Category Archives: Home Loans

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Pros and Cons of loan take over

We as borrowers might get very excited and happy about lower interest rates and would want to transfer our existing loan to a new bank , but there are many factors we must keep in mind while going in for loan take over.

  1. Calculate the total amount  you would be paying after you get a take over of loans. Do your maths properly before going in for take over. It’s always the interest part that we pay to the banks first so always do your calculations wisely otherwise you would not be in winning position, rather it would be a silly decision.
  2. Check how much loan amount you would be transferring vis a vis your collateral’s valuation. If your loan amount is small then keep aside the security double the amount for some other bigger loan you would want in future and provide another collateral.
  3. Just check the other charges like processing fees or allied charges or another new bank account you are asked to open and compare these with the lower interest rates you would be getting.


Whole idea should be to get your calculations right before taking any decision on take over of your loans. Decide wisely.

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Takeover of Home Loans

Home Loan may be taken over from the following Institutions?

  • Scheduled Commercial Banks (SCBs);
  • Private and Foreign Banks;
  • Housing Finance Companies (HFCs) registered with National Housing Bank (NHB);
  • Borrowers employers if they may be Central/State Govts. Or their undertakings or Public Sector Undertakings, yes. Issue to the following:-
  • Borrower should fulfil the eligibility standards for availing Home Loan as in line with the Banks instructions.
  • The borrower needs to have serviced interest and/or instalment of the existing loan regularly, as in step with the authentic terms of sanction.
  • The borrower has valid documents evidencing the title to the house/flat.

Take over with sanction of Higher Loan Amount is possible?

Bank may sanction an amount higher than the amount taken over from different bank/ monetary group for purposes of protection/ extension/ furnishings. Similarly extended repayment period may be sanctioned supplied that always the standards regarding maximum permissible finance and security margin under the Bank’s schemes aren’t diluted.

What is the process for Take Over?

  • The borrower ought to deal with a letter to the bank/ economic group from whom he has availed the loan asking them to supply, at once upon receipt of the loan quantity, the name deeds and other securities, if any, direct to our lending branch;
  • The borrower must give to the branch a request letter for paying to his existing lending financial institution / monetary group the excellent quantity of his mortgage by debit to his mortgage account.

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What is a Foreclosure

Foreclosure is what takes place when a house owner fails to pay the loan.

More especially, it is a legal process by which the proprietor forfeits all rights to the belongings. If the owner can’t pay off the outstanding debt, or sell the belongings via quick sale, the belongings then are going to a foreclosures auction. If the belongings does not sell there, the lending institution takes possession of it.

To recognize foreclosure, it facilitates to remember that the phrase “owner of a house” in this case is clearly a misnomer. “Borrower” is more apt term. That’s what a loan, or deed of trust , is: a mortgage agreement for the purchase charge of the home, minus the down payment. This file places a lien at the bought assets, making the loan a “secured mortgage.”

When a lender loans you cash with none collateral (credit score card debt, as an example), it could take you to court room for failure to pay, but it may be very tough to accumulate money from you. This is considered an “unsecured mortgage.

A secured mortgage is different because, even though the lender may take a loss at the mortgage in case you default, it will get better a larger portion of the debt by way of seizing and selling your property.

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Home Construction Loan

Building your personal house can be a awesome and a fun experience – however it could also be a long and expensive process. However, the most people cannot afford to pay for the cost of home  construction up front, and getting a mortgage can be difficult. After all, you’re asking a financial institution or a loan lender to present you money for some thing that doesn’t even exist yet.

A standard mortgage loan isn’t always going to reduce it – however you’ll be eligible for a unique type of loan referred to as a construction loan.

What Is a Construction Loan?

A construction loans  is typically a brief-time period mortgage used to pay for the price of constructing a home. It can be supplied for a set time period (commonly round a 12 months) to allow you the time to construct your property. At the cease of the construction system, while the residence is completed, you will need to get a brand new mortgage to repay the construction mortgage – this is from time to time called the “end loan.”

Essentially, this indicates you have to refinance on the end of the time period and enter into a trendy loan of your selecting (together with a fixed-charge 30-year mortgage) that could be a more traditional financing choice on your newly completed residence.

