What you Should Know Before Opting for a Home Loan Consolidation

Getting a home loan these days has become extremely affordable, thanks to flexible norms and lower interest rates. While some people only take home loans to buy a home, others get a little ambitious. In that, they top up their home loans to carry out some home improvement projects.

Of course, this means that they end up paying for two different loans, which may seem achievable in the beginning but can turn out to be a major financial burden eventually.

So, what alternatives do these individuals have? The loan debts certainly aren’t going away for at least the next decade. What other options do they have? Obviously, going for a debt consolidation loan sounds like the best choice.

If you or any one of your closest acquaintances is in a similar predicament, you’re in the right place. Home loan consolidation has become a norm now. Here’s a guide that that can help, if you are looking to transfer a Home loan emi. This article tells you all about refinancing your home loan to consolidate your debt.

How does Refinancing your Home Loan Work?

For starters, refinancing a home loan into a debt consolidation loan involves combining your multiple monthly loan payments into a single one. When planned carefully, a consolidation loan can help you save a lot of money too.

However, you should opt for a refinance only when it makes sense financially. Say for instance, you have a home loan of Rs.20 lakh and a home improvement loan of about Rs.2 lakh, going for a consolidation doesn’t make financial sense.

Also, you need to be sure that the interest rate for Home loan emi you’re getting on your new loan is lower than the ones you are currently clearing off.

Things to Do Before Getting a Home Loan Debt Consolidating Loan?

There are certain things you need to analyse before you opt for a debt consolidation loan so that you don’t overburden yourself.

Here are a few points you must consider:

1. Talk to your Lender

Most of the lenders will be willing to hold on to their business which means if you talk about the terms of the loan agreement with them, there’s a chance that you can come to an amicable solution. Imagine you’re having difficulty in repaying your loan because of the interest rates; a discussion with the bank will most likely help you get a much better deal.

2. Figure out what you Need Exactly

A consolidation loan will definitely be beneficial if you’re unable to keep up with multiple repayments. But one main question you need to ask yourself is about the lifestyle changes you will have to make. Consider the deal a new lender is offering and how that deal is going to help you.

3. Calculate the Cost of a New Loan

As mentioned earlier, you’ll have to pay an application and a processing fee when you opt for a new loan and on top of that you will also have to pay a penalty to foreclose and exit a Home loan emi deal.

http://articles.abilogic.com/146635/what-you-should-know-before.html

House loan calculator

Calculate Home Loan Emi

The Problem With Home Loans

The latest in Reserve Bank of India’s measures to protect customers with home loans is a proposal to change the way banks determine their `base rate’ – the benchmark for all floating rate loans. The need for a re-look arose because customers have been complaining of a raw deal in pricing.

In recent years RBI has taken a number of measures to provide a better deal for home loan borrowers. The introduction of base rate ensured that banks do not reduce rates only for new customers by playing with the interest spread. In the past banks could play with the spread as they would lend below the prime lending rate (their earlier benchmark) for new customers while old customers continued to pay over the PLR.  This was not possible with the `base rate’ which was also the floor rate for pricing. In June 2012 RBI forbade banks from imposing a penalty on pre-payment of home loans irrespective of whether the loans were being refinanced or repaid. This made it possible for disgruntled borrowers to move away to rivals if their loans were not re-priced when interest rates were falling.

But there are a number of areas RBI could look into as part of its consumer protection initiative. Here are a few.

Compulsory insurance: Banks have an interest in the property mortgaged with them and they need to ensure that it is protected against any eventuality. At the same time banks also gain by selling insurance policies.  But what needs to be insured is the cost of construction and not the cost of land. 

A 1000 square foot house may cost Rs 2 crore in Mumbai but the cost of construction would be around Rs 20 lakh. So there is no need of buying property insurance for the whole loan amount. Yet many banks insist that the buyer pay 15-year insurance premium upfront based on the market value of the property rather than the construction cost. Also in cities like Mumbai, the property is owned by the cooperative society which is required to insure the property. It is therefore not clear whether the bank’s insurance policy will pay a claim when the housing society is also making a claim for the property damage.

Non-intimation of interest rate changes:  Most home loan borrowers focus on the interest rate at the time of availing home loans. But floating rates are dynamic and vary from time to time. The borrower is not aware of this because while rates vary, the equated monthly installment or EMI does not. Banks merely change the tenure of the loan. So in a rising interest rate regime it is not unusual for borrowers to find that their principal loan amount is unchanged even after years of repayment.  Very rarely does a bank communicate to the borrower changes in interest rates.

Notice of intimation of mortgage: In Maharashtra the government has made it compulsory for all mortgage interests to be registered. This is aimed at preventing fraudulent sale of the property even as a loan is outstanding.  While the objective is laudable, the trouble is with the process. Although the law actually protects the bank’s interest lenders have shifted the onus on the borrower.  Rather than use their institutional clout to facilitate smooth registration, borrowers are forced to approach agents and spend a few thousands to complete this process.

