Housing Loan Rates Hiked? Know How to Deal With Them Properly!

Home loans that carry a high credit value and an extended repayment tenure is a long-term interest commitment. The credit form imposes a considerable pressure on a borrower’s financial capacity. A hike in home loan interest rates can become challenging for an individual paying EMIs, especially for a floating interest housing loan.

For instance, if one avails Rs.25 lakh at a 10% interest rate for 20 years, total interest payable will be Rs.32,90,130 while EMI Rs.24,126. A hike of 0.5% will compel borrowers to pay an EMI of Rs.24,959. 

This rise in expenditure can be managed in certain ways. 

Ways to deal with the hike in housing loan interest hike

A potential borrower or existing home loan borrower can check these ways to receive a comfortable interest rate.

• Go for a higher down payment

A home loan applicant can opt for a higher down payment to reduce home loan EMI burden. This process reduces liability from a lender’s end and encourages levying a lower interest rate. Moreover, down payment will reduce the outstanding balance, which automatically makes the financial situation viable.

• Opt for a short repayment tenure

Choosing a shorter home loan tenure during application helps to bring down the EMI and housing loan rates. For instance, a Rs.25 lakh loan with a tenure of 10 years brought down to 7 years will simultaneously reduce the interest payable amount. However, keep in mind that doing so would also increase your EMIs. 

• Choose part prepayment

A borrower can use their extra savings to make part-prepayments for the existing home loan. This would help in reducing the loan obligation and simultaneously lowering the EMI. 

Also, if an applicants' income increases, one can use the funds to increase the EMIs, resulting in faster repayment, thereby lowering the interest payable.

• Transfer home loan balance

Refinancing is an excellent option to reduce one’s burden of monthly repayment. A borrower can opt to transfer the home loan balance to a better lending institution. However, one must consider one must opt for this facility when the tenure is longer like 10-13 years or else the transferring charges may become expensive than the savings made by refinancing.

Taking one or more of these steps should help borrowers reduce additional strain from interest rate hikes.

Read More

Important tips to consider before taking a Home Loan

As per recent data, the RBI recently linked the risk weight of home loans to LTV ratio, as applicable to all new housing loan sanctioned up to March 31st, 2022. This particular facility seems quite beneficial for the real estate sector, as it is expected to generate more revenue within the next few years.  

Even though all these aspects have made a positive impact in the home loan segment, individuals are still required to keep certain things in mind before availing this advance. Borrowers inevitably come across a few components of housing loans that play vital roles in the credit sanctioning process. 

In order to make sure the process goes smoothly, here are some important tips one should consider before they avail a home loan:

• Compare different lenders

Depending on how much your equated monthly interest or EMI will be against the home loan, you can choose the tenor and total amount conveniently. Therefore, it is advisable to go through what different lending institutions are offering as interest rates before making a decision. 

• Maintain a healthy CIBIL score

No matter what strategy you have decided to apply in order to smoothly handle the repayment, a poor CIBIL score can hamper all your future plans. Make sure to keep a good repayment track record and maintain a credit score of 750 or above to meet the home loan eligibility criteria. 

• Foreclosure rules

Usually, it helps the borrowers to settle the outstanding home loan amount before its tenor ends. Therefore, along with other important aspects, you also need to ensure that your preferred financial institution does not impose any foreclosure penalty in case of early repayment.

Additionally, going through the home loan documents properly, making a sizable down payment, paying heed to additional charges, etc., should also be prioritized before you apply for a home loan.

Read More

Important Things to Remember While Transferring your Home Loan

Besides lower interest rates, home loan transfer also accompanies a range of benefits like better service, pre-approved offers and many more. 

However, to leverage the optimum advantage, individuals have to consider a few things. Here are some of them. 

1. Time of refinancing

It plays a crucial loan in determining the profitability of this facility. Generally, in the initial stages of repayment, individuals mostly service their interest liabilities. Thus, it is often wiser to opt for this facility during the first half of repayment term. 

