Home Loan

Home Loans - Things to Know

Home loans have made home buying in India approachable and manageable. There are many leading companies that provide customers with easy loans. In the home loan arena, government and well established companies are considered to be the most preferred loan institutions. Known for their unique and compelling propositions, these companies have enabled a hefty number of people achieve their aspirations. There is no point in signing the dotted line of a scheme, which is dripping with heavy interest rates and inconvenient operations of EMI. In simple terms, it is imperative to first understand the do's and don’ts of applying for loans.

Loan Application Requisites:

The usual protocol which banks usually follow is to keep the loan amount 60 times more than your net monthly income.

Your monthly income has to look reassuring to repay the amount in future. For example, if you wish to take a loan of Rs. 30 lakhs, it is mandatory to earn Rs. 50,000 every month.

In case you have taken personal loan or that for buying an automobile, you are not eligible to apply for a home loan.

There are certain things which are required in documentations like address proof, identity proof, income proof etc. that needs to be submitted to the bank or financial institution.

The features and benefits enjoyed by the Home Loan takers are voluminous. Although there are many features which are an integral part of the loan scheme, here are some of those mentioned.

Total Loans:

Many companies understand that purchasing your dream nest and doing all the fittings and other essential tasks would cost you a hefty amount. If you have bought a house and are moving in immediately, these companies give you a separate amount for meeting this requirement as well.

Part Prepayment Facility:

If you have paid your first EMI successfully, you can make prepayments for your loan. Monetary situations might differ from time to time, and most of the people do prefer to make chunk payments, as and when they have funds. Hence, this feature enables them to pay as many EMIs in advance as they like. However, the minimum limit for this is 3 months.

Refinance:

Buying a property with your own money can help you avail this benefit; provide you have bought the property within 12 months. You then become eligible to take loan against property which has been registered.

Prompt Repayment Benefit:

If you are an early bird and always pay your EMIs on time, then you are in for a reward. On clearing the first 12 EMIs on time, you get 0.5 % of the annual interest amount paid back, at the end of 12 months. You get to enjoy this facility for the first 3 years of your loan tenor.

Nil Foreclosure Charges:

Loan can be foreclosed at any time of your home loan tenor. The good news is that you are not subjected to any foreclosure charges.

Online Account Access:

These days, financial companies have their online customer portal that provides details like repayment track, interest certificate, payment schedule and others, regarding your loan. To avail this service, the customer has to make an account on the digital portal.

[Source: http://ezinearticles.com/?Home-Loans---Things-to-Know&id=8522378]

How Does a Home Loan Calculator Help You Choose the Right Home

If you've bought a house or are currently hunting for one, I'm sure you'd agree with me that there's nothing as daunting as finding a roof of your own. An unplanned step, an unexpected expense can set you back on your mortgage bills. And from then on, everything goes haywire. Not many know that disasters like these can be averted with a simple tool that can help them plan their purchase. A home loan calculator is an effective tool, which can help prospective buyers decide on the amount that they can afford to pay for the home loan without putting a strain on the available resources.

The calculator determines the amount you can afford to pay, by asking your input on three basic things; the budget or the money you want to spend on the house, your salary, and the rate of interest. These tools give a general idea about the money that you would need to allocate. There are other tools that are elaborate and allow you to determine the loan on several parameters including affordability, mortgage payment, investment, housing payment and even interest rate sensitivity. For example, if you're interested in knowing how susceptible you are to interest rate fluctuations in Singapore, all you've got to do is to enter the principal amount, the rate of interest and the number of years. Once you've sent your input, a chart that calculates the monthly payment for the period you've specified is displayed.

Key in the total home loan amount, the annual interest rate and the term of the loan and you have the total amount that you'd be paying as mortgage through the mortgage calculator. Entering details such as the length of the loan, interest rate, loan amount, annual property tax, and the annual insurance amount will tell you the exact amount that you would have to partake with, to complete the loan.

For those looking to buy a property for investment purposes, but are skeptical about the return on investment, there are specialized calculators that allow people to determine the potential returns on invested capital that can be achieved with various interest rates and the down payment and tenor of the home loan. All that you've got to do is to enter the property price, the down payment, stamp duty, total cash outlay and you'd be getting the expected rental income per year.

The home loan calculator allows people to know their maximum borrowing capacity. But it makes sense to choose from a popular site.

Source: https://www.evernote.com/shard/s477/sh/9e577837-80fd-4704-9ec4-7e07a25936b9/058c331fbfd63bc36bd60b720dab1bb3

Calculating Loan Installments With an EMI Calculator

What is an EMI?