No refinancing of existing loans:  Lenders often poach from home loan borrowers of other institutions. But when it comes to their existing customer they do not offer them the benefit of new rates.  If there is a special scheme running in the bank, existing borrowers are not informed of it. Also banks charge customers a processing fee even when their loan is refinanced within by their own bank but under a different scheme.

Complex pricing: Some banks have resorted to complicating the pricing of home loans introducing interest free years in middle of the tenure of the loan. Innovation in financial products are good only as long as they do not obscure pricing. Borrowers need to have the opportunity to compare the cost of one home loan against another.  One way to make the pricing transparent is to disclose the cost in the form of annualised yield to the lender based on prevailing rates.

Source: http://blogs.timesofindia.indiatimes.com/small-change/the-problem-with-home-loans/

Repay the Home Loan without Any Prepayment Penalty

The last decade has witnessed an unprecedented growth trend due to the development of organized retail and IT sector, expansion of large corporate houses to the upcoming metros and state capitals and the increased disposable income in the hands of Indian youth. Owning a home is no longer a after 40 affair. The increasing trend among the Indian youth is to own a home in the early thirties. The sky rocketing price of real estate is also fueling the scenario. Real estate is no longer associated with the mere residence purpose, rather treated as a smart investment option.

However with the rising interest rates and mounting inflation the home loan customers are little bit annoyed. To counter this, banks are beginning to encourage them to partly prepay their loans without any penalty or a decreased penalty. Earlier all the banks in the home loan segment were doing with prepayment penalty.

The redemption of early payment penalty has come up with the increased Repo rate of the RBI. Repo is the rate at which the central bank lends money to bank in the banking system. The central bank has also increased the cash reserve ratio or the CRR. The cash reserve ratio is the percentage of deposits banks must keep with the apex bank. as the CRR and the Repo rate has been increased, the banks were bound to increase the home loan rate and as a consequent result through Housing Loan Calculator  home loan EMI increased. Most of the Indian banks raised their lending rates 50 basis points to 100 basis points. In such an expensive credit situation, in order to give respite to the customers the banks are looking at aggressively encouraging part-prepayment. The tight liquidity conditions and the high cost of funds will be somehow countered by this facility.

The penalty free prepayment facility will help banks to access cheap funds from consumers and this fund can be redeployed to high interest earning segments like personal loan plans and corporate loan plans. Simply, the customer can make repayment of 14 years if the loan plan is of 15 years.

The prepayment penalty of home loan was of 2-3 per cent on the amount paid (over and above the cap). The banks used to levy such penalty because the lose out on the interest income. Since the banks are encouraging the customers to prepay the loan amount due to the hike in interest rate, they are avoiding the penalty for any early payment. According to the Industry estimate, 15 -20 per cent that customers will repay without any penalty.

However the waiver of penalty is not followed by the banks without any discrimination. Some of the Public sector banks are considering the penalty waiver on a case-to-case basis when customers prepay to keep home loan EMI and tenure unchanged. When the customer has taken another loan to prepay the home loan, the banks charge him a fee and it is treated as a source of fund generation for the banks.

[Source: http://ezinearticles.com/?Repay-the-Home-Loan-Without-Any-Prepayment-Penalty&id=1308519]

Home Loans and the Meaning of EMI

What is EMI? This is a very common term that is being used very frequently nowadays by everyone. People converse about this term and usually this is used regarding discussions and taking of home loans. The meaning of EMI is "Easy Money Installments". More often this term is used regarding home loans but it can mean about any type of loans. 

Business loans, car loans, mortgage loans, second home loans and just about anything under the sun that can be taken on loan! The loan repayment schedule shows the amount that is termed as the EMI.

Loan for a home can be taken from private lender or government and personal home loan lenders. The total amount of EMI varies according to the loan amount and also the rate of property per square feet in that particular area. It is understood that the company or lender giving loan needs to be assured about the repayment of the loan.

The period for which the loan has to be repaid is also calculated. Monthly installments are to be paid by the individual as process of repayment of home loans. "Easy" installments means a comfortable amount is calculated according to the repayment capacity of the borrower of the loan. This depends upon the individual's financial status, his profession and whether he is going in for fixed interest loan or flexible interest loan for the home.

Usually Emi Calculator Home Loan is according to monthly payments but sometimes they may also be annual that is once in a year. This comes to a bigger amount but it is adjusted according to the individual's professions and financial standing regarding repayment. Many people get annual checks of salary or property rents or investment returns either in a year or in four months that is quarterly. So they can go in for a home loan and come to an understanding regarding EMI's and the repayment of the loan according to their convenience.

[Source: http://ezinearticles.com/?Home-Loans-and-The-Meaning-of-EMI&id=5412994]

What a Home Loan Calculator Can Do For You

Purchasing a dream home has become convenient with many online websites of lending institutions and also advisers regarding the same. With so many options available regarding loans many websites have put up online home loan calculators for the reference and guidance of borrowers. What is the meaning of a home loan calculator, how do these help and what services can be offered by these will be discussed in this article.

