Is Home Loan Balance Transfer a Good Idea?

With a balance transfer on your existing home loan, you can get a better deal. Many borrowers keep complaining about banks being unfair to them when it comes to interest rates on home loans. Banks are quick at hiking the floating home loan rates in a hardening interest rate scenario but when the rates soften, they are not very inclined to reduce the home loan rates.

Many borrowers opt for a home loan balance transfer with other banks or lenders. There are many lenders in the market who are willing to take over home loans by offering a low interest rate to attract borrowers. Even though it seems beneficial to transfer the loan to another bank, it may not be the right solution for all borrowers.

It is necessary for borrowers to do some research on interest rates that are on offer by other banks. The rates can viewed on the website of almost all reputed banks. This will help the borrowers identify the best deal.

According to experts, home loan balance transfer is a good idea for borrowers if the difference is approximately 175 to 200 basis points (1.75 to 2.00 percentage points). The tenure remaining in the original loan will be playing an important role in deciding whether or not switching lenders is a good option. Total savings are likely to be higher if the remaining tenure is longer (12 to 13 years). There is no point in switching to another bank if there are merely three to four years left to repay the home loan. Borrowers also need to consider the prepayment fee.

Be it a mortgage loan against property or a home loan balance transfer, it is very important for borrowers to find out the rates and fees charged by the lenders.

What are the benefits of a Top up Loan on Home Loan?

Many reputed banks offer a top up loan to existing home loan borrowers. The tenure of this loan can be anywhere between 15 and 20 years. It will mainly depend on the term of the home loan.

Even though the tenure of top up loans is based on the home loan term, many banks decide the tenure on the basis of their evaluation. They consider several factors like the borrower’s repayment capacity, credit history, value of the property and outstanding home loan amount. Only when the criteria are met, the bank sanctions the loan amount. Usually, the top up loan and outstanding home loan amount does not exceed 60% of the property’s market value. 10 Lacs INR is the maximum limit under this type of loan.

What are the benefits?

You can apply for this loan and use the amount for meeting personal requirements such as, furnishing a house, high education, purchasing furniture, business needs, marriage purpose or to meet medical needs. According to experts, if borrowers utilize this loan for acquiring add-ons to their existing home or to make certain modifications or renovations, they can claim tax benefits for the same.

Compared to applying for a personal loan, the process for top up loan application is shorter and simpler. Since you will be an existing customer of the bank, you will get it done easily.

Choosing a reputed home loan lender

It is very important to choose one of the reputed home loan providers in Mumbai. Only when you get a good lender, you will get to enjoy attractive interest rates and other benefits. From understanding documentation requirements to learning more about the different types of loan requirements, there is a lot of preparation that should go into obtaining a loan.

Benefits of Applying for Lease Rental Discounting

Did you know you can generate funds from your residential or commercial property? Your property will not only get you rental income on a monthly basis but the rent receivable will also help you yield more benefits in terms of funds.

Lease rental discounting is a type of term loan that you can raise against the rental income of your commercial or residential property. The funding you obtain from the loan can be used for personal as well as business purposes. This type of term loan is approved against the current market value and discounted rentals of the property.

In this case, the loan agreement is made between the lessee, lesser and the lending institute. The lesser doesn’t collect the rent because the amount gets credited on a monthly basis to the lending institution through an escrow account. The current occupant or the lessee is required to deposit the rent in the escrow account directly.

So, if you are looking for a short term loan for personal or business needs, lease rental discounting is the best option to look out for. Just make sure your property has a registered agreement between you and the lessee before you approach a lending institution.

Here are few points that you need to know about this type of loan:

• For collateral, you need to present a residential or commercial property that is on lease
• This loan can be taken for a tenure of up to 9 years
• You cannot obtain more than 70% of the property value as loan amount
• You can get the funds at an attractive interest rate, if you negotiate

Whether you are applying for a lease rental discounting loan or you need loan against property, make sure you are choosing a reliable and established lender.

All You Need to Know About Commercial Mortgage

Looking for ways to expand your business? There are several commercial mortgage options that you can choose from. This type of mortgage will give business finance that can be used for moving, expanding or improving your company premises. With the loan amount, you can plan business development in an affordable way. Just remember, if you don’t keep up repayments on your mortgage, your property may be repossessed.

This type of loan is secured by commercial property such as, office building, shopping center or an apartment complex. Typically, the proceeds from this mortgage are used for acquiring, redeveloping or refinancing commercial property.

If you are applying, you will have to ensure that your trading history is good. Lending institutions are very particular about the trading history of the borrower. They wish to know if the borrower can afford the mortgage and even repay it.