Whether you apply for a car loan, home loan or a personal loan, you have to pay an Equated Monthly Installment. To calculate the monthly payments accurately, people use an EMI calculator. Soon after you decide to apply for a loan, you need to research on available types of loans in the market. Today, financial institutions and banks in India offer all different kinds of loans to fulfill different property buying needs of the residents. As you avail advance cash from the banks to buy your dream house or car, it is clear that you have to pay the borrowed money back. Further, you need to pay some interest along with the principal loan amount to the banks. The loan is to be paid back in equal monthly installments. An property loan emi calculator makes it easy for the loan applicants to calculate the monthly installments and schedule the payments.

Equated Monthly Installment EMI, a monthly amount is to be paid by the loan borrower to the financial institution or the bank from where the loan is taken. EMI is the combination of principal amount of the loan and the interest and is paid until the full loan amount is cleared. The interest and total principal amount is divided by tenure and this sum is generally paid monthly. Normally, the interest and principal amount doesn't change but its proportion might change as times. With every consecutive payment, the loan borrower pays more towards principal amount and less as interest.

Using EMI calculator

With an online EMI calculator, the calculations have been further simplified for the loan borrowers. Every bank or the financial institution offers top quality EMI calculators to assist the borrowers to calculate equal monthly installments. There are many benefits of using an online EMI tool.

• With graphical charts and easy to understand graphs, the online EMI calculators assists the loan borrowers to easily calculate the monthly installments.

• Making accurate calculations is possible with a sophisticated online calculator.

• An online calculator assists you to calculate car loan, home loan or a personal loan instantly.

• It is easy to determine monthly payments against interest and principal amount on the loans. With this, you can judge how suitable and affordable a loan is for you.

• Use the calculators to avail quick loan quotes as per the EMI

Calculating the equated monthly installment is simple through an EMI calculator. Simply enter details like rate of interest, period of loan and the principal amount to make instant, accurate calculations. Along with the basic monthly installments, you can calculate the total payable interest and total amount along with interest. The EMI will differ as per fixed and variable rate of interest. The Equated Monthly Installment that you attain gives an idea of personal financial commitments for the future. For example, you can find out whether you can afford personal financial commitments during the period of the loan. With this, you can plan personal finances better and take efforts to fulfill life's requirements.

HDFC, India's leading residential finance provider deals with a wide range of home loans, property loans and even deposit schemes. Use the property loan emi calculator to know your monthly installments for the loan you avail.

Source: http://www.articles.howto-tips.com/HowTo-Article-Directory/calculating-loan-installments-emi-calculator

Calculating Loan Installments With an EMI Calculator

What is an EMI?

Whether you apply for a car loan, home loan or a personal loan, you have to pay an Equated Monthly Installment. To calculate the monthly payments accurately, people use an EMI calculator. Soon after you decide to apply for a loan, you need to research on available types of loans in the market. Today, financial institutions and banks in India offer all different kinds of loans to fulfill different property buying needs of the residents. As you avail advance cash from the banks to buy your dream house or car, it is clear that you have to pay the borrowed money back. Further, you need to pay some interest along with the principal loan amount to the banks. The loan is to be paid back in equal monthly installments. An house loan calculator calculator makes it easy for the loan applicants to calculate the monthly installments and schedule the payments.

Equated Monthly Installment EMI, a monthly amount is to be paid by the loan borrower to the financial institution or the bank from where the loan is taken. EMI is the combination of principal amount of the loan and the interest and is paid until the full loan amount is cleared. The interest and total principal amount is divided by tenure and this sum is generally paid monthly. Normally, the interest and principal amount doesn't change but its proportion might change as times. With every consecutive payment, the loan borrower pays more towards principal amount and less as interest.

Using EMI calculator

With an online EMI calculator, the calculations have been further simplified for the loan borrowers. Every bank or the financial institution offers top quality EMI calculators to assist the borrowers to calculate equal monthly installments. There are many benefits of using an online EMI tool.

• With graphical charts and easy to understand graphs, the online EMI calculators assists the loan borrowers to easily calculate the monthly installments.

• Making accurate calculations is possible with a sophisticated online calculator.

• An online calculator assists you to calculate car loan, home loan or a personal loan instantly.

• It is easy to determine monthly payments against interest and principal amount on the loans. With this, you can judge how suitable and affordable a loan is for you.