Having tough competition among lending institutions and awareness on the part of the borrowers many financial advisors and websites have put up online calculators. These calculators are put up as forms to be filled with details of the borrowers and they get a rough estimate of loan amount that will be available and the monthly EMI amount they will have to pay in order to repay the home loan.

With the form given online the borrower can make the first step of searching websites and understanding finances regarding home loans right from under their own roof in the privacy of their home. Here the individual does not need to publicize or share his idea about applying for a loan, and all information can be got by these loan calculators before taking the decision of applying for a loan.

Having this knowledge helps the borrower to understand his financial repayment capacity and the amount available as loan. The lending institutions have tried to put as much information as possible in these forms in simple manner. One can fill up details regarding monthly salary, age of the borrower or applicant, monthly incoming money and other liabilities or expenses. By stating this financial repayment capacity is judged and how much you can comfortably repay as monthly installments or Emi Calculator Home Loan.

 In the final slot after filling all the details the borrower can get the figure of total amount available as home loan and also the loan tenure for repayment. There are also many options where one can select different loan tenure periods and also fill in different loan amounts by just adding the details in the given slots. Here you can get different options available for repayment schedules and also calculate different loan amounts and the monthly EMIs to be paid.

With these home loan calculators one gets the option to try different modules and consider all repayment options before finally taking the plunge and applying for a home loan. The interest rate is also filled and the borrower can calculate how this interest rate will affect the monthly EMI structure. Once you know different financial loan lending institutions and their interest rates you can fill up the details and get the figures immediately. 

This will prevent wastage of time, energy and other hassles which the borrower has to face by directly approaching financial loan lending institutions before applying for home loans. After getting this figure the borrower can judge regarding the amount available as loan within his financial repayment capacity and status.

Online home loan calculators are a boom for any applicant of home loans. Not only do they give you different options available for repayment of loans but they also save precious time and money spent by making rounds of different financial loan lending institutions for enquiries regarding availability of loans.

Once the figure of loan amount available is got the purchaser of the new home can go about considering only those projects for which they can get a loan and avoid wasting time considering other homes out of their budget. This will help to narrow down your search for a home and also amount available for loan.

Always remember that these online home loan calculators are for reference purposes and only consider them for prior research. The total figures and loan amount given may not be applicable for all lending institutions and also there is no binding for any institution to offer loans on basis of these calculators and the borrower has a guarantee of getting a loan amount mentioned on these home loan calculators.

[Source: http://ezinearticles.com/?What-a-Home-Loan-Calculator-Can-Do-For-You&id=6323615]

What are registration charges?

Owning a home is a dream come true for many individuals. It is the culmination of much efforts and time. Getting across the gauntlet that is securing the appropriate financial measures is only the beginning in what is often a long and arduous process before you finally get to own your home for good.

Owning a property is so much more than simply taking possession of your dream house

 There are a huge number of legal hassles and tedious documentation to get through before you can undoubtedly own your property. You need to have a clear title and other relevant documents of ownership that affirm your ownership of the property.

In the final stages of the paperwork, you need to pay stamp duty and relevant registration charges before you are handed over your documents. With these final hurdles cleared, you are now free to enjoy your home to the fullest extent possible.

Stamp duty is one of those insidious charges that tend to sneak up on you and not make itself known until the last minute. Stamp duty is a kind of compulsory fee payable to the state government. There is a time period within which stamp duty must be paid in full before you can take ownership of your home. The actual rate differs from state to state but usually varies between 5 to 7% of the registration value and not market value (also called transaction value). Until this fee is paid in full, the house will not be transferred to your name and you will be, in all effect, an illegal occupant in the property in the eyes of the government. The stamp duty serves as the charge to maintain your name as the owner of your property in the official records of the government. It also ensures that all government sources and documents reflect you as the proper owner of the property.

After stamp duty has been paid, you need to register your property within four months. This requires payment of an additional registration fee over and above the stamp duty that you have already paid. Registration fee is the charge required to actually register the property in your name and make any transfers from the previous owner (if any). Although these charges vary from state to state, the registration fee is typically 1% of the market value, usually subject to a pre-set maximum. The registration process is typically a painless one that involves you providing documents of personal identification such as copies of photo ID, various other verification documents, and the proof of payment of stamp duty.

While these charges can add up to a huge number, there are some ways to save a bit of money here. Many states offer a lower rate of stamp duty if the property is registered in the name of a female. Also, you can claim a tax deduction on the amount you pay on stamp duty and registration fee. You can also save emi for home loan tax by agreeing to a purchase price that is close to the base price published by the government.

Source: http://homeloanemicalculator.tumblr.com/post/147944128055/what-are-registration-charges

How EMI is calculated!!

I decided to purchase a house in Bangalore (an extremely tough task) and the first thing that struck me is equated monthly installment or EMI. This is the single most important parameter while taking any kind of loan. This is the amount outgo every month from your personal finances which will cover both the principle as well as interest.

