7 mistakes that can ruin your home loan prospects

September, 2018

We look at seven crucial aspects that home seekers should guard against, while availing home loans, to ensure that their borrowing does not turn into a burden in due course

Home loans have become an invaluable tool, for most people looking to buy a home. However, the process can turn into a nightmare, if the borrower commits certain mistakes while applying for the loan. In comparison to other loan products, a home loan usually has a very long tenure and the amount involved is enormous. Therefore, there is no room for mistakes. Given below are seven crucial mistakes that home seekers should be aware of, to ensure that one can avail of and service a home loan smoothly.

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Mistake 1: Not having sufficient funds to make the down payment

Usually, banks provide home loans of up to 80 per cent of the value of the property, depending on the CIBIL score and repayment capacity of the borrower. This means that the borrower should contribute the remaining 20 per cent of the cost, as a down payment. For example, if the value of the property is Rs one crore, then, the bank will provide a maximum loan of Rs 80 lakhs and the remaining Rs 20 lakhs should be contributed by the borrower, as a down payment. The borrower first needs to provide the down payment, after which, the bank starts disbursing the loan. So, it is essential that the borrower is ready with this margin money, before applying for the loan.

Mistake 2: Applying for a bigger loan amount than you can repay

“When financing your home, or any other purchase, consider your current financial situation. Ideally, your EMI outflow should not be more than 30-40 per cent of your income. Do not try for a bigger loan with a higher EMI, on the premise that you are due for an increment in six months. You will be in a fix, if the increment is lower than expected, or if there are additional expenses. Savings are also an area, where you should not cut corners. So, consider your overall current financial health when you borrow,” suggests Adhil Shetty, CEO, BankBazaar.com.

Mistake 3: Selecting the wrong loan product

There are several types of home loan products in the market and the borrower must choose the most appropriate loan product, to get the maximum benefit in the long term. For example, banks offer floating rate home loans, fixed rate loans, semi-fixed rate loans, home loan with overdraft benefits, incremental EMI home loans and so on. The home buyer needs to figure out his/her own requirements and accordingly, select the appropriate loan product, as otherwise, one may land up paying unnecessary charges or find it difficult to repay the loan.

Mistake 4: Taking a loan for a short tenure

Banks generally provide home loans for tenure of up to 30 years, depending on the eligibility of the borrower. There is no prepayment penalty on the home loan. So, if you take a home loan for 30 years and repay it in 10 years, then, you do not need to pay any penalty.

However, if you have taken a home loan with a tenure of 10 years and failed to repay an EMI, then, you may be liable to pay certain penalties and it will also negatively impact your CIBIL score. Hence, it is better to opt for a longer duration home loan.

Mistake 5: Not comparing various banks’ offers

Nowadays, there are many websites, which allow you to compare the home loan products offered by different banks, on the basis of interest rate, charges, penalties, etc. Home loan seekers should avail of this facility, to avoid selecting the wrong loan product, which may put you in financial distress.

Mistake 6: Ignoring one’s credit score, before applying for a home loan

Some people commit the mistake of spoiling their credit score, by not repaying the EMIs for small debts like credit card bill or a personal loan. Once the credit score is spoiled, then, it weakens the chances of getting a home loan. So, it is essential to keep the credit score healthy, if you are planning to take a home loan.

Mistake 7: Not taking insurance to cover risks associated with a home loan

Home loan borrowers should take appropriate insurance cover, to protect their families from financial distress. “In case the borrower faces an unforeseen contingency, illness, death, accident or any kind of tragedy that leads to permanent disability and affects his ability to service the outstanding dues/EMIs, the home loan insurance can help his family to clear off the dues.

“Home loan insurance is important for the borrower, as it ensures that the dependents of the borrowers do not become homeless, in his/her absence or crisis,” cautions Anirudh Jain, business head – insurance, Centrum Insurance Brokers Ltd.

Importance of the loan agreement

Experts point out that the essential clauses of a home loan, are usually in the fine print of the loan agreement but very few borrowers bother to read it and this oversight my come at a hefty price, later. One must read the loan agreement and sign it only if you find it appropriate. Otherwise, ask the lender to make the essential changes, or avoid taking the loan from that institution.

Also read: HOW TO BUY A HOME IN YOUR 20S...