• Use the calculators to avail quick loan quotes as per the EMI

Calculating the equated monthly installment is simple through an EMI calculator. Simply enter details like rate of interest, period of loan and the principal amount to make instant, accurate calculations. Along with the basic monthly installments, you can calculate the total payable interest and total amount along with interest. The EMI will differ as per fixed and variable rate of interest. The Equated Monthly Installment that you attain gives an idea of personal financial commitments for the future. For example, you can find out whether you can afford personal financial commitments during the period of the loan. With this, you can plan personal finances better and take efforts to fulfill life's requirements.

HDFC, India's leading residential finance provider deals with a wide range of home loans, property loans and even deposit schemes. Use the house loan calculator to know your monthly installments for the loan you avail.

Source: http://www.articles.howto-tips.com/HowTo-Article-Directory/calculating-loan-installments-emi-calculator

How your home loan EMIs are calculated

Institutions providing home loans intermittently come up with new forms of loans that are devised 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 EMIs.

An EMI, or equated monthly installment, is a certain amount of money that is payable by you to the bank (in case you have taken a home loan) in order to obtain legal possession of the house.

What is an EMI?

In plain financial terms, an EMI is the amount of money paid by borrowers, each calendar month, to the lender, for clearing their outstanding loan. This also means that a sum of money gets deducted from your particular account irrespective of any sudden untoward financial stringency faced by you. EMI payments are made every month, generally on a fixed date, for the entire tenure of the loan, till the outstanding amount has been completely repaid.

EMI break-up:

When it comes to segregating the sum that is payable towards the loan, EMI is actually deduced based on an unequal combination of principal and interest. In the initial years of the loan, a major portion of the EMI comprises the interest payable by the borrower. As the loan matures, and as the principal gradually gets paid, the outstanding loan amount reduces. The interest component thus becomes lower than the principal, and finally minimal. The EMI, though, stays as a constant amount each month, except in the following cases:

Instances when the borrower paid a lump sum amount of the outstanding loan, then this amount gets duly adjusted against the remaining balance, thereby reducing the EMI. Now, in this particular case, the borrower gets an option where he/she can maintain the EMI while reducing the loan tenure.

In case the borrower has opted for floating rate of interest, then the EMI varies according to market fluctuations.

The EMI of your home loan is determined by four major factors

Principal amount: The principal amount refers to the actual sum of money that is borrowed by the lender. Beyond question, the principal amount is a major determining factor towards the EMI that is to be paid by you.

Rate of interest: The rate of interest is the rate at which the borrower has taken money from an organization or market. This is the most important factor when it comes to determining your EMI. The higher the rate of interest, the greater is the EMI payable by you. It is always advisable to do a market study of various interest rates offered by lending bodies and then decide upon a particular product.

Loan tenure: The tenure of the loan refers to the duration for which the loan has been taken. The longer the duration of the loan, the lesser the monthly EMI burden on the borrower.

Method of computation: The method that is adopted to calculate the EMI is a crucial factor when it comes to determining the EMI payable by you. The various methods adopted are:

a. Annual reducing method: In this method of EMI calculation, although the EMI is paid by the borrower at the end of every month, the principal amount and the rate of interest is made at the end of the year. This type of EMI calculation has a huge disadvantage attached to it, as the borrowers continue to pay interest on a portion of the principal that has already been paid back to the lender.

b. Monthly reducing loans: This is a better and easy-to-understand method of EMI calculation and is usually the most common calculation method adopted. In this calculation methodology there is a reduction in principal with EMI being paid every month. The interest is calculated on the outstanding balance.

c. Daily reducing loans: As the name implies, in this method the principal reduces every day, with daily loan repayments. The interest is charged on the outstanding balance. However, daily EMI payment is not a very feasible option; hence this method is not a very popular method.

Calculating EMIs:

Mathematically, EMIs are computed using the formula mentioned below:

EMI = (loan amount x Interest) x (1  interest) to the power of N/[(1interest) to the power of N]-1

Interest = (% rate)/12; N = loan tenure

A typical example showing EMI calculation is as follows:

Let's calculate the EMI for a loan of Rs 10, 00,000 @ 9 per cent p.a. interest rate for 15 years.

Loan amount = Rs 10, 00,000

Monthly interest = 0.09/12 = 0.0075

N = 15 years, i.e., 180 months

EMI = (10, 00,000 x 0.0075)  x (10.0075) to the power of 180/ [(1 0.0075) to the power of 180]-1

Therefore, EMI = Rs 10,142.67

This EMI is a combination of both the interest and principal portion of the loan, to be paid every month.

Loan amortization schedules

A loan amortization schedule is a product that contains home loan information such as period of scheduled payments, amount borrowed and amount outstanding. It also gives a detailed breakup of every EMI towards repayment of interest and the outstanding principal of the loan. The amortization table is prepared with the use of financial mathematics by financial institutions. It helps borrowers make vital decisions about their loan, on prepayment or refinance. It also provides details of interest for tax related benefits.