Qualifying for a Construction Loan

Banks and loan creditors are frequently leery of production loans for many motives. One major issue is that you need to place a lot of trust in the builder. The bank or lender is lending money for some thing that is to be constructed, with the assumption that it will have a positive fee whilst it’s far finished.

If things move incorrect – as an example, if the builder does a bad job or if assets values fall – then it may flip out that the bank has made a terrible investment and that the assets isn’t really worth as tons as the loan.

To attempt to protect themselves from this intricate outcome, banks frequently impose strict qualifying necessities for a construction loan. These typically encompass the following provisions:

  • A Qualified Builder Must Be Involved. A certified builder is a certified trendy contractor with a longtime reputation for constructing exceptional homes.
  • The Lender Needs Detailed Specifications. This consists of floor plans, in addition to details about the substances which might be going for use inside the domestic. Builders regularly prepare a comprehensive listing of all information (occasionally referred to as the “blue ebook”); details normally include the entirety from ceiling heights to the type of domestic insulation for use.

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What are Secured Loans

Secured Loan

Secured loans are these loans that are included by an asset or collateral of some type. The item bought, comparable to a house or a vehicle, can be utilized as collateral, and a lien is positioned on such object. The finance enterprise or bank will keep the deed or title except the mortgage has been paid in full, together with interest and all relevant expenses. Other items such as stocks, bonds, or personal property can also be put to secure a loan as well.

Secured loans are regularly the exceptional (and handiest) solution to acquire big amounts of money. A lender just isn’t prone to mortgage a huge quantity with assurance that the money shall be repaid. Putting your residence or other property on the line is a really dependable guarantee that you will do the whole thing in your power to repay the mortgage.

Secured loans will not be only for new purchases both. Secured loans can also be home equity loans or home equity lines of credit score. Such loans are founded on the quantity of home equity, which is quite simply the current market price of your residence minus the quantity still owed. Your home is used as collateral and failure to make well timed repayments could result in losing your home.

Secured loans mainly present cut lower rates, greater borrowing limits and longer compensation phrases than unsecured loans. As the time period implies, a secured mortgage manner you’re offering “security” that your mortgage will be repaid in keeping with the agreed terms and stipulations. It is main to recall, if you’re unable to repay a secured loan, the lender has recourse to the collateral you will have pledged and may be equipped to sell it to repay the mortgage.

Examples of Secured Loans:

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Different types of Home Loan

Home loans are an appealing and preferred approach of shopping a dream apartment for most folks. In India, the demand for home loans has expanded manifold in the last decade. Day-to-day numerous people observe for home loans to own a perfect homestead for themselves. The fact that home loans include brought advantages (like tax benefits) is the icing on the cake.

The following are some general forms of home loans available in the Indian housing finance market:

Land Purchase Loans

Land purchase loans are taken to buy a plot of land on which a borrower desires to assemble his residence. Most banks offer as much as 85 percentage of the price of the land. These loans will also be availed for residential as well as for funding purposes. Nearly all main banks present this loan like ICICI financial institution (Land loan), Axis bank (loan for land purchase) and many others.

Home purchase Loans

The home purchase loans are probably the most preferred and probably the most normally on hand home loan variants. These loans can be utilized to finance the acquisition of a new residential property or an historical condominium from its prior owners. In this type of loan also, lenders usually finance up to 85 percent of the market value of the house. These loans are offered either on fixed interest rate or floating interest rates or as hybrid loans.

Home Construction Loans

These loans may also be availed with the aid of these contributors who need to assemble a residence in line with their needs instead than buying an already constructed one. The loan application and approval procedure for home constructions loans are reasonably different from these of the traditionally on hand housing loans. The plot of land on which the borrower wishes to construct the house should have been bought within a year for the cost of the land to be included as a component for calculating the total price of the house. If the plot has been purchased more than a 12 months in the past, then the above clause is just not applicable. The borrower has to make a tough estimate of the rate to be able to be incurred for the construction of the condominium after which apply for the mortgage with the equal quantity. The lender then takes over from their and analyses the appliance to decide whether or not or not to sanction the loan. The approval or disapproval of the equal is intimated via the lender to the applicant. The loan amount is also disbursed at one go or in a couple of installments according to the growth in the construction of the house. Banks like Canara financial institution, UCO financial institution, bank of Baroda provide these loans.