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Source: housing.com

These are the factors that impact how much home loan you will get

September, 2018

While an applicant’s income is the main factor for determining the amount of home loan that he can get, here are some other factors that one can leverage to increase this amount Besides checking an applicant’s eligibility for a home loan, lenders also have certain criteria to ascertain the quantum of home loan that they can grant to the person.

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Income of the applicant

While computing your home loan eligibility, the lender will subtract the EMI on your existing loan, from the amount available for servicing the home loan. Consequently, your home loan eligibility will be based on this reduced amount. Therefore, if you have an existing loan, where the outstanding amount is small, it makes sense for you to prepay the outstanding loan, as this could enhance your home loan eligibility substantially. The incremental home loan eligibility, will be much higher than the outstanding amount on the existing loan.

Age and remaining years of service of applicant

Home loans are generally available for tenures of up to 20 years. However, your age and remaining years of service, could restrict your loan amount. For example, if your age is more than 40 years and your remaining years of service is less than 20 years, your loan eligibility shall accordingly get reduced. For a salaried person, a retirement age of 60 years is taken into account, while for self-employed borrowers, the lenders consider a retirement age of 65 years, for determining the home loan’s tenure.

Availability of co-borrowers

The amount of home loan that you are eligible for will increase, if you are able to add someone, who is acceptable to the lender, as a co-borrower to the home loan application. The lender will pool the income of all the co-borrowers, to determine the amount available for paying the EMIs. Please note that all the joint owners of the property, have to be included as co-borrowers, irrespective of whether they have any separate income. However, a person can also become a co-borrower, even if he is not a co-owner of the property.

Tenure of the home loan

Your home loan eligibility is directly linked to the tenure that you opt for. With the same surplus income, a longer home loan tenure will give you a higher home loan eligibility. As there is no prepayment penalty on home loans and with lenders mostly offering loans under the floating rate of interest, it makes sense for you to choose a longer home loan tenure, so as to have higher eligibility and better flexibility. You can always prepay your home loan partly or fully at any time, in case you have surplus funds.

Also read: HOW TO BUY A HOME IN YOUR 20S...

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Source: housing.com

Bullet train work to start near Thane in January 2019

September 16, 2018

Around 26 villages in Thane district will also have to be displaced for the project.

More than a year after laying the foundation stone of the bullet train project, on-ground work near Thane is expected to begin in January 2019. The National High Speed Rail Corridor Limited (NHSRCL), the executing agency of the 508-km bullet train corridor project, will be procuring boring machines for construction of the underground tunnel. The boring machines will be placed for the sea-bed work in Vikhroli, in Mumbai. Further, the station design of major stations has been prepared by the high speed corridor.

“The undersea tunnel will be major and critical work, which we aim to begin first. The tenders will be floated in November and boring work will begin by January 2019,” said Dhananjay Kumar, spokesperson of NHSRCL.

Of the 508-km alignment connecting Mumbai and Ahmedabad, 155.76-km will be in Maharashtra, 348.04-km in Gujarat and 4.3-km in Dadra and Nagar Haveli.

Around 26 villages in Thane district will also have to be displaced for the project.

The Joint Measurement Survey (JMS) of the land in Thane has been completed and process of land acquisition is likely to start soon. However, the implementing agency continues to face strong opposition in Palghar over land acquisition, as 109.06-km of the corridor will pass through the district.

Prime Minister Narendra Modi and Japanese Prime Minister Shinzō Abe had laid the foundation stone of the PM’s pet project on September 14, 2017.

The work on the underground sea tunnel is critical and had already begun in December 2017, wherein a team of engineers from NHSRCL, Rail India Technical and Economic Service (RTIES) Ltd, and Japan’s Kawasaki Geological Engineering studied the data on the seabed, based on geo-technical surveys. The survey was conducted to understand the structure and depth of the seabed of the Thane Creek in December 2017 and based on the report, the alignment of the tunnel was fixed.

Further, the NHSRCL is also in process of completion of the station designs of the 12 stations between BKC in Maharashtra and Sabarmati in Gujarat.

Station designs for BKC, Sabarmati, Baroda, Surat, Vapi and Billimora are completed; station designs for Maharashtra are going on. According to the proposed exterior, Surat railway station will have a diamond-shaped entrance, whereas the exterior of the Sabarmati station will be based on the Dandi March.

The bullet train stations will have two floors. The first floor will have concourse and the second floor will have two platforms. Meanwhile, BKC and Sabarmati railway stations will be called as the hub and will have four platforms each.