Step up and step down EMI

EMIs are at times planned according to the expected increase and decrease in the salary of the borrower.

In step up EMI, the EMI is gradually increased on the premise that the salary of the borrower will increase in the future. In this system, the initial EMI charged is less, and it increases as the expected income of the borrower increases. The change in EMI would be done twice during the entire loan tenure.

Similarly, in the case of step down EMI, the initial EMI charged is substantially higher and it gradually reduces with the number of payments done.

Pre-EMI and advance disbursements

There are instances where the borrower may opt for a partial disbursement of their home loan on the basis of the stages of construction of their house. In such cases, a pre-EMI is to be paid every month till the final loan is disbursed. The real loan repayment would commence only after the entire loan is disbursed. This pre-EMI would, therefore, comprise only the interest accrued on the disbursed money.

Also, there are cases when the entire loan may be disbursed by lenders before the completion of house construction. This is known as an advance disbursement and is undertaken by the lender when it is requested by the borrower and the lender is convinced of the capabilities of the builder to complete the construction work in time.

In these cases, the EMI payment starts immediately from the date of disbursement.

Fixed and floating rate of interest

EMIs can be calculated either on a fixed or a floating rate of interest.

Fixed rate of interest: A fixed rate of interest is charged throughout the loan tenure, thereby making the EMI payable a constant sum. It is generally better to opt for a fixed rate only when the prevailing interest rates have reached rock bottom levels and if an upward trend is anticipated.

Floating rate of interest: Floating rates vary with the market lending rates and are thus prone to fluctuations. The calculate home loan emi would increase or decrease depending on the interest rate movement. In this case, banks provide an alternative to increase the tenure of the loan, at a constant EMI, for borrowers who do not desire their EMI to be increased in case of higher interest rates.

Source: http://www.pr4-articles.com/PR4-Article-Directory/how-your-home-loan-emis-are-calculated

Loan Calculator

The multi-purpose loan calculator is a 4-in-1 calculator that aims to answer your questions such as:

·         How much is the monthly payment – aka EMI – for my loan?

·         How much money can I afford to borrow?

·         How long will it take to repay my loan?

·         How much interest would I have to pay for an item (electronic gadgets, furniture, household appliances etc.) that I purchased under a “low EMI” scheme?

These four calculators aim to address all the above questions, and more, with an easy-to-use and intuitive interface that provides instantaneous answers.

It is also important to understand the home emi calculator concept before using these calculators. Banks charge more than just the interest rate on loans. When obtaining a loan, lenders charge various kinds of non-refundable fees including processing fees and documentation charges. The home emi calculator factors in these one-time costs associated with borrowing. Home emi calculator, which is expressed as a yearly percentage rate, represents the true cost of your loan after taking into account the loan interest rate plus the fees & charges that you pay when getting a loan. Home emi calculator is a more complete measure that reflects the net effective cost of your loan on a yearly basis. For the banks, it represents their internal rate of return (IRR) on the loan.

If you pay ₹ 1600/- as processing fees for a computer worth ₹ 40,000/- under a zero percent EMI scheme with a tenure of 6 months, your home emi calculator is 14.15%. i.e., you are effectively paying 14.15% interest on the loan.

EMI Calculator

This calculator is available on the homepage of our website and is provided again here for your convenience. Enter the amount you wish to borrow along with the interest rate and tenure to determine your EMI. You can also change the start date for the EMI payment schedule. Interest rates offered by different banks may vary and you will be able to quickly determine your monthly payment under all scenarios.

Loan Amount Calculator / Loan Affordability Calculator

If you are planning to purchase your dream home or car, you must be wondering how much money you can afford to repay without overburdening yourself. It depends on how much EMI (i.e., monthly payment) you can pay and for how long. If you have an idea about how much EMI you can pay every month, then it will be easier for you to know how much you can afford. Enter the amount of EMI that you can pay every month, the interest rate charged by your bank and the preferred tenure, the loan amount calculator will tell you how much you can afford to borrow. Read more about factors that influence the amount you can borrow.

Loan Tenure Calculator

If you are planning to refinance your loan at a lower rate, you have the option to either reduce your EMI or loan tenure. In case you choose the latter option, you can quickly estimate how much time is required to repay your refinanced loan.

If you are planning to make a partial pre-payment on an existing loan, you can determine the remaining tenure on the outstanding principal amount using this calculator.

