Showing posts with label housing loan interest rates. Show all posts
Showing posts with label housing loan interest rates. Show all posts

Wednesday, January 9, 2013

How Eligibility Calculators help in availing home loans?

Eligibility calculation is one of the important aspects of home loan processing. Banks calculate home loan eligibility of each and every customer who applied for a home loan by taking applicant and co-applicants income into consideration before giving a sanction letter to the customer. A little idea on how this eligibility is calculated will make much difference in the process of home loan.

The process of eligibility calculation varies from customer to customer depending on the income source. If the customer is a salaried customer then the sum of regular components of salary is taken into consideration along with 50% of the variable pay for the calculation of eligibility. If the co-applicant income is also considered then the same principle will be applicable to the co-applicant also. After arriving at a component both the applicant incomes is added and take a maximum of 60% of the salary for the contribution of home loan EMI. If any liabilities are there then the component of their EMI will be deducted from this amount and on the remaining amount the eligibility is calculated by dividing the amount with the per lace EMI component of the home loan interest rate charged for the desired tenure or applicable tenure which results the home loan eligibility.

The Eligibility process is the same for the NRI Salaried also the only difference is the amount is converted to Indian currency before calculating the eligibility. The calculation differs a bit for self employed whose gross income along with depreciation, Interest paid, and remunerations are considered for the calculation and remaining process is same. The calculated eligibility by the bank is final. Liabilities that a customer would like to close to avail a home loan will not be considered as a liability and liabilities below 6 months are also not considered. Having liabilities will decrease the loan eligibility and it is always suggestible to close all the liabilities before applying for a home loan for comfortable repayment of home loan.

Eligibility calculators help you to know how much amount you will be eligible for if you go for a housing loan depending on your requirement. The Eligibility calculators will take all the information about your income and your requirement's then give final eligibility depending on the values provided. The value arrived finally may vary from bank to bank depending on product and tenure considerations.


Monday, December 31, 2012

How to reduce the Interest Paid on a Home Loan?

Every customer in the market is worried about the amount of interest paid on a home loan during their repayment tenure. A blind calculation gives a result of 100% of loan amount is the amount of interest paid on a home loan during the tenure considered if the customer pays the EMI’s for the whole tenure i.e 20 Years. This is a shocking result to every customer because the home loan interest rate looks very low but when calculated it is exactly the same amount of higher amount of loan that we are paying towards interest on the home loan.

If Some simple measurements taken at the time of availing the home loan then we can avoid the huge amounts that to be paid towards interest of home loan. Just follow the stated below before applying the loan

·         Make more margin money payment towards the property
·         Apply for lesser loan amount which will have lesser interest rate
·         Opt for least possible tenure
·         Opt for possibly higher EMI
·         Make part-payments yearly twice at least
·         Go for home loan linked life and General insurance
·         Opt for Interest saver account if available

Let’s see how the above measurement will save the interest on Home Loan. Banks usually give 80% of the property cost as Home Loan, means higher the property cost, higher the loan, Higher the EMI and Higher the Interest component of EMI. For the initial years the Interest component will be higher so to avoid that opt for lesser loan amount, lesser tenure and Higher EMI with which one can save a very good amount on Home Loan Interest and making part payments will be most helpful too as the amount paid will be directly deducted from the outstanding principle of loan account which in turn reduces the interest and the repayment tenure also.

Wednesday, December 26, 2012

How to manage EMI Effectively?

EMI refers to Equated Monthly Installments a key term in all loan products which stands for the loan repayments to the bank. The EMI is calculated by taking the loan amount, Interest Rate and repayment tenure into consideration. All the Banks and Financial Institutions do the calculations in the same manner so the amount will not change from one bank to other. All the EMI are calculated on diminishing rate which is mandatory in Home Loans.

Banks provide the facility of repaying the loan in Equated Monthly Installments which is a combination of Principal and Interest Components. The EMI will have Interest Component higher in the initial stage of tenure and as the tenure goes on the Principal component increases and the interest component decreases. 