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What You must understand before Refinancing

Getting a new mortgage loan to exchange the common is called refinancing. Refinancing is done to allow a borrower to acquire a better interest term and rate. The first mortgage is paid off, permitting the 2d loan to be created, as a substitute of without problems making a new loan and throwing out the long-established loan. For debtors with a superb credit score historical past, refinancing can be a good way to convert a variable loan rate to a constant, and obtain a slash interest expense. Borrowers with not up to excellent, and even weak credit, or an excessive amount of debt, refinancing will also be dicy.

In any economy, it may be complicated to make the repayments on a home loan. Between viable excessive interest charges and an unstable economic system, making loan repayments could end up tougher than you ever anticipated. Should you end up in this predicament, it probably time to recollect refinancing. The chance in refinancing lies in lack of awareness. With out the right potential it may truely hurt you to refinance, growing your interest rate rather than reducing it.

What’s Refinancing?

Refinancing is the procedure of obtaining a brand new personal loan as a way to lessen monthly repayments, curb your interest rates, take cash out of your house for gigantic purchases, or change loan organizations. Most individuals refinance when they have got equity on their house, which is the change between the quantity owed to the mortgage company and the worth of the house.

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Reduce your borrowing cost

How you can reduce your borrowing costs

Borrow only when you need to

In some cases, borrowing makes sense. But there’s constantly a fee: the interest you pay. Traditionally, borrow handiest while you ought to – and to pay for matters that have lasting worth or the talents to head up in value.

Borrow only as so much as you ought to

Look at your gross debt service ratio (GDSR). That is the percentage of your gross monthly revenue that you simply have to pay your normal housing costs. If your GDSR is greater than 32%, you may find it difficult to cover other expenses.

Additionally take a look at your total debt service ratio (TDSR). This is the percentage of your gross month-to-month earnings that you simply use for housing and other amazing loans and money owed. Most financial institutions won’t grant you a loan if your TDSR is above 40%.

Shop round for the lowest interest rate

If you’re making a important purchase, like a residence, a fraction of a per cent can prevent hundreds and hundreds of rupees. Make certain you understand the correct inquiries to ask before you borrow.

Plan forward

It’s mostly easier to negotiate a lower interest rate if in case you have time on your aspect. It can also be easier to get approved for detailed types of loans, like line of credit, before you may need them. An extra notion is to get a pre-approved mortgage if you know you’re going to purchase a residence.

Pay down your debt quickly

The turbo you pay off the primary, the much less interest you’ll pay. For example, paying down your personal loan biweekly as a substitute than month-to-month can prevent a huge amount of interest. However, in case you pass over a payment, your interest rate might go up and you might damage your credit rating.

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Home Loan by Lakshya Financial Management

Important Things which you should keep in mind while taking a loan.

Do not borrow greater than that you could repay

The first rule of shrewd borrowing is what the older new release has been telling us at all times: do not reside past your way. Take a home loan which you could quite simply repay. One thumb rule says that vehicle EMIs will have to now not exceed 15% whilst personal loan EMIs must no longer account for more than 10% of the online monthly income. “Your monthly outgo closer to all of your loans put together must now not be more than 50% of your monthly income,”

Preserve tenure as short as feasible

The highest home loan tenure furnished by all predominant lenders is 30 years approx. The longer the tenure, the cut back is the EMI, which makes it very tempting to head for a 25-30 year mortgage. However, it is high-quality to take a mortgage for the shortest tenure which you can come up with the money for. In a long-time period mortgage, the interest outgo is just too excessive. In a ten-yr loan, the interest paid is 57% of the borrowed quantity. This shoots as much as 128% if the tenure is twenty years.

Make certain well timed AND average compensation

It pays to be disciplined, principally in relation to compensation of dues. Whether it is a brief-term debt like a credit card or a long-term home loan, be certain you don’t miss the payment. Missing an EMI or delaying a payment are among the many key reasons that can have an effect on your credit score profile and hinder your chances of taking a mortgage for other wishes later in lifestyles.

Don’t borrow to splurge or make investments

This is also one of the crucial basic rules of investing. Under no circumstances use borrowed cash to invest. Extremely-trustworthy investments like fixed deposits and bonds are not going to be capable to compare the rate of interest you pay on the loan. And investments that present larger returns, corresponding to equities, are too volatile. If the markets decline, you will not only undergo losses however can be strapped with an EMI as well.