Interest Rate Calculator

It has become common these days to purchase high-end electronic gadgets, furniture and household appliances (such as fridge, TV, washing machine etc.) using installment loans. Manufacturers and sellers lure buyers with low emi for home loan payments and buyers fall into the trap without understanding the interest rate for such loans. Given the loan amount (i.e., item price), EMI and tenure, this calculator helps you estimate the interest rate on such loans.

Source: http://emicalculator.net/loan-calculator

Tax Benefits Associated With Housing Loans

Multiple benefits - how?

EMI (elementary monthly installments) consists of two parts - the interest portion and principal amount. Interest paid is allowed as a tax benefit under section 24(b) (subject to restrictions), while the principle amount repaid is allowed as a deduction under section 80C.

Maximum ceiling on tax benefit

Maximum tax deduction for repayment principal component of home loan can't exceed

Rs 1, 00,000 under section 80C. One should keep in mind that other investments/contributions are also allowed as a deduction under section 80C, and this limit of Rs. 1,00,000 applies to all of them put together.

Housing loan interest deduction, on the other hand, is allowed up to a maximum amount of Rs 1, 50,000 under section 24(b). However, the acquisition or construction of the house property should be completed within 3 years from the end of financial year in which loan was taken; otherwise, the amount of interest benefit allowed is only up to Rs 30,000.

Furthermore, the above tax deduction limit u/s 24(b) is applicable only for self-occupied house property. In case of let-out or deemed to be let out house property, interest is deductible without any limit.

Starting date for claiming tax benefit

Some say that deduction on principal component of home loan under section 80C is allowed as soon as one starts repaying the home loan. Some say deduction is allowed only once the construction is completed. The law isn't clear on the matter; hence the ambiguity remains.

Interest deduction on house loan under section 24(b) is allowed only on acquisition or completion of the house property. However, interest deduction for pre-acquisition or pre-construction period is also allowed but only after acquisition or construction is complete. It is allowed in 5 equal annual installments. But even after including the above, the total deduction should not exceed Rs. 1, 50,000 per annum.

Source of home loan

Unlike section 24(b), Section 80C doesn't allow tax deduction for home loans taken from friends and relatives. For claiming tax benefit on principal component of the home loan under section 80C, you need to borrow only from the lenders specified in that section. There is no such restriction under section 24(b) of the IT Act for claiming tax benefit on interest component of the housing loan.

Purpose of housing loan - Home purchase / construction vs.

Home improvement Deduction under section 80C for principal portion of the housing loan EMI is not allowed if the home loan borrowing is for the purpose of reconstruction, renewal or repair of house property. Put simply, tax benefit under section 80C is only allowed for buying or constructing a new home. In contrast, deduction for Interest is allowed under section 24(b) even for the loan taken for the purpose of repair, renewal or reconstruction of existing house property but subject to the limit of Rs 30,000 in case of self-occupied house property. In case of let out house property, actual interest is allowed without any ceiling.

Payment Basis - Due Basis vs. Cash Basis

Tax benefit u/s 80C can be claimed only when the actual payment is made. Interest deduction u/s 24(b), on the other hand, is allowed on accrual or due basis. Put simply, unlike principal portion, interest deduction can be claimed even if not paid.

[Source: http://ezinearticles.com/?Tax-Benefits-Associated-With-Housing-Loans&id=6743691]

Home Loan Calculator to Gain Tax Benefits

As per the provisions of income tax act you can claim exemption for the repayment of interest as well as principal. But there are certain limits to get exemption for interest and principal repayment. To know your tax exemption on home loan repayment you need to first understand how interest is calculated, and that’s where Quick’s Home Loan Calculator comes into the picture. Following is the illustration showing two components of your EMI i.e. interest and principal.

How does this Home Loan Calculator Work?

Praveen’s yearly income is Rs.10, 00,000. His age is 30 years. He is purchasing a house worth Rs.50, 00,000 and availed a loan for Rs.40, 00,000. Loan tenure is 15 years and interest rate is 10.5%. Following is his loan repayment/amortization schedule.

From this schedule, in our Home Loan Calculator we can see that for initial years major component of EMI is interest and payment towards principal is very little. The graphical presentation of the same data shows interest as well as principal payment due after every year. The next column in the table after interest column shows your tax savings every year based on your income slab. While calculating tax benefit, growth in your income at 3.5% per annum is considered.

If we look at the total amount for interest we can see that, at current interest rate for 15 years you end up paying as much interest as your borrowing amount. If you increase the tenure, total interest payment increases.

Let’s understand how this repayment schedule is prepared in this Home Loan Calculator. On your first EMI payment interest on your borrowing is calculated for one month. This interest amount is deducted from EMI. The difference is considered as your payment towards principal. So for the next month interest is calculated on your reduced principal due after last month’s payment towards principal.

