Home loans Helping you realise your dreams

Sponsored Section Having a home of your own is no longer a far-fetched dream. Today, thanks to initiatives by the government as well as the banks, most of us can have one before our retirement years. Besides giving tax benefits, banks also offer lucrative discounts, waiving off of fees and disbursing of loans within a record period of three to 15 days Some financial institutions offer attractive incentives such as free property insurance, discounts and even waiving off professing fee or the pre-payment penalty. Some also sanction of the loan without making you zero-in on the property you want to purchase
Among the basic few necessities of life, most people count having a home of their own as among the top three. Gone are the times when one would consider oneself lucky if a house was passed one from one generation to the next. The others, who were better off, could dream of building one of their own, or buying one. Not anymore. Today, thanks to the endeavor of banks and the government initiatives that look at provide housing solutions for every pocket, a home of ones own can be any ones dream - a dream that can come true.
Having said that, more credit goes to banks and the initiatives taken by them to facilitatehome loans and make them accessible, less hassle free and with affordable. If you look at the home loans segment in India, you witness a whole lot of movement in the rates in the recent past years. For instance, the home loan rates that were offered at around 7 per cent floating rate of interest in 2004, have now gone up to as much as 10 per cent. Consequently, EMI payments on loan amounts have also gone up. What bring a little relief are seasonal festive discounts offered by leading banks. And it should come as no surprise that of the home loan market in India, approximately 80 per cent of the loan market is made of that below Rs 20 lakh.
Not only the government of India, but also RBI has also done its part by assigning lower risk weight to home loans up to Rs 20 lakh, thus facilitating banks to offer smaller loans at lower rates. And much to the loan seekers delight, on an average, the loans are disbursed within three-15 days of satisfactory and complete documentation and completion of the banks relevant procedure. And while some financial institutions ask for one or two guarantors, others don t have it as their requisite option. On an average, the repayment option range from five to 15 years.
Home loans also keep your investment portfolio healthy and give you health benefits. Both principal and home loan interest attract tax benefits. For instance, for rental property, it is adjusted against the rental income. For those who are self-employed, the income if treated at nil and the interest payment is treated as minus the income, which is then adjusted other income. Also, the principal amount of the repayment of loan - along with features such as provident fund, peoples provident fund, life insurance premium and so on - is eligible for deduction from gross income up to a maximum of Rs 1,00,000.
In the home loans category, there are several kinds of loans offered by banks. Some of them are:
Home purchase loan: As the name suggests, it is to buy a home.
Land purchase loan: Again, it is offered to purchase land for building ones own home or merely using the land as an investment tool.
NRI loan: This is offered to those non-resident Indians who wish to have a home of their own in India.
Home construction loan: This loans is also to own a home, but it is offered to construct one, rather than just purchase one.
Home conversion loan: It is given to those who have already got a loan for the present home, and are now purchasing or moving to another home for which additional funds may be needed. Here, the existing loan is transferred to the new home and includes the additional amount. The procedure does not require the need for pre-payment of the previous home loan.
Home improvement loan: This kind of loan is offered to renovate and repair the home.
Bridge loan: If you wish to sell the existing house and purchase another, this is the loan for you. It helps you tide over the time between purchasing a new house and finding a buyer for the old one.
Refinance loan: It helps you repay debt you are under while borrowing from private sources such as friends and family for the purchase of your home.
Balance transfer loan: This kind of loan assists you in paying off an existing home loan that has a higher interest rate and get a loan that has a lower interest rate.
But there is some amount of fine print one should know of while seeking a home loan. One, there are extra costs involved with home loans. A processing charge is levied by the bank and is a fee to be paid to the lender for the loan. It can be fixed or a percentage of the loan amount. Pre-payment penalties are charged by the bank if the loan if paid before the stipulated duration. Commitment fee is levied if the loan that has been processed and sanctioned is not availed of within a specified period of time. The others include documentation, consultation charges or registration of mortgage deed.
Some financial institutions offer attractive incentives such as free property insurance, discounts and even waiving off professing fee or the pre-payment penalty. Some also sanction of the loan without making you zero-in on the property you want to purchase.
The other thing to keep in mind is the types of interest rates that are offered for home loans. These can be divided into three categories: daily reducing is a system wherein the principal, on which you pay interest, comes down from the day your pay for EMI. Monthly reducing system is one in which the principal reduces every month that you pay your EMI. In the annual reducing scheme, the principal reduces at the end of each year.
Courtesy:- Business Standards dt:- 27-April-2010
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