I talked to few people and everyone is bit confused on how EMI is calculated. It is really simple and just few steps would enable you to calculate EMI at your end.

So here is a rather simply formula for calculating EMI.

You would wonder why EMI is called "equated", the reason is that EMI is nothing but loan amount plus total interest divided by loan tenure. If that is the case then why this complicated formula. The reason is because as you keep paying EMI, some portion of EMI goes as interest but some portion goes as principal repayment. So if you pay an EMI of Rs10,000 for a house loan, not the entire Rs 10,000 would go as interest payment, but some portion goes as principal repayment, which essentially reduces the principal on which further interest is calculated. It is extremely important to understand what goes for interest and what goes for principal repayment.

It is very clear (for mathematically inclined) that when Loan Amount goes up, so does the EMI. Similarly if the interest goes up again so does the EMI, but if 'n' (loan tenure) goes up, EMI reduces. A note of caution, a low EMI for longer period does not necessary means a good bargain. A good bargain depends on your requirements as well as the total interest you pay over the entire loan tenure.

Another thing to keep in mind is whether the reduction in loan amount happens on monthly basis or yearly basis. Any loan which reduces the principal on monthly basis should be given preference. A monthly reduction implies less interest payment from next month onwards, definitely a huge savings.

Also usually interest rates come in flavors of fixed and floating rates. A floating rate changes based on market's prime lending rate (PLR). A fixed rate stays fixed for the tenure of the loan. For a longer period of loan, my personal preference is always fixed interest rate, even if it is 1-2% higher, at least the monthly outgo is fixed, so planning of your outflows can be planned pretty well. I personally think that similar to rupee averaging for mutual funds, the floating rate almost remains same as fixed rate over a long tenure of home loan interest calculation. [The floating rate will go up and down and hence your monthly outgo]. And for short tenure loan, in a high interest regime, go for floating rate, but in a low interest regime choose fixed rate.

Source: http://www.articles.howto-tips.com/HowTo-Article-Directory/how-emi-calculated

Tips on Taking Home Loans

If you have visited any website that talks about buying a home or taking a home loan; they all glorify the fact that owning a home is a dream for everybody and how this can easily become a reality. But they forget to mention that sadly sometimes you get a rude awakening from this dream!

Why? The answer is: because you overlooked a few simple things. Read on – so that your dream does not remain a dream and at the same time does not give you nightmares.

Useful tips on taking home loans

1. A Pre Approved Loan Helps

Ajay after six months of search found a house that fitted his budget and his requirements. He applied to a bank for a loan and paid the deposit amount to book the house. The bank began its process and after six weeks Ajay was informed that his loan was rejected due to a minor technical aspect. Ajay just had two weeks left before he was supposed to pay the builder failing which he would lose the house and the deposit too. He had no choice but to approach a private bank which promised him a loan in two weeks’ time but the interest rates that they charged were higher.

You do not want this to happen to you. So get a pre-approved loan in case you are planning to buy a house in the near future. You can get better rates, are sure about getting a loan and will not miss the bus when you finally find a house that you like.

A pre-approved loan is usually valid up to six months.

2. Read and Understand Terms Well

For any financial product that you buy it is always advisable to understand the basic aspects well before you even start looking around for the product. In my experience of working at a financial institution I have several times come across customers who come complaining to the bank about how they have been cheated or fooled.

However often it is simple things like not reading the fine print or not understanding a term that is the root of the problem. Do not expect the company representative to educate you; all information is easily and widely available on the internet so spend time and understand terms like EMI, fixed v/s floating rate, fault, BPLR etc.

This will help you in making an informed decision and also in planning ahead and if nothing else it will make you sound wise during a conversation!

3. Buy Home Loan Insurance

Owning a home provides you and your family with a sense of security but you must ensure that asset does not turn into a liability. You must insure your home loan as in case of the death of the primary loan applicant, the insurance company pays up the unpaid loan amount.

Illustration: Mr. Basu bought a home 5 years back and took a loan of Rs. 25, 00,000 for the same. The house was worth Rs. 35, 00,000 at the time of purchase. When he passed away; his wife faced a big dilemma.

Mr. Basu did not have home loan insurance although he did have life insurance; the house was worth almost Rs. 50, 00,000 and she was in fix; she did not want to lose the house which had appreciated in value and could have provided them with the much needed security.

She did not want to use the life insurance money to pay the loan and she could not own the house as it had a huge unpaid loan. Home loan insurance would have saved the day the day for them!

Some companies offer this insurance as a freebie like ING Visa so there is no extra cost involved; it is also a good idea to check about the permanent disability clause where the loan company pays in case of a permanent disability of the insured.

4.  “Fixed” is actually not fixed

When you begin your home loan journey one of the crucial decision you will have to make is about the interest rate type. These rates and types vary across banks and you will most commonly come across terms like fixed rate and floating rate.

