Buying a home is all about making the right decisions, after sieving through a host of options. This is not just relevant when choosing the proper home, but is equally important in finalising the simplest home equity credit . Considering a home equity credit is perhaps the longest financial commitment for many folks , a scientific approach in making this important.
Getting a home loan
Who can get a home loan? Home loans can be availed of by individuals (salaried and self-employed), co-operative societies, corporate bodies and associations of persons. Typically, the house loan seeker can avail a loan amount that doesn't exceed 80 per cent of the value of the property.
The three pillars
Higher eligibility, competitive interest rates on repayment and tax benefits are the three pillars of home loans providing a fillip to the buying of new homes. If we are seeing families buying a home in an area considered ‘more expensive’ than what their budget would originally have allowed them to, this trend is attributed to these three pillars. It has empowered families to maneuver into bigger homes, in locations that they earlier would only have dreamt of staying in – home loans have changed things within the residential land market and empowered families to maneuver into better lifestyles.
The actual loan amount
How is the actual loan amount determined? This is done after taking under consideration factors like repayment capacity, age, educational qualifications, stability and continuity of income, number of dependents, assets, liabilities, saving habits etc. If the individual is married and is an earning member of the family, that individual can become the co-applicant. This will substantially improve both the probabilities of getting a loan also as increase the entire amount of loan taken.
Tenure
The tenure of the loan ranges from 1 to twenty years. In some cases, loans up to a 25 year tenure are often availed of. The term however, doesn't extend beyond the retirement age or 60 years whichever is earlier (65 years for self employed individuals).
One should also consider plans for retirement and amount required whilst choosing the tenure of repayment.
Document Requirement
The following are the essential documents required to use for a home equity credit . However, the documentation requirements may vary basis customer profile, location of home, loan requirement and a number of other factors.
1. Income and identity proof related documents for the salaried include Salary Slip, Form-16 and ID.
2. Balance Sheet, P&L A/c and Bank statements for Businessmen.
3. Photocopy of property documents if the property has been identified.
Tax benefits
It is not just those that don't have adequate funding to shop for homes who find a home equity credit attractive. Tax benefits on home loans are often availed under Section 80C on complete and self-occupied properties. Thus, many an one that doesn’t quite need a home equity credit still finds it advantageous to require a loan and avail of tax benefits. In most fast-growth residential areas, this has been the norm instead of the exception. If one looks back at the past couple of years, growth of the home loan segment and the residential realty market’s growth seem to be in sync with this trend. However, it is worthwhile to note that tax benefits on home loans cannot be availed on under construction properties or for properties being acquired only for investment purposes.
Types of home loans
Some of the more popular home loan products are the regular home loans, home extension loans, home improvement loans, home mortgage loans, home loans for women, non residential property loans, lease rental finance, step up EMI product etc.
The days of the regular ‘take it or leave it’ home loans are long ago gone. Home loan seekers find on offer several tailor made products aimed at specific locations, with add-ons that are obvious sweeteners for the loan applicant. This can be an add-on policy for the property or the loan taker, for instance . Today, as long as the typical customer’s financial awareness has improved significantly, he / she lists out the specified add-ons for the house loan provider to guage .
The size of the EMI depends on the quantum of loan, rate of interest applicable and tenure of loan. Some Housing Finance Companies have a regressive payment scheme meant for home loan seekers who are due for retirement within the term of the loan and have applied jointly with an eligible younger co-applicant.
Repayment Capacity
One should judge one’s repayment capacity considering all the above elements then seek an appropriate loan amount. If you're married and have a family to support you want to not aim to distribute quite 40 per cent of your net because the EMI (Equated Monthly Installment).
Should you be single and planning to settle down with family after the first five years of loan disbursement, you could easily budget 60 per cent of your net income for the EMI, depending on your lifestyle and spending habits. While these are general thumb rules, it's going to help for you to think about your other financial commitment – both short and future – before choosing the loan amount.
Advantage of Shifting current home loan lender
Banks generally do not pass on the advantage of decreasing loan rates to the existing Loan borrowers who are repaying a loan for the past two or three. However, on the basis of good repayment track record, individuals can also discuss and re – negotiate with the new lender for better interest rates. Not just the reduction in interest rates, there are several more reasons thanks to which one would want to vary his current lender. The new lender may be more flexible. In case, you need to renegotiate on some terms and conditions with existing bank such as increasing the tenure of your loan and decrease the amount of your EMI but your bank has not agreed thereto whereas the new bank may agree on these terms.
