business. Therefore it becomes necessary to have an insurance plan for home loans to manage such incidents by insuring loan amounts for your HDFC home loan. When the borrower dies, the insurance firm pays the remaining loan amount. Thus, the deceased’s family does not need to worry about the non-payment of the loan when the loan insurance is taken.

Insurance on a home loan acts as a safety belt for the family if the sole earner meets with an eventuality. A home loan insurance plan can be bought while availing of the home loan. It is valid throughout the loan period. Since it is not compulsory to get insurance for your home loan, it expires once the amount is repaid. It can help the borrower reduce his burden of monthly instalments and the home loan processing fee if he/she suffers a significant loss in business or loses his job. The home loan Protection Plan (HLPP) kicks in during such scenarios, and the family can claim the money in the policyholder's name. This money is equivalent to the remaining amount of the home loan that needs to be paid to the lender and saves themselves from losing ownership of the house.

Some of the key characteristics and benefits of a Home Loan Insurance plan are -

• The insurance provides the remaining loan amount lump sum that can be used to repay the loan.
  
  
• The insurance policy can expire if the borrower does a home loan balance transfer or s restructuring the loan tenure.
  
  
• If the borrower decides to close the home loan earlier than the tenure, the policy ends.
  
  
• The nearest of the kin or the beneficiary mentioned by the deceased policyholder gets the lump sum.
  
  
• The borrower also has access to tax benefits under various sections of the Income Tax Act.
  
  
• If the policy is upgraded to premium, specific medical issues like disability or chronic illness can also be covered and adjusted in the insurance amount. In this case, the sum is not provided as a whole. Instead, it is paid on an annual basis.
  
  
• The Home Loan Protection Plan does not include deaths by suicide, war or due to natural calamities.
  
  
• The borrower can convert the insurance premium into the monthly EMI for his/her home loan.

There is no specific type of home loan insurance provided by the firms. There are at least three different types of insurance plans that the borrower can buy -

1. Level Plan : In this insurance plan, the coverage of the amount remains the same throughout the loan tenure.
   
   
2. Reducing Cover Plan : This is analogous to the floating rate method to calculate the home loan interest rate. The coverage and remaining loan amount keep decreasing simultaneously.
   
   
3. Hybrid Cover Plan : As the name suggests, it combines both the Level Cover Plan and the Reducing Cover Plan. The coverage remains constant in the first year of the loan tenure. It starts decreasing as the loan amount reduces with time.

Conclusion :

One key feature of HLPP is that even if the borrower has not paid any premium for the insurance so far, his family will be eligible for obtaining the outstanding amount for the loan. It is a great way to counter the economic liabilities of the borrower's family, providing more comprehensive coverage and flexible tenure.

Home loans are considered one of the most affordable services in the financial markets, but there are undoubtedly exciting things that one must know if they are or if they will avail a bank home loan soon.

Home loans are loans where banks and other financial institutions provide financial assistance to the borrowers in loans who want to get the house of their dreams. Home loans not only provide financial support but also help in enhancing the dignity of an individual. Having your own home is seen in India as a sense of achievement, and it provides different respect to the societal status and the well being of an individual. That is why the home loan is considered a significant service by the banks and financial institutions as they know the sentimental value of a home attached to a person.

Some of the interesting facts about home loans are -

• Home loans are available at very low home loan interest rates. If we compare home loans with other loans such as gold loans and personal loans, we will see a vast difference in them. While gold loans and personal loans are much more expensive than a home loan with minimum interest rates going to 8%,9% and sometimes above 10%, a home loan is available at an interest rate of as low as 6.65%. Many lenders offering their services, including TATA Capital home Loan, provide the best in class rates of home loans in the market.

• The highest home loan interest rate ever went up to 18% in 1981 when the country faced an economic crisis. This rate was the highest ever recorded rate of home loan interest. 

• Many people don't know it, but paying extra on your loan can reduce the tenure of the loans. Home loans are to be repaid in the form of EMI, and that is primarily because the total value of the home can not be refunded at once. If done extra at the time of availing, home loan repayment is more likely to reduce its tenure, passing the house ownership quickly to the borrower once the total payments are made.

• Home loan payments can be automated. There are two systems- Fixed rate of interest and floating rate of interest. The borrower can choose any of the above. While in a fixed rate of interest system, the rate of interest remains the same no matter what and in a floating rate of interest system, the rate of interest changes as per the market conditions.

• One of the best things about home loans is that they do not require any down payments to be made. This proves very helpful from the borrower's point of view as they can start using the loan amount without making any significant payment in the introduction. The charges are to be made in the form of EMI later on.

• One of the most talked-about factors while making a home loan or any other loan is the credit score. A credit score measures the reliability of a person before providing any credit, and almost all banks use it to verify before giving any credit to anyone. A credit score of 750 or above is essential before your home loan application gets approved. Not only this, but with the help of a home loan, one can improve their credit score too. By timely and regular payments of home loan EMI, the credit score gets impacted positively.

• Self-employed finds it a little difficult to avail of a home loan. As they get hit by a two-headed sword when they try to show less income to save on Income tax, but at the same time, a steady income is required to avail a home loan. So maintaining a proper balance sometimes becomes a little hectic for self-employed and people in business.

• It is not required to open up a bank account with the lender before providing home loan services. Still, if a borrower does open up a bank account with the lender, the banks offer various additional benefits and discounts.

Conclusion -

Home loans are a significant part of the portfolio of any bank or financial institutions. Home loan demand is all set to rise in the coming years as repairs and renovations are an ordinary expense for a home which is also a service offered in the home loan agreement.

Must Read:- Home Loan Insurance