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Source : hindustantimes.com

SC lifts stay on construction activities in Maharashtra

September 07, 2018

Mumbai

The Supreme Court on September 5 lifted its August 31 stay on constructions in Maharashtra.

The stay was imposed as the state government had failed to inform the apex court that it had framed a Solid Waste Management Policy in 2017. The state was also fined Rs 5 lakh for its failure to ensure being represented in court. The first fine of Rs 2 lakh was imposed in July and was to be paid within two weeks. The government failed to do that as well. The second fine of Rs 3 lakh was imposed on August 31. Both the fines were paid off by the government on September 4.

Senior counsel Shekhar Naphade, specially appointed to represent the state government to lift the stay on construction, said the affidavit was filed and the court then lifted the stay. He added that no intervening application was filed.

Rajesh Prajapati, Public Relations Committee Chairman, Confederation of Real Estate Developers of India-Maharashtra Chamber of Housing Industry, said lifting of the ban is great news for the real estate industry. "We were positive the Supreme Court would lift the ban on all constructions in Maharashtra as the policy and rules on solid waste management were already in place."

Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO), said, "Given the proactive manner of working of the administration, I am confident the policy will be implemented in due course. The decision brings relief to home seekers who were faced with the possibility of delayed possession of their homes. Across construction sites jobs are secure and with construction activity continuing stakeholders, including material suppliers, will be pleased that offtake of construction material will continue."

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Source : magicbricks.com

Tips for Landlords: Earn Safe Returns On Your Property

September, 2018

Renting out a property can be a tedious process for a first-time landlord, where even a small mistake can have serious repercussions, in the absence of a proper agreement. Here’s how you can ensure that your property is safeguarded even when it’s rented out

When it comes to giving out their property on rent, owners’ concerns generally revolve around the quantum of rent to be charged, tenant’s ability to pay, queries pertaining to the lease agreement, lock-in period, security deposit, verification tasks and registrations, if any. “Without due diligence, it can become a serious headache and often a nightmare,” points out Santhosh Kumar, CEO – operations and international director, JLL India.

“The most common problems that first-time landlords encounter, include finding the right tenant, delay in receiving rent, misuse of the property by the tenant, tenants refusing to vacate and tenants not paying the maintenance fees (if the rental agreement requires them to),” Kumar elaborates.

LEGAL DOCUMENTATION

Proper legal documentation is crucial while renting out a property. Infringement of property by illegal means, delay or absence in the receipt of rent and unlawful activities owing to lapse in tenants’ background checks, are some of the risks that owners expose themselves to, in the absence of legal documentation, cautions Krishna Gupta, founder and CEO, Popterry.com. “Moreover, without legal documentation there won’t be any means to solve disputes,” he points out.

RENT AMOUNT

Real estate experts opine that the amount to be charged as rent, is directly related to the home’s value. Generally, the rental amount is 0.8 % to 1.1 % of the home’s total value. Other factors that can be considered are, the location of the property (upmarket locations will have higher rentals) and amenities being provided (semi-furnished, fully furnished property). Other external charges, such as maintenance charges, may also be included in the rent.

RENTAL AGREEMENT

“Every rental agreement should be in writing and registered. The rental agreement should specify the terms and conditions of the lease, the monthly rental amount and security deposit. It should also specify who will pay for the utilities, water, electricity and maintenance charges. The purpose of tenancy should be clearly mentioned – whether the property is being used for commercial or residential purposes. If the rental agreement is set to expire and you and the tenant agree to extend the term of the lease for a specific period, then, the extension should be in writing,” says Kumar.

REGISTRATION OF THE LEASE AGREEMENT

Expert suggests that it is important to register the lease agreement, under the Registration Act, to make it legally valid. According to the Transfer of Property Act, lease deeds, with a tenure of more than one year, should be registered. The general practice that is followed in the market, is to enter into a lease deed for 11 months, with the option to renew it when the period lapses, by another 11 months, provided certain conditions are fulfilled. Such leases should also be properly stamped.

Also read: HOME FINANCING OPTIONS FOR NRI BUYERS

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Source: housing.com

How to choose the best home loan repayment option to ensure good financial health

September, 2018

Here are some aspects of home loan repayment which you must take into account to ensure that the repayment terms don’t put any additional burden on your finances.