Fixed rate theoretically means that the rate remains fixed over the loan duration. Irrespective of what you go for always keep in mind the fact that a fixed rate is not fixed in the real sense of the word which means that hidden somewhere in the fine print is a clause which says the bank will revise the rate after a fixed period or due to some xyz condition.

You cannot change this fact so what should you do? When you take a loan you plan your budget and prepare to pay a fixed EMI every month but be prepared (mentally and financially) that this can change suddenly with a letter sent by the bank.

So spare yourself sleepless nights and keep some money aside for such exigencies. While you take try and adjust to the higher EMI (be assured the bank is rarely/never going to lower the rate) you can use this exigency fund to pay the differential.

5. Compare Deals and Rates

When you start looking for a loan you will realize that there is a lot of variation in the rates of interest; while interest rate is the most important aspect that you must consider when taking a loan it is definitely not the only aspect. You should also look at the loan period, processing fee charged, security cover clause*, free insurance provided by some companies etc. Always negotiate and look for available discounts.

Don’s Stretch Yourself Financially:

Taking a home loan does involve careful planning and cutting down on some expenditure about but do not get overoptimistic about your potential of cutting down your expenses. A bank makes an evaluation about your creditworthiness but you should also take a realistic view of you situation.

Ideally you should reduce your debt burden before you take a home loan and your EMI must not exceed 40% of your salary in hand. Also do not exhaust all your savings when buying a house; keep aside a chunk for situations like an increase in the EMI,(due to interest rates revision),paying additional security, job loss so that you can still pay you emi calculator home loan on time etc.

Conclusion:

Being forewarned is being forearmed so keep the above in kind and get the best deal for yourself. There are a large number of players in the market so getting a competitive and good deal is not difficult as long as you are sure about what you want.

*Security deposit clause gives the bank a right to ask for an additional security deposit in case the property value comes down.

Source: https://www.wisdomtimes.com/blog/tips-on-taking-a-home-loan/

How to Calculate Mortgage Payments

Mortgage in common parlance means a long-term loan financed by the banks to help the borrower purchase a house. The EMI repayments however include interest payments in addition to the principal amount and the property acts as the collateral in the whole process. This information is basic in nature and if you are willing to purchase a house, aided by a mortgage, read on to know the functionalities of a mortgage and how to pay it off.

Once the house is bought and savored with rituals like house warming, furnishing and decorating your living space, harsh reality props at the end of the month in the form of EMIs. To get everything straight and keep your household expenses going along with the monthly installments  make a list of all the investments, mortgages, savings, insurance schemes, EPF and PPF, postal deposits and sometimes even ULIPs. Maximizing the benefits of cash inflow could be the next major step in managing the monthly monies. So instances where you are paying higher interest on investments should be cancelled and channelized to the apparent closing of the home loan.  

In order to repay your debt quickly and not withstanding it for long duration of time three methods can work in your favor.

Partial Pre-payment:

One of the fastest ways to close a home loan by paying the banks from bonus, salary arrears, gifts, profits on shares, property sold, closed deposits, maturing of tax saving investments, closure of savings, giving you lesser returns in comparison to the home loan, etc. can reduce the principal amount in the loan. Leading to a shorter term of EMI payment and reducing the interest rates paid on the entire sum.

Shifting to a lower rate:

The lower interest rate on the principal amount is the smart way to acquire a home loan. This will reduce few years from your home loan emi calculator and a speedy closure on your mortgage. Switching banks to transfer loans with a lesser interest rate will also mean scrutinizing the property and furnishing legal paperwork afresh with a clean track record of the monthly EMIs.   

Increase the monthly installments :

By increasing the amount allotted from your monthly income for EMIs will ensure closing the home loan faster. Adding a little extra on the monthly installment will make a huge difference in the loan tenure reduction.

With a thorough knowledge on loans the next big step would be to invest in real estate that is significantly trustworthy in the business. Adani realty, real estate giant in India with their upcoming projects provide a profiting opportunity for property investment. The Shanti gram Township epitome of smart value homes packed in with modern amenities to make for a healthy and peaceful living experience.

Source: http://www.articles.gappoo.com/2015-Article-Directory/how-calculate-mortgage-payments

Home Loans are Tax Friendly

For most Indians, owning a house isn’t just an investment but pride. ‘Home- Sweet-Home’ is tailored by your tastes and relationships. It is the space of your absolute freedom. Everyone dreams of owning a house but certainly have misconceptions about it. The real-estate boom in India is attracting foreign investors too in this sector. Choosing a flat/property to your tastes is easy because you decide. But, one requires a little financial know-how before planning for it.

With the rise of housing finance institutions, owning a house is now pocket-friendly with a home loan. With the advent of selling flat/property online, the segment has become more competitive but to the convenience of the consumer. Though buying a house is an expensive proposition, growing real estate prices made almost impossible to own a house without a home loan. The home loan is such a credit facility where interest rates are cheaper and tenure is longer. Not only that, it comes with exciting tax benefits too while income tax filing.