Financial experts also suggest avoiding this option after 3 years of repayment.  

2. Negotiate Interest rates

Before switching a lender, existing borrowers should negotiate with their lenders for better home loan interest rates. Lenders often offer revised rates to those with an impressive repayment history. 

Thereby, individuals can save on several charges that are applicable while availing this facility. 

3. Additional charges

Typically, a home loan refinancing comes with several charges that borrowers are entitled to pay. For instance, borrowers need to pay processing fees, foreclosure fees, inspection fees, administration fees and others. 

Thus, before approaching a new lender, borrowers have to weigh if the charges are worth the transfer. For more clarity, they can also use a home loan balance transfer calculator to estimate the cost of this facility. 

4. Repo-rate linked loans

RLLR or Repo-rate Linked Lending Rate is determined by RBI. If the repo rate decreases, the interest rates also decrease and vice-versa. Since interest rates are subject to the market scenario, individuals may have to pay a higher interest rate than before in the event of rate hikes. 

On the other hand, borrowers get immediate relief when RBI cuts repo rate, resulting in reduced EMI outgo. 

5. Credit report 

The eligibility for this facility also relies on the credit history of the borrower. Lenders generally offer loan transfer facilities only to those who have an excellent repayment history and a credit score of 750 and above. 

Hence, keeping these facts in mind, individuals can make most of this home loan transfer facility and lower their home loan EMI burden. 

Read Also: Increase You Home Loan Eligibility: 5 Points to consider

Read More

Important Factors You Should Know Before Taking aTop-Up Loan on a Home Loan

 With a top-up loan, which is usually available during home loan balance transfer, a lender extends an additional credit line over and above the existing loan amount. Such credit is usually available at an easy rate of interest. Nonetheless, there are a few important factors that borrowers should keep in mind before availing a top up loan on home loan –

• Conditions to avail it 

To be eligible for such an additional loan amount, borrowers need to initiate the home loan balance transfer process. Moreover, one needs to have a regular repayment record as well. 

• No end-use restriction

 There are no limitations imposed on home loan top up in terms of its usage. The fund may be utilised to meet any number of expenditures that the borrower sees fit. 

• Tenure

The maximum repayment tenure of a top up loan is 20 years, or till the period of repayment of the home loan. This loan tenure also depends on the borrower’s age, income, credit profile and property value. For such credit, you can calculate your monthly outgo with the help of a top up loan calculator.

Must Read: Things you should know before taking a top-up loan.

• Amount limit

Even though the total balance does not usually exceed 70% to 80% of the total property valuation, the maximum top up loan amount sanctioned varies from one lender to another.

• Tax benefits 

If you have used the top up loan amount for construction, extension or renovation of a home, or funding children’s education, you are entitled to claim tax benefits. 

Thus, a top up loan can provide you with much-needed liquidity when you are in need of urgent funds. You would not have to undertake the hassle of applying for a fresh loan to avail the funds. Moreover, this credit is also available at a competitive rate of interest.

Read More

You Should be Aware of Which Home Loan Tenure is Right for You

A home loan is a convenient financial solution for individuals looking to invest in residential property. Potential borrowers can avail up to Rs.3.5 crore under this funding solution to use for constructing or purchasing a house. 

Nonetheless, availing a housing loan also depends on certain factors, where tenor plays a crucial role.

Factors to consider when choosing the home loan tenor

• Monthly income

Understanding home loan EMI aids borrowers in the systematic planning of monthly outlays. An individual’s income stability plays a crucial role in determining the home loan tenor. In this scenario, an applicant must know that opting for a shorter tenor would mandate paying higher EMI. Comparatively, selecting a longer tenor would decrease the EMI but increase the total interest outgo. 

Hence, a shorter tenor is a compatible option, as it reduces the chances of accumulating higher debt in the long run. An individual with a stable income can request a lender for a befitting tenor option.

