Buy a house is not easy. First, you have to find a house, you have to see if you can afford it and if you can, then you need to find the right loan agency.
Borrowers are often spoiled for choice today. So here are some important tips to the lender's option.
The Fine Print
Borrowers should read the draft of the housing, including the fine print carefully and get doubts clarified before signing on the dotted line. After all, the loan is funded by one of the largest investment for many worthy of intensive care.
Interest rate
Even seemingly small differences in interest rates can translate into large amounts of money to a borrower. Rs 30 lakh loan for 20 years to 10.5 percent per year, equated monthly installment (EMI) of Rs 29951st
Change rate of 11 percent and a monthly contribution will increase to more than Rs 1000, Rs 30966th Excess amount paid over the term of the loan by the borrower would have a significant Rs 2, 43421st It follows that borrowers should look for lenders offering competitive rates.
Fixed rate loans are always more expensive than a floating-rate ones. The reason for this is so firmly fixed interest loans provide a stable monthly outgo. Borrowers should consider whether they are willing to pay a premium for the benefit of a stable EMI. Many fixed rate loans, these days, is fixed only for a certain period or within a certain range.
Borrowers should also check whether and when a fixed interest rate may change. In floating rate loans, the borrowers should examine how lenders calculate the effective interest rate and whether it makes sense.
Banks these days use their base rate (which vary with time) and to compare the mark-up added to arrive at an effective rate of interest. HFC rates generally have their own criteria (which will become regular intervals), and the spread (difference between pre-determined) to reach the effective rate. Borrowers should also check whether the lender offers the opportunity to exchange fixed and floating rate loans and vice versa. Flexibility in this regard and I would pay the lender a competitive score.
The processing fees
In addition, interest rates, borrowers should also consider the processing fees for lenders.
Processing fees can vary between 0.5 to 1 percent of loan value, or a fixed amount. In most cases, which are collected by the lender for processing a loan application at the time of prepayment and are non-refundable.
The lower the fee for processing, the better it is for the borrower. Some lenders also offer value-added services, such as helping borrowers in their home search process. Borrowers should check that the fees for services are reasonable.
Loan to Value
Lenders limit the amount of a mortgage of the property value. For example, if the property to the RS 40 lakh as a loan-to-value is 80 percent, or HFC Bank provides loans up to Rs 32 lakh.
The balance amount (RS 8 lakh) must be paid by the buyer to the builder. In many cases, lenders require borrowers to deposit the balance amount of the builder before the home loan is sanctioned.
Lenders who offer larger loans and the value may be preferred because it helps reduce the need for borrowers to arrange.
During Reset
In case of floating rate loans, the borrowers should review the lender during the reset. This refers to the frequency in which interest rates, lenders look at and modify them if needed. Today, many lenders rates reset quarterly.
Reset period longer works to the advantage of borrowers when interest rates rise.
However, the flipside, if rates fall, borrowers have to wait longer benefits passed by the lender. In this context, borrowers should also look at the track record of some lenders passing on the benefits of reduced rates.
They should also ask if lenders treat their existing and new customers to par. This is often seen that many lenders to attract new customers to offer them better terms than existing borrowers.
Lenders who do not discriminate would score higher.
Borrowers should also look at how lenders calculate interest on the loans - daily, monthly or yearly reducing balance basis. On this basis, the shorter the better it is for the borrower.
Prepayment penalties
Borrowers, lenders would be good to check your policy prepayment penalties that could be about 2 to 3 percent of the amount paid. With a lot of nudging from regulators, banks and HFCs have done much to advance for at least a floating rate loan. Lenders who advance to waive off the charges to stand in a better position than those who do not.
Repayment options
Lenders who offer flexible repayment options, depending on the requirements of the borrower's score brownie points.
For example, features such as EMI can start even before construction is completed, and the structuring of EMI such that they are lower than the initial period of increase in the future increase in the borrower's income, could suit the specific needs of home buyers.
However, borrowers should check whether the flexibility of an extra cost, and whether it makes sense.
Penalty for default
If a borrower defaulting on payment of the mortgage, the consequences can be severe. Penal Code, self-interest can range from 18 percent to 24 percent a year. Lenders are less stringent conditions, which are related to default and penalty interest rate is lower than the result of better.
Article source :- http://www.thehindubusinessline.com/features/investment-world/article2783172.ece?homepage=true&ref=wl_home
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Monday, January 9, 2012
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