The amount that a bank can lend is up to 80% of the property value. This depends up on various factors to check the eligibility. Banks are strict with these checks and otherwise bad loans can become burden for them. Every lender tries to ensure the borrower’s capacity to repay the equated monthly installments (EMIs) in time and repay the principal amount. To do this, they would look up to your credit history, current assets, liabilities and other financial details.

Tax Planning:

The biggest benefit in availing home loan is that one can plan their tax savings after considering all deduction benefits while filing I.T.Return. All home financing companies including banks usually give a provisional certificate at the start of the year which is based on EMIs and break up of principal and interest. This certificate will give you a fair indication of how much principal has to be repaid and how much interest has to be paid for that year. Based on this, you can plan for other investments. At the end of the year, you will get an original certificate based on the actual EMIs paid for that year. This certificate has to be submitted along with the income tax returns to claim the deduction.

Let us now dwell upon various tax benefits on availing home loan:

Any home loan will have two components in it namely, principal and interest. While income tax efiling one can get tax benefits through home loan under two different Sections of Income Tax Act.

Under Section 24– Deduction on interest on home loan for self-occupied property up to Rs 2 lakh.

Under Section 80C– Deduction on repayment of principal amount on home loan up to Rs 1.5 lakh.

Deductions in both components of a home loan are therefore governed by two different sections of the same Income Tax Act.  If the above sections are expanded in detail:

Tax benefit on Principal Amount:

The amount paid as repayment of Principal Amount of home loan by an Individual/HUF (Hindu Undivided Family) is allowed as tax deduction under section 80Cof Income Tax Act while filing I.T.Return. The maximum tax deduction allowed under Section 80C is Rs. 1, 50,000. (Increased from 1 Lakh to Rs. 1.5 Lakh in Budget 2014). The Amount paid as stamp duty & registration fee is also allowed as tax deduction under Section 80C even if the loan is not taken. However it is important to note that tax benefit of home loan under this section for the repayment of principal part of it is allowed only after the construction is complete and the completion certificate has been awarded. No deduction would be allowed for under construction properties.

Tax benefit on Interest Amount:

Tax Benefit on Home Loan for payment of Interest is allowed as a deduction while filing income tax return under section 24 of Income Tax Act. As per Section 24, the income from house property shall be reduced by the amount of interest paid on home loan where the loan has been taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.

The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs (increased from 1.5 Lakhs to Rs. 2 Lakhs in the 2014 Budget). In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under this section.  This is the best part of it because you can avail the same benefit upon all interest paid if you rented your house without you (owner) residing in it.

Using the above sections to the most of our benefit, the following opportunities can be explored:

Taking a joint loan- One can avail home loan with co-borrower as spouse, if working. All benefits under sections 80C and 24 of Income Tax Act can be enjoyed for each borrower. If you take home loan under 50:50 ratio, the overall tax savings of the household can be increased. The spouse earning more should have more portion of the loan to avail maximum benefits.

HRA (House Rent Allowance) Benefit- If you stay in a rented house and paying rent and at the same time availed a home loan for your own home, you can avail benefits of both HRA and home loan. This is subject to your home receiving rental income which is taxable.

Interest Rates on your home loans:

RBI has maintained status quo in the first policy of this financial year and the governor insisted upon monetary transmission of benefits of previous repo cuts.

Many banks have reduce their loan rates by almost 25 basis points as a result of which an interest rate war has triggered which will soon be followed by other lenders too. Most lenders at present can offer home loans at 9-10 percent. This competition would benefit home loan consumers, who have been struggling under high EMIs for years. As inflation is under control, one may expect more rate cuts in near future.

            One can apply for a home loan online with all end to end assistance in documentation and consultation process. To avail home loans hassle free and get best quotes, calculate your EMI’s visit: home loan emi calculator

Miscellaneous Charges of Home Loans

It is a well-known fact, that one takes a Home Loan only once or twice in his/her whole life cycle. Hence, however, well read one may be, it is well near impossible to understand the detailed implications of Charges involved in taking a Home Loan.  There are various charges one has to pay at each stage of a Loan from Application to Loan Disbursement. And well, the charges do not stop there, as even after the Disbursement, there are various other charges that one has to cough up. Read on to know them as the Banks/NBFCs Never highlight them to the Potential Borrowers.

At the time of Loan Disbursement, You are handed over a Booklet containing the list of ‘Terms & Conditions’. The Borrower signs it immediately so as to get the much awaited Loan Amount Cheque in hand. Later, even after having read this list of ‘Terms & Conditions’, the detailed meaning of the fine prints are mostly not understood.

It is only later, when you approach the Lender to Cancel Disbursement, Change Rates, Make Prepayment/Foreclosure etc. that you understand the Implications of the fine prints of the ‘Terms & Conditions’ when you have to Cough Up Certain Fixed Charges for each one of them.

Charges:  Up to Home Loan Disbursement

1. At The Time of Loan Application. Loan Processing Fees up to 0.5% of the Loan Amount or Rs 2,000 whichever is higher plus Taxes and Statuary Levies and Charges, as may be applicable from time to time.