• Age

Age is again a crucial factor when deciding a home loan tenor. Lenders give more preference to young borrowers who have more workable years. They easily approve a young borrower’s request to repay the outstanding amount over a longer tenor. Most NBFCs set an age limit of 23 to 62 years for salaried individuals under home loan eligibility parameters.

•  Housing loan interest rate

The applicable home loan interest rate also affects the loan tenor. Usually, this interest rate is revised from time to time, where a longer tenor can significantly increase the interest payment. Comparatively, shorter loan duration decreases the chances of the interest rates being revised to become higher. One can use the housing loan EMI calculator on a lender’s platform to calculate the exact rate of interest.

These few tips can help the housing loan borrower to opt for a suitable tenor that would facilitate ease of repayment.

Read More

Facts to Know About PMAY Subsidy Scheme

PMAY or Pradhan Mantri Awas Yojna is a scheme introduced by India's government to offer affordable houses to the economically weaker sections by 2022. This scheme is primarily divided into two sections - Urban and Gramin. 

Under PMAY urban scheme, eligible candidates are divided into three categories, namely -

• Economically weaker section

• Low Income Group (LIG)

• Middle Income Group I and II (MIG I and II)

Individuals belonging to these categories can use the PMAY calculator to determine the exact subsidy amount they are eligible to avail by entering necessary details like loan amount and tenor. 

What is the goal of the PMAY scheme?

This Credit Linked Subsidy Scheme (CLSS) aims for -

• Slum redevelopment using the support of the private sector and by employing land as a resource.

• Offering home loan to eligible candidates for house construction at a low-interest rate.

• Providing a weaker section with affordable houses under private and public sector partnership.

Eligibility criteria for PMAY 

Interested individuals need to fulfil specific PMAY eligibility parameters to make a successful application.

• An eligible candidate mustn't possess a pucca house in any part of the country.

• He/she shouldn’t avail any credit under other existing housing schemes offered by central government.

• Ideally, individuals with an annual income of up to Rs.18 lakh can apply for this PM Awas Yojana.

An individual complying with the above-mentioned criteria needs to fill an application form on the official website. After submitting details, he/she will receive an application number which is crucial for checking the name on PMAY list.

How to check the PMAY list?

An applicant can check his/her name on the PMAY list by following these steps-

• Log in to the official site and select the beneficiary tab.

• Fill in details like Aadhaar number and redirect to the next page.

• Select the ‘submit’ option to view the selection and application status.

Individual’s without an Aadhaar card can use their assessment ID to view their PMAY status. They have to select the PMAY’s track application status page and enter personal details to view the same.

For the PMAY Gramin list, individuals need to open the designated website and fill in the registration number for details. However, if the registration number is amiss, clicking on the ‘search beneficiary details’ option will be helpful. 

Must Read: Know How to check PMAY List

Read More

Reasons Why You Should go for a Top-Up Loan

When you have taken out a loan, a top-up is an additional advance over and above the existing loan amount. Such a facility is popularly termed as top-up loan. It is particularly helpful when borrowers need new credit, but do not seek to avail external financing.  As the borrower's credentials are already submitted to the lender, securing top-up is hassle-free and less time-consuming. 

Here are some of the dominant reasons why a top up loan can be a favourable option -

• Faster processing and disbursal 

Since this additional credit facility is availed from an existing lender of home loan, both the verification process and fund disbursal happens quickly. All the relevant documents of the borrower have already been vetted. 

• Simpler criteria 

While borrowers opting for balance transfer can readily avail a top-up loan, it involves the simple CIBIL score criteria 750 or up, and a healthy credit repayment history. 

• No-end use restriction 

One of the major advantages of this additional credit is that there is no restriction on final utilisation of this fund. You can use to it meet any requirements, which may or may not be related to housing. For example, you would have the liberty to use it for interior decoration or to meet a medical emergency. 

• No further collateral

Borrowers are not required to submit any other collateral apart from what has already been mortgaged while taking out the home loan. Naturally, this credit line is a favourable option among borrowers. 