One can pay more than the Home Loan Interest Calculation or can pay a lump sum whenever they have excess income or saving to reduce the interest payment. The amount you pay beyond your EMIs goes towards the repayment of principal amount and it reduces interest outgo in subsequent payments.

Source: http://homeloanemicalculator.tumblr.com/post/147792340220/home-loan-calculator-to-gain-tax-benefits

What Is EMI And How Is It Computed?

EMI is an oft repeated term that is associated with any loan taken. Let us understand how EMI works and what are the different aspects associated with EMI. The EMI facility helps the borrower plan his budget. The EMI is calculated taking into account the loan amount, the time frame for repaying the loan and the interest rate on the borrowed sum.

An Equated Monthly Installment (EMI) is usually a fixed amount of money that you need to pay your bank or lender every month as repayment of a loan taken, until your loan is totally repaid. It is essentially made up of two parts, the principal amount and the interest on the principal amount, divided across each month of the loan tenure. The EMI is always paid to the bank or lender on a fixed date each month. This could be done though post-dated cheques issued in favors of the lender or by providing auto debit instructions to your bank for the same.

Here’s the formula to calculate an EMI:

EMI = [P x I x (1+I)^N]/[(1+I)^N-1], where P is the loan amount or Principal, I is the Interest rate per month. [To calculate rate per month: if the interest rate per annum is 14%, the per month rate would be 14/(12 x 100)], and N is the number of installments.

Now, you might assume that the equal parts of the principal and interest are repaid to the financial institution every month. However, this not the case. During the initial years of repayment, the interest component repaid is higher while in later years, the principal component is higher. So, you cannot assume that you will have repaid half of the loan amount once half of the loan tenure is over. A more likely scenario us that you’ve reduced the total interest component that was due by a considerable amount while the principal amount remains to be paid.

Here is a simple example that explains how the repayment of your EMI reduces your loan amount during the repayment period leading up to the end of the loan tenure.

Here the loan amount is Rs. 1, 00, 000, which is lent at an interest rate of 12% with loan tenure of 12 months.

The monthly EMI is calculated at an annualized rate of 12% and amounts to Rs.8, 885 per month with the total interest component amounting to Rs.6, 619.

You will notice that the interest repaid decreases with each passing month while the principal repaid increases at the same time. This means that with a larger loan amount of say Rs.5 lakh and a longer tenure of 20 years, the interest component will form a greater portion of the EMI. This interest portion will reduce leading up to the loan tenure, while the reverse is true for the principal component.

Will the EMI change during the loan tenure?

There are three reasons why your EMI might change during the tenure of your loan.

Interest rate on your loan changes – If you have opted for a floating interest rate, the interest rate on your loan will change whenever the floating rate is reset by the lender. This, in turn, will result in a change in your EMIs. However, note that you can instruct your lender to not to change the EMI and instead request for change in the tenure of the loan.

You prepay the loan – In case you prepay the loan amount during the tenure of the loan, your EMI will change. This is because the principal of the loan will have gone down and the interest due will be based on this new principal. Here too, you can ask your bank to change your tenure instead of the EMI. This will help you repay the loan quickly.

You opt for progressive EMIs – Some lenders offer the option of repaying the loan through staggered EMIs. Here, you pay a fixed EMI for a specific number of years initially and after that term, you start paying larger EMIs. This is generally chosen by young earners who have just started their career and cannot afford to pay large EMIs initially and hope to pay larger EMIs as they grow in their profession.

At the end of the day, loans are liabilities and it is best to close them as quickly as possible, unless you are getting other benefits such as tax exemptions. It is best not to reduce your home loan interest calculation even if interest rates fall.

Source: https://blog.bankbazaar.com/what-is-emi-and-how-is-it-computed/

What are Home Loan process and its phases?

An Applicant approaches Bank with documents supporting their Employment, Income, Residence and Age Proofs.

The Bank then conducts a scrutiny of applicant’s submitted documents. After positive verification, the applicant is issued loan sanction letter. The loan sanction letter contains Bank offer to Applicant. This is Sanction process. If, applicant agrees through a mutual acceptance letter; he is given loan amount as part of disbursement process.

Ground Zero:

Each applicant is required to find out different home loan products and then compare them. Take your time and ask around as to how to go about home loan. Home Loan is a complex bank product and it is alright to little lost, as there are many factors to consider. If you have spent months finding the best nest for you, then you should spend the same time in Home Loan.