2. At The Time of Loan Application (NRI Loan). Loan Processing Fees up to 1.25% of the Loan Amount or Rs 2,000 whichever is higher plus Taxes and Statuary Levies and Charges, as may be applicable from time to time.

3. Loan Application Cancellation. Forfeiture of Processing Fees, Taxes and other Statuary charges paid.

4. Loan Sanction: Re-Appraisal after 6 Months. Processing Fees of Rs 2,000 for Re-Application plus Taxes and Statuary Levies and Charges, as may be applicable from time to time.

5. Loan Disbursement Fees. (SD/MOD/MOE)

6. Loan Cheque Disbursement Cancellation. Up to Rs 500 plus Taxes.

Charges:  After Home Loan Disbursement

1. Switching Charges.

(a) To Variable from Fixed Rate. Conversion Fees up to 0.5% of Balance Principle Outstanding and Un-disbursed Amount (if any) or a Cap of Rs 50,000 plus taxes whichever is lower.

(b) To Lower Rate from Variable Rate. Conversion Fees up to 0.5% of Balance Principle Outstanding and Un-disbursed Amount (if any) or a Cap of Rs 50,000 plus taxes whichever is lower.

2. Pre Payment Charges/ Foreclosure.

(a) Fixed Rate & Floating Rates.  No charges, if paid from own sources (Own Sources does not Include Loans borrowed from other Banks/NBFCs).

(b) Combined Rates of Interest.

(i) During Fixed Period. 2% of Loan Amount plus Taxes and Statuary Levies and Charges, as may be applicable from time to time on the outstanding amount being so prepaid.

(ii) During the Variable Period. No prepayment charges.

Home Loan Miscellaneous Charges.

(a) Increase/Decrease in Loan Term. Rs 500 plus Taxes and Statuary Levies and Charges, as may be applicable from time to time.

(b) Delay Payment Charges. A Maximum of 18% per annum.

(c) Cheque/ECS Dishonour . Rs 200 per dishonor.

(d) Photocopy/List of Documents. Up to Rs 500 plus Taxes.

Conclusion:

Banks offer loan for home at various Rates of Interest. In most cases they DO NOT explain the meaning of fine prints that are printed in the list of ‘Terms of Agreement’ in detail. The Borrowers only come to start understanding the implications of the fine prints of the ‘Terms and Agreement’ when they approach the Lender for Cancellations/Changes in Rates/Prepayment/Foreclosures of Loans etc. and are asked to cough up certain charges for each one of them. Therefore, it is pertinent that the Borrowers understand the Detailed Implications of the Home Loan Interest Rates and avoid unforeseen/unplanned charges.

Source: http://www.articles.seoforums.me.uk/Europe-UK-US-Article/miscellaneous-charges-home-loans

emi calculator housing loan

If you can dream about owning a house, you can surely own it! With the right kind of knowledge about the home loan product it can be quite fun and exciting experience. Today, there are lots of government and private sector banks & finance firms that offers customized forms of home loans to their clients. People can approach these banks and private financial firms to get the best deals on home loan interest rates and other processing charges. It is obvious that owning a house means lots of pros and cons associated with it before finalizing a bank. When you visit a bank or an agent they will ask you to purchase a home loan,  with protection cover or other protection commodities along with housing finance. They will assure you that it will be added to your loan amount or at times an individual is completely clueless on how much loan amount he or she needs on the grounds of place for living, income source, building or society requirements, interest rate applicable, EMI to pay, etc. They feel like lost in a sea of confusion without the right form of knowledge. Relax! Finding the right home loan amount and understanding various jargons & terms associated with it is quite easy with the help of home loan EMI calculators offered by banks & firms online. Here are some tips that will help you find the right home loan in an easy manner:

Today, India’s leading private sector banks & firms are offering housing finance with new structure of loans that are developed to meet the needs of house buyers from every section of the society. However, before choosing a particular loan, it is very important to have a comprehension about the most important constituent of the loan – the EMI (Equated Monthly Installment). An EMI is a certain amount of money that an individual pays to the bank as pre-decided in the terms & conditions of the loan policy towards obtaining the legal possession of the house in near future. It is paid each calendar month, to the lender, for clearing their outstanding loan.

Your home loan EMI is calculated based on three things: Enter your home loan required amount, choose an interest rate applicable by home loan provider and select the tenure you wish to repay loans. Once you enter these details your calculated EMI amount along with interest applicable will be displayed for your information.

The home loan EMI calculator helps you understand the regular EMIs applicable on your housing finance. These calculators help you cut down the hassles of usually tedious and time consuming manual calculation of EMI applicable on your home loan. It is simplified and loaded with all the essential data, including amortization details and the ability to alter components like interest rates and tenure to try other types of permutation and combinations. This will help you make the conditions of repayment feasible as per your requirements. The most important benefit is you can plan your budget well in advance and keep aside the monthly EMI amount towards your housing loan.