• Easy interest rate 

The interest rate on top-up is relatively lower than other unsecured loans, making this credit facility more cost-effective. 

• Income Tax benefits 

Borrowers can enjoy income tax benefits for funds available under this credit facility if used for a home extension, renovation, construction, etc. 

Should you seek to derive the full benefit of this credit line, find out about the top-up loan option on the home loan offered by your lender, and streamline your plan to use funds, accordingly. 

Read Also: Things you should know before taking a top-up loan.

Read More

Step by Step Guide for First Time Home Loan Borrowers

Purchasing a home requires borrowers to a vital financial decision, and availing a home loan helps to fulfil this dream. Nonetheless, first-time homeowners often get confused about how they should make the most of availing these funds. 

Following is a step-by-step guide to help homeowners to make an informed decision. 

Step 1: Check the home loan EMI, eligibility, etc.

The first factor new home loan borrowers should check is the EMI payable and eligibility criteria to guarantee approval. In this regard, they can also use a home loan EMI calculator that computes the monthly instalment amounts efficiently. 

Step 2: Check the approval status of the property 

The property one is buying should have a proper and valid registration in the seller’s name. Depending on this factor, lenders approve the loan. 

Step 3: Choose an interest type 

Home loan interest rate is another crucial factor that borrowers will need to consider. Depending on the requirements, they can choose between fixed and floating interest rates. Since it determines the EMI component, borrowers need to be careful while making their decision. 

Step 4: Consider pre-payment and other charges 

Besides choosing housing loan rates, individuals also need to consider different charges that lenders often levy under various instances. For instance, pre-payment, foreclosure fees, etc., are some of the charges that borrowers need to pay. 

Along with that, they also need to know the documents required for home loan. It will expedite the loan verification process. 

Step 5: Choose a lender 

The last step comprises choosing the right lender. Borrowers need to compare home loan rates before settling for one. 

Therefore, following these steps, a first-time homebuyer can avail a housing loan and effectively optimise their borrowing experience. 

Read More: Documents Required for Home Loan Refinance

Read More

Documents Required for Home Loan Refinancing

Individuals looking to avail a lower interest rate on their existing housing loan have the option of transferring the outstanding balance to a new lender. However, one needs to submit a few documents to initiate this home loan balance transfer process -

1. Consent letter 

An existing borrower needs to put in a written application to the current lender intimating about the balance transfer and issuance of consent letter for the same. 

2. No Objection Certificate

One has to obtain NOC from the present financial institution that indicates assent to transfer the outstanding loan amount to a new lender. 

3. Loan agreement

This agreement pertains to a sanction letter issued by the initial lender. 

4. Foreclosure letter

 It declares that the loan is foreclosed at a specific date without any outstanding balance. 

5. Post-dated cheques

To obtain a housing loan, borrowers have to submit post-dated cheques with the lender. These pending cheques are subsequently to be deposited with the new housing finance company. 

6. Property documents

Property documents are highly important for a home loan balance transfer. The entire set has to be submitted to the new financier.  

7. KYC documents

 The new financial institution would require these KYC documents –

• Identification proof 

• Aadhaar card 

• PAN card 

• Voter card 

• Driving license 

• Employment ID card issued by NREGA  

• Address proof

• Aadhaar card 

• Passport 

• Driving license 

• Voter ID 

8. Employment documents 

 These financial documents are essential for balance transfer –

• Latest salary slips 

• Previous six months' salary account statement 

• Form 16 from your present employer 

9. Property related documents 

For home loan transfer, the following set of documents are also required to verify the purchase of your property –

• No Objection Certificate from housing society or property developer 

• Property purchase documents 

• Registration certificate

• Stamp duty papers 

Depending on the new financial institution, further additional documents may have to be submitted for a home loan balance transfer, apart from your photograph and application form of the original lender. 

One should note that availing a top-up loan during balance transfer does not require borrowers to submit any additional documents.

Read Also: Important Things to Consider before Transferring Your Home Loan

Read More