Sticking to Home Loan process, let’s assume you have decided upon a Bank X to apply.

1). Do your Home Loan Documents

The most frustrating part of taking a home is documentation. There is nothing smart about the documentation process. Here is a list of documents to prepare. Once you have ALL the documents, before calling Bank X, You have saved almost 2 weeks. (In typical scenario, Bank Agents take 3 documents, and then call 4 days later for 3 more and 2 weeks later for 4 more documents.)

2). Home Loan Application

Bank X will provide you a form to fill and submit. While you are at the bank, show them your documents and ask for GFE (Good Faith Estimate) of your Home Loan interest and processing Fee. Please take the form back home and take your time reading it. This will also give you time to compare bank X offer with Bank Y.

Note: Your home loan documents submitted are used for credit risk rating. Your Home Loan Interest Rates are only committed, after Home Loan Sanction process.

3). Submit Application

Fill out all details in home loan application form and take all your documents to bank X. Submit the form and documents to Bank official and take acknowledgement of all documents submitted. Ask the bank about the time they will take for Sanction process.

Note: Once you apply, the processing fee is non refundable, even on loan rejection.

4). Applicant Verification

(Address, Age, Income source, credit history, assets, liabilities etc.)

5). Condition Sanction Letter

If the Bank finds you credit worthy, they will lend you. An offer letter is sent to you by Bank. Or they are required to tell you the rejection reason.

6). Property Documents

Let the Bank now about decision. Good time to negotiate on the offer with Bank X. If you accept, Bank X now needs all documents for legal verification of yours (to be) property.

7). Property Legal Verification & valuation

8). Property Registration and Signing

9). loan for home

Source: https://loaneasy.in/home-loan-process/

Use an efficient way to calculate home loan EMI’s

The market of home loan in India is quite geared up due to aggressive advertising by banks & financial firms. From hoarding to bus backs, TV commercials to radio jingle, banks & finance companies are willing to display how home loans are offered at a competitive lower rate of interest, nominal processing fee, easy online documentation process and flexible repayment options. Besides, friends and relatives are always there to advice for the best home loan deals in India. But admist all this, it is important you stay alert to do sufficient research on all aspects of your housing finances.

Banks & institutions keep on introducing innovative home loan solutions to  meet the needs of house buyer from every section of the society. However, before choosing a particular loan, it is important you understand the parameters associated to loan structure such as the home loan eligibility amount, interest rate applicable, type of interest rate such as floating or fixed, processing & other charges like administrative or service charge, repayment options, etc.

If you personally sit down to do all these complex calculations on your own, you may find it extremely difficult to come up to the right consensus. Resultant would be, you may end up paying extra money on elements like the interest rate on total tenure, processing fee or pre-closure charges, etc. Therefore, leading banks and finance companies in India have introduced home loan EMI calculator under which you can fill in all the relevant factors and come to know the exact EMI that you should continue paying the banks or finance companies to repay your loan on time. When using home EMI calculators there are various elements like income source, employment status, tenure of  the loan, etc. taken into consideration. With the few relevant inputs it makes your decision careful and thorough. They  help individual mentally and financially prepare themselves for the requisite amount to clear off the loans on time. It helps them understand the nitty-gritty of the entire loan structure.

These calculators are available on websites and is provided for your convenience. While using you can enter the amount you wish to borrow along with the interest rate and tenure to determine your EMI to pay towards debt clearance.  Interest rates offered by different banks vary and using such calculator help you quickly determine your monthly payment under all scenarios.

Factors that will influence your home Loan while using home loan EMI calculators:

Income: The income plays one of the decisive role for loan amount and EMI you can pay to the bank. Usually 40 to 45% of your monthly gross income can be utilized for paying EMI, which again decides the amount of loan that you can borrow.

Expenses: Your monthly expenditure determines the amount of money you have in hand which to divert towards for loan repayment. So current expenses and future inflation will also count.

Lifestyle: It is advisable, always try to take a loan that should not let you compromise at least on the basic lifestyle needs. It should mean that you can continue to go for family outings, or eat in a restaurant, or meet other financial goals while repaying your loan.

Risk Appetite: An individual’s risk appetite and the attitude towards debt also matters a lot. You may opt for co-applicant for higher EMI deductible, quicker clearance of the loan. If you expect to get cash benefits in the near future, you might opt for foreclosure after some years of loan repayment. 

Planning for dream home needs very focused approach. Home loan EMI calculators are great step ahead towards easy solutions on house loan calculations and measured approach towards it.

What Happens after Your Home Loan is approved?

You’ve searched for your dream home. Now you’re looking for a Home Loan? If you’re wondering what happens after your Home Loan is approved, this is your quick guide to the post-application process.