The EMI can be increased if the income of the applicant increases. But the cant be reduced once it is fixed. If the customer wants to make any part-payments during the repayment tenure then the paid amount will be directly deducted from the outstanding principle and tenure will be re-scheduled according to the latest outstanding amount by keeping the EMI fixed at the same amount. This provision is available only for the Home loan customers. 

Banks reserves the right to reschedule the loan tenure if there is any change in the home loan interest rates on the Loan that the customer has availed. If there is any change then banks will increase the tenure first and if the tenure is crossing 300 months then banks increase the EMI as there is a cap on repayment tenure for 300 months. If the Interest rate reduces then banks decrease the repayment tenure but not the EMI. Customers need to personally request the bank to reduce the EMI component and the decision is at the sole discretion of the bank. All the Home loan products attract Tax Exemption under section 80© of Income Tax Act.

Monday, December 24, 2012

Why Home Loan is a Best Product?

Banks have introduced the product home loan and started funding to customers which resulted in fulfilling the dream of people who wants to own a house of their dream. Banks provide home loan on two kinds of rates of Interest one is Fixed and the other one is Floating. The fixed interest rate will be fixed for a limited period of time even if the rates in the market fluctuates and floating interest rates will be increased or decreased according to the rate fluctuations in the market.

To avail home loan from any bank or financial institution one need to submit all his personal and income documents which prove or authenticate his identity and income to the concerned bank where he wants to avail the loan. Along with the personal and income documents the customer need to submit the documents of the property which he is buying. The documents should cover last 15 years transactions over the property. 

Post submission of all the documents banks usually take a min of one week time to conform whether they will fund to the property in the name of customer or not or the application is fit to their policy. Banks will verify the details stated in the application form so it is always suggestible to stated only required and genuine information only for which you have authenticated documents to provide. Banks reserves the right to ask for additional documents if needed. It’s the bank sole discretion on all the loans. Once the application is approved then the Home loan will be disbursed by taking the required documentation like Post dated cheaque’s, signed agreements, sale agreements and disbursement request forms etc. Post disbursement the customer needs to register the property on his name and submit in the bank. The whole process takes just one week and fulfills the dream of a common man of owning a house. 

With the Equated Monthly Installments and longer comfortable tenure to repay without any worries the product Home Loan is considered as the best product in the market.

Monday, October 15, 2012

Floating or Fixed which is the best to Opt?

It’s been a big myth to customers in opting the interest rate type while going for a Home Loan. Customer seeks their friends, colleagues and relatives advice that already availed a Home Loan. But still it’s been a puzzle to most of the customers how to opt and what to opt when it comes to the home loan interest rates. A little bit of understanding of the two banking terms eases the process of interest rate selection and which gives the best possible returns on the Home Loan over the period or repayment tenure.

All the home loan products are pre packed with two types of rate of interest i.e Fixed and Floating.  Fixed rate of interest is fixed for a limited period of time over the loan even if there are any fluctuations in the rates in the market. Banks will not increase or decrease the rate charged on the loan which is fixed at the time of availing the loan even if the rates comes down or goes up. Banks charge a min of 1% higher rate compared to the current prevailing rate to the customer who opts for the Fixed Rate of Interest. Post the term of Fixed the interest rate will be the rate charged on fresh loans at that time.

The Floating Rate of Interest is based on Base Rate and BPLR rates and charged according to the loan applied slabs. The floating rate can be increased or decreased if there are any fluctuations in the market. Banks revise the rates on quarterly basis on the loan amount and inform the customer about the revision of interest. If the rate is increased then accordingly the repayment tenure will be increased and if Possible banks can Increase the EMI also. 

Going for a fixed rate is better if the fixed tenure is above 3 years and taking conformation from the bank that the rate will not be revised even there are any huge fluctuations in the market makes a sense.