While using emi calculator housing loan individual should consider charges applicable like processing fees of the loan, pre-closure charges, type of interest rates (fixed or floating basis), etc. Each EMI of the loan amount pays a part of the principal that you owe to the bank along with the decided interest rate on it. Banks and financial firms, have a certain mathematical formula to calculate the EMI based on loan amount, interest applicable, your income sources and other important details.

For a given loan amount, tenure and interest rate, the EMI calculated and the amortization schedule offered by banks and private financial firms will be similar. The pattern of reduction of principal amount through payment of each EMI will follow a similar trend across all financial institutions. Also, individual should note that the initial EMIs contribute more towards payment of interest due as compared to the principal amount. As the tenure progresses, subsequent EMIs will clear off the principal amount. Thus, by paying each EMI to bank you get an inch closer towards clearing off the debt and owning your dream home forever.

Source: http://homeloanemicalculator.tumblr.com/post/146938162180/emi-calculator-housing-loan

home loan emi calculator

The first and the most important strategy to negotiate your interest rate on home loans is to constantly update yourself with what different lenders are offering.

At present, customers have a plethora of options available from banks and financial institutions with regards to home loans and their interest rates. Today, banks and financial institutions also offer flexible interest rates for different income categories. Here's a few tips to negotiate your interest rates on home loans:

Information:

The first and the most important strategy to negotiate your interest rate on home loans is to constantly update yourself with what different lenders are offering. One should check both the fixed and variable home loan rate and then compare the two against each other. Figuring out the loan eligibility on the basis of information collected from agents is another crucial pre-requisite before deciding to opt for a home loan. Such discussions also help consumers in deciding relevant issues such as type of interest rate tenure, other charges etc. Exercises like this will also protect the borrower from getting misled by lenders who often use various jargons to lure customers.

Having all the information you require can also be useful for someone who has already availed a home loan. It will help him/her learn if they are paying an extra amount and also if another bank or financial institution could provide a better rate. The facts on the rates offered by different banks and financial institutions will help the borrower discuss the situation with more authority and this may further lead to the lender agreeing to a better rate for the existing home loan. This helps as from a lender's point of view it is easier to retain an existing customer than to get a new one.

One could also opt for a balance transfer in case another bank or financial institution is providing a better rate, but such a decision should be taken only after weighing all the pros and cons. The borrower should get a clarification from the new prospective lender on all start-up fees involved with refinancing the existing home loan besides asking the existing lender to explain the costs involved in paying out the loan. The transfer process should only be initiated after there is a clear indication that the move will save money.

Credit score:

In today's time, a good credit score helps the borrower negotiate his/her loan and interest rate, processing fees, pre-payment penalty and all the other charges involved while purchasing a property. Most banks and financial institutions believe that customers with a sound credit rating are less likely to default on the loan amount. Borrowers with salary accounts or credit cards can also avail further discounts on processing fees and prepayment penalties from banks.

In case one has a poor credit score certain steps should be undertaken to help set things right. One could take start making payments, whenever due without delaying them any further, by not utilizing the maximum limit on your credit card , pay off any debt etc.

Documentation:

There is no substitute to effective documentation while availing home loans. This gives banks the confidence about the borrower's credibility and repayment capacities thus helping in securing loans. The document filing is also an important step in this process as it is highly unlikely for a bank/lender to offer a best possible quote until the documents are submitted. One must be completely honest about existing debts, credit cards, and repayment history to all lenders to give a clear idea about their existing financial position. This will also help individuals to negotiate home loans better by enhancing their credibility as banks will also check the same with the Credit Bureau about the credit worthiness of the individual.

Another important point to keep in mind before availing a home loan is approaching prospective lenders only after the property is finalized and disbursement is required in the next few days. Most lenders are interested only in disbursements and reserve their best rates only for immediate disbursement cases.

Time your loan:

Borrowers should look at timing their loans towards the end of the month or quarter for better rates. Banks and financial institutions have pre-defined sales targets for its staff towards the end of the month/quarter and may offer competitive rates to complete their targets.

One should also look at timing their loans towards the festive season as lenders tend provide incentives in terms of lower interest rates and processing fees during this period to encourage sales.

Larger customer:

Bundling loan requests with friends & relatives to offer a larger business opportunity to banks and financial institutions is another tactic one can use for negotiating home loan rates. This is possible as banks and financial institutions would be saving on their legal and technical costs relating to property title, valuations, etc.

Conclusion:

Getting a home loan is becoming a hassle free/simple procedure with financial institutions increasingly focusing on shortening the entire process. Lenders are giving applicants an option to fill the application form online besides providing on-ground assistance of home loan advisors to assist them. With the increasing competition, financial institutions may go all out to offer home loans at competitive rates and make the entire process simple, but customers should sign up for home loan emi calculator only after ensuring that they are getting the best deal from their financial institution.

Source: http://www.articles.howto-tips.com/HowTo-Article-Directory/loan-requests-better-home-loan-rates