Property assessment

First things first, property assessment! The property that you want to buy, as well as any property that you provide as collateral security will be inspected by a technical officer. If it is an under-construction property, the stage of construction and quality of construction is noted. If it is a completed property, the age of the property, internal and external maintenance, and development of the surrounding area will be noted by the officer.

Scrutiny of documents

The documents pertaining to the property will also be scrutinized by a lawyer. Generally, only the original documents for the property are accepted by the bank. The No Objection Certificates (NOC) need to be submitted to the bank.

Property Registration

You need to go to the sub registrar office for the registration of your property. You also need to pay your stamp duty and registration charges. After this process is complete, you will receive a copy of the Sale Deed and another copy will go to the bank.

Pay Your Part

The bank will ask for proof of your contribution to the loan. This is your down payment. You might need to give your bank statement, with a cheque or net banking details of transferring the money to the builder.

Disbursal of Home Loan

On your acceptance of the loan offer extended by your lender, the assessment is done and documents are scrutinized. The property also gets registered in your name. Once this is completed, you will need to submit the final processing fee to your lender by cheque.

When the processing fee is received by your lender, a cheque for the approved loan amount is prepared and given to you. Your Home Loan repayment schedule will begin one month after the loan is disbursed.

Funding Release

If you purchase an under construction apartment, your bank will release the funds in stages. This will be based on the construction progress. So, until the construction is totally completed, you needn’t pay EMIs for the whole Loan amount. Sounds fair? For a completed apartment or house, the funding will be released in one shot.

ECS Set Up

The Electronic Clearing Service (ECS) or the standing instructions need to be set up for your loan. Here, you need to sign ECS forms so that the EMI gets auto-debited every month. Earlier, this might not have been mandatory. Now, banks are making it mandatory to submit ECS forms for all Loans. This way, you don’t have to worry about forgetting the due date of your EMI.

Get Demand Letters

As and when the builder completes the construction of the house or apartment, funds will be released by the bank. You need to get a demand letter from the builder and give it to the bank whenever the funds need to be released. The builder needs to provide a receipt for the same. This receipt should be handed over to your bank

Additional Reading: home emi calculator

Getting a Home Loan is simple, really. If you’re ready to get one step closer to your dream home, why don’t you browse our offers on Home Loans?

Source: https://blog.bankbazaar.com/what-happens-after-your-home-loan-is-approved/

How Does A Home Loan Really Work?

Banks often publicize their housing loan interest rate, but they seldom explain the workings of a loan for home. While a housing loan is not very simple to understand, it isn’t rocket science either. In this article, we try to explain the workings of a housing loan, but first, you need to understand a few key terms:

Principal of a Housing Loan:

The principal of a housing loan is basically the amount borrowed and not yet repaid. For housing loans, interests are usually charged on this principal amount.

Housing Loan Interest Rate:

Interest rates for housing loans in Singapore are usually quoted as a fixed rates or SIBOR + a fixed value, in case of floating interest loans. For example, a floating rate loan could be quoted as SIBOR +1.25%.

Loan Tenure:

The loan tenure is simply the agreed length of a housing loan. In Singapore, homebuyers can take out housing loans with tenure of up to 35 years.

An Example:

Let’s assume you’re about to take out a home loan of SGD200,000 for 30 years, at an agreed interest rate of 1.75%. We also assume for the purpose of this example, that the rate is fixed for 5 years and then it’s estimated to be SIBOR +0.5% and SIBOR keeps stable at 1.25% for the whole duration. (Please note that in Singapore the fixed rate is fixed only for 1st few years and thereafter is pegged to Singapore Interbank Offer Rate (SIBOR)

Illustration:

Home Loan Amount: SGD200,000

Interest Rate: 1.75% per year

Loan Period: 30 years

Interest and Monthly Repayment Calculation:

The interest on all home loans in Singapore is calculated monthly. In this case, the 1.75% yearly would equate to a monthly installment of $714.49. However, out of 8473.88 dollars paid in the 1st year, the interest payment in the 1st year to be $3459.11.

This rest of the payment goes into bringing down the loan principal (what you owe on your home loan).

As your home loan interest is calculated based on what your principal, the interest on your loan from the second year onwards will be slightly lower.

In calculating the monthly amount you’re required to pay, banks use a formula called an “amortization formula”. This formula helps in calculating your monthly payment amount and works in such a way that by the time you get to your last payment (based on your agreed loan term); you would completely pay off your loan and all the due interest.

The monthly repayment amount usually remains the same for the entire term of your loan.

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