Buying a house is one of the most significant investments that anyone makes in one’s lifetime for securing one’s foreseeable future. If one plans to avail a home loan for financing one’s ‘dream home’, it becomes extremely important to choose the best loan repayment option to ensure that the home loan doesn’t become a burden with unmanageable EMIs at any point. One needs to carefully compare and contrast not just the interest rates, but also other terms associated with it, such as tenure, loan eligibility and type of interest rate as well as the penalties, if any. All these factors together can impact the total cost of a loan and in turn any borrower’s long-term financial goals and health.Here are some aspects of home loan repayment which you must take into account to ensure that the repayment terms don’t put any additional burden on your finances:

Choosing between fixed and floating interest rate

Availing a home loan often leaves one perplexed when it comes to choosing the type of interest rate. One can opt for fixed rate loans in which case interest rate remains constant during the loan tenure or for floating rate loans where interest rate changes as per changes in the benchmark MCLR rate announced by banks on a regular basis. Banks nowadays are more comfortable offering semi-fixed interest rate loans as opposed to fixed rate loans in which the rate of interest remains fixed for a specified time period, post which it becomes a floating rate loan.

The primary benefit of taking a fixed rate or semi-fixed loan is that it clearly defines one’s loan obligations and the EMI burden as it is unaffected by movement in market rates. Rates on semi-fixed rate loans are the same as that on floating rate loans. However, fixed rates are usually 0.5-1% higher than floating interest rates. Fixed rate or semi fixed rate loans are primarily advisable in a rising interest rate cycle scenario. In contrast, if one wants to make a choice adaptable to the interest rate movements in the economy, it is best to opt for a variable/floating interest rate. These loans become especially attractive in a falling interest rates cycle scenario and the best part is that these loans do not carry prepayment charges, as directed by the RBI.

If one opts for a floating rate loan, it is important to check and compare the past movements in MCLR rates of various banks in response to changes in market repo rate as well as the interest rate reset frequency to pick a bank that is prompt in passing on the benefits of interest rate revisions to their borrowers. If one opts for semi- fixed rate loan, it is important to check the benchmark rate and other terms applicable on the loans when it converts from a fixed rate loan to floating rate loan to ensure that it doesn’t pinch on their pockets at a later date.

Choosing the right loan tenure and EMI to repay

EMI is the monthly amount you pay to repay your home loan and is a function of many factors that includes your age, salary and loan amount eligibility. Home loan tenures usually range from 10 to 30 years, but the tenure must be chosen on the basis of one’s age and repayment capacity.

One’s age determines the prospects and the length of one’s career and its growth graph, which in turn determines their repayment capacity. While someone in their 20s or 30s can opt for a 20-25 year long loan, someone in their 50s or nearing retirement will not get a loan of more than 10-15 years. In case the EMI goes up and lack of funds forces one to seek extension for repayment, the loan tenure can extend beyond one’s retirement which poses a risky financial situation for the borrower as well as the lender.

The second important factor is determining one’s repayment capacity on one’s home loan which is a function of net monthly income or net take home salary. The maximum loan that one is eligible for is up to 90% of one’s property value with a maximum EMI to be capped at 65% of one’s monthly income. A shorter home loan tenure amounts to a high EMI while a longer tenure results in a lower EMI. In case of an unexpected need for funds such as paying off medical bills, education fees etc., one can find it difficult to pay off their EMI and hence, one is better off by choosing a lower EMI and longer loan tenure. In some cases, there is no option, but to opt for a longer tenure loan to ensure that one gets the required loan amount.

Additionally, the return on the investment depends on whether one is availing the loan for buying the house or for making a sale for profit. One is guaranteed better returns on a shorter loan tenure if one’s aim is to secure profit by selling the house. Those with fluctuating monthly income can opt for a home loan overdraft scheme which allows them to deposit or repay any surplus amount they have into their home loan current account and pay interest only on the amount utilised during a period. Overdraft schemes are fairly economical for salaried employees earning high bonuses or self-employed with fluctuating cash flows requirements during the year.

Choosing an apt mode for loan repayment

Last but not the least, to ensure that repayments are done in a timely and convenient manner very month, opt for repayment through ECS linked to one’s salary/personal account or one’s primary business current account. Setting up auto ECS debit instructions ensures timely payments of one’s loan EMI without the hassles of remembering the due dates, avoids the issuance of multiple cheques or cheque bounces due to signature mismatches and reduces the possibility of charges for late payment.

Also read: HOME FINANCING OPTIONS FOR NRI BUYERS

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Source: financialexpress.com