How much money you will get as loan will be determined on the basis of loan to value (LTV) and the debit service coverage ratios. You can choose fixed rate or floating rate of interest for this type of loan. Underwriting factors as well as market interest rates affect the rate of interest generally quoted on a certain commercial real estate. Compared to residential mortgages, commercial mortgage interest rates are higher.

Generally, this type of loan can be taken for a term of five to ten years for stabilized commercial properties that have an established cash flow. Whereas, for properties in transition such as, newly opened properties or a property undergoing renovation, the term of this type of loan is between one and three years.

Be it a home loan or commercial loan, find out all details such as, documentation requirements or factors like home loan balance transfer and fees before choosing a lender.

How top up loans work

A top-up loan is the add-on loan that one gets above their home loan. It allows you to avail an amount of money on your home loan when you need some extra funds on an urgent basis. This loan is an additional loan given to you by the bank on top of your home loan. A top-up loan is usually offered after a few years of taking a home loan.

How a top up loan works?

A top up loan allows you to get an extra loan on top of your existing home loan. The top up loan on home loan gives you the privilege of taking an additional loan on the home loan you have already taken. This top-up loan is granted only if you have an impeccable loan repayment track. 

Are you eligible for a top-up loan on your home loan?

You can only get a top up loan if you have a home loan on which you can top it up. The home loan providers in Mumbai, which are the banks, might provide you top up loans on your home loan. And if not, you can transfer your home loan to another bank that offers top up on the current home loan. Though the terms and conditions of each bank vary, there is a need to wait for a period and clear some of the home loan amounts to take a top up loan. 

What would be your tax benefits?

Tax benefits on top up loans are determined by the reason for which the loan is taken. The tax deductions on home loans are based on the interest rates. So if you’re paying EMIs for your home loans, the interest component for this EMI can be claimed for deduction. You can also claim a deduction for the principal too.

What you should know about Home loan against Property?

Loan against a property is provided when you are looking forward to invest in real estate. Home loan is provided at a certain percentage based on the market value of your existing property. Ideally the percentage falls between 40% - 60%.

It is not a hard and fast rule that you have to buy a home against a home loan for a property. There are companies and banks that provide personal loan. But, if you are unaware then loan interest is something which can make or break your deal. Personal loans offer higher interest rates and they vary between 16% - 21%. But taking home loan against a property means you will have to pay interest at the rate of close to 15%. These statistics may vary. But there is a huge difference for sure between these interest rates whatsoever. Though, the preferred option can be Home loan against property.

If you are applying for a loan against property through Bank, below is the process involved in its application:
•    If your property has owners more than one, then it is viable that you apply for the loan together.
•    Bank checks all the documents related to your property and verifies electricity, telephone and residence proof. Identity proof such as Pancard, Passport, Aadhar card or a Voter ID card have become a must submission at a bank. (Any one or any of the combinations are must submission for a loan at a bank).
•    Not just this, if you are employed or self-employed bank requires bank statement for the past 6 months and 2 years respectively.
•    The minimum age for borrowing a loan is 24 years and maximum is 60. For a self-employed individual the age limit is 65.

Bank reviews your credit limit by going through your timely payment track of other bills etc, before giving an OK for any Property loans. Based on the information collated, bank decides whether to give consideration to your loan or no.

The general rule for buying a property and for applying a loan request depends on solid reasons and assurance of your repayment for that loan. Hence, suggested; Do your study well. Get in touch with the bank or the financial company and be prepared with the documents asked for to avoid delay in the process of home loan for buying a new property.

What Income is taken into consideration when opting for a Home mortgage loan?

We all need a home of our own. Home is a one-time investment and real estate is the bank of profit if the property chosen by you now delivers enough money in the near future when you plan to sell it. But, coming back to the point, home loan is the best way to get closer to your dream of owning a home.

But as they promote, Home loan is not made available that easily to any investor. A good study of the investor and his income is just the beginning to the home mortgage loan process. So, here are lists of sources, variables etc. that will help you know if you are eligible for a loan.

•    For a regular salaried person, the lending partner i.e: Bank or finance companies, they would want to see the current pay stubs as well as tax forms for the past 2 years. If there has been a raise in salary or change in pay in any form, then you are required to get a statement from your boss confirming on the permanency of change.

•    You are also eligible to use special case income for eg: amount for overtime or commission etc. These will be income calculation for commercial property loans or home loan.  To prove about these additions in your income, it is important that you quantify the same with documents received for commission or overtime of last 2 years. It is also important that a written letter is given by the boss, that you will be expected to continue doing the same.

If the income your earn comes from another source beyond a company i.e a source for a part-time work or a side job, then it is important or mandatory to submit W2 forms for these too.