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L.Srikumar Pai
B.Sc( Engg.), MIE, MIWWA, MICI
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House Loans
( House loan tips and guidelines )

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Housing Loan - Fixed or floating rate which is better ? 


Home loan seekers usually face a dilemma of whether to opt for fixed rates or floating rates. This is mainly because many of them do not know the exact nature of differentiation between fixed rates and floating rates. There are some fundamental differences between the various rates on offer that individuals must appreciate before opting for a home loan. More....

Housing Loan - Guidelines  

1. For what purposes can I seek a first time home loan?

You can generally seek a first time home loan for buying a house or a flat, renovation, extension and repairs to your existing house. Most banks have a separate policy for those who are going for a second house. Please remember to seek specific clarifications on the above-mentioned issues from your commercial bank. More

Home loans: Multiply your gains with joint ownership

Tax benefits on home loans have turned out to be an important aspect of home buying . Here is how you can benefit from the same.
For self-occupied house property, the annual value of the house property is considered to be nil. Further, an individual could claim a deduction for the interest paid on the home loan (for purchase or construction) up to Rs 1.5 lakh, subject to certain conditions.                                  ( More.. )              

Purchasing a house can be a valuable form of investment. However, it requires considerable thought and careful financial planning before taking on such a big step. If owning a house is part of your financial goal, then you’ll need to know whether you can afford from your income and savings.

Most people take  housing loan from a banking institution which offer different loan packages to cater for the needs of different users. Be sure to compare rates and choose a loan based on its features, fees and charges as well as the quality of service offered by the institution. Also, make sure you have all the required documents for your application

Depending on the market value of the property, the margin of financing can go as high as 95% of the property’s value. This is assessed on factors such as:

Type of property
Location of property
Borrower’s age
Borrower’s income

Commonly, the length of a housing loan can last up to 30 years or when the borrower reaches the age of 65, whichever is earlier. Each loan package differs from one institution to another, so do not base your decision on any single feature. Look out for features like flexible repayment terms or graduated payment schemes to suit your repayment capability.

When you purchase a house, it’s extremely important that you provide insurance coverage for your home as this acts as a form of financial security for you and your loved ones. Consider the following insurance products:

House Owner/Fire Insurance Policy
Mortgage Life Assurance (MRTA)

When taking up a housing loan, you’ll need to be aware of your rights and duties as a borrower and that of the banking institution’s as you will be dealing with the banking institution for a long period of time.

Cut-throat competition among Indian housing finance companies has brought down the interest rates by a few notches. The vast difference in interest rates across-the-board has all but disappeared, and home loan companies are taking recourse to product innovation to stand out in the burgeoning home loan market. Today, apart from the resident Indians, even NRI's can apply for a home loan. An applicant applying for a loan can either opt for fixed or floating rates. The loan rates of companies today are in between 7.50% to 12 %, depending on the repayment years.

Some of the Top Home Finance Banks or Companies are:

Housing Development Finance Corporation (HDFC) Bank, State Bank of India, Punjab National Bank, ICICI Bank, IDBI Home Finance, LIC Housing Finance, GIC Housing Finance, Bank of Baroda etc

( Courtesy: )


Make the correct choice

Choosing the right home loan option is as important as picking up the right piece of property

The rising interest rates may be good news for those who invest in bank deposits. For property buyers looking for home loans, the current scenario is not really comforting.

Not only have interest rates gone up by 2-3 per cent in the last 12-18 months, even banks have tightened their lending norms. Vijaya Bank, for instance, has taken a conscious decision to lower its exposure to property loans going forward and according to the bank's Chairman and Managing Director, Prakash P. Mallya, a number of other sectors such as infrastructure and manufacturing would become key borrowers in the coming year.

Fixed or floating

In such a scenario, property buyers need to be more knowledgeable about their home loans than in the past and with interest rates on the upswing, the debate between fixed and floating rate option has become more crucial than earlier.

For instance, floating rate would be a natural choice when interest rates are on the downward trend or when they are static. On the other hand, fixed rate would be an automatic option when the rates are on the rise.

But the task gets even more challenging because nobody can get a fix on the interest rate movement. But our task is to make matters easy for you and when you shop for your property, there should be no dilemma on the loan option.

Fixed or floating? In the current interest rate scenario, you may be tempted to believe that fixed is the best option. However, please remember that even in a fixed loan option, the interest rate is not fixed forever. Most fixed loans carry a clause which allows the banker to increase the interest rate in the event of steep hike in interest rates. As a result, most of the home loan rates are linked to the primary lending rate. However, borrowers often tend to ignore this fact.

Fixed loans would be best suited when the loan period is for a longer period, ranging from 15-20 years. Also, keep in mind the fact that fixed loans generally carry a higher interest rate than a floating rate.

Floating rate, on the other hand, is ideal for those looking for a short tenure loans. Ideally, go for this option if your loan is for less than 10 years.

The biggest advantage is the interest rate is lower on floating rate loans and most banks don't charge penalty in the event of pre-closure of loans.

A floating rate works to a great advantage for short-term loans with five-year tenure because even in the event of a rate hike, it would not be expensive.

Though home loan rates have gone up in recent times, banks have tended to keep this hike to 0.25-0.5 per cent at one go.

Since the difference between a floating rate and fixed loan has generally been 0.75-1 per cent, you don't lose much if the loan tenure is for five years.

Flexi loan

Make the best of both: A flexi loan product is an ideal solution for someone who can't take a call on interest rate.

Many banks offer this product which is a combination of fixed and floating option which allows the borrower to switch from one option to another, a limited number of times.

Even those looking for a home loan with a tenure of 10 years can look at this option as it offers flexibility. But read carefully the fine print relating to the number of switches because it is very crucial in a flexi plan. Also, check out whether you can do the switch free of cost.

Despite the rising interest rates and property prices, if investors are still flocking to real estate, it is largely due to the huge potential and tax benefits. As you are aware, interest paid on home loan up to Rs 1.5 lakhs offers tax benefit. In fact, this is the biggest tax benefit for those in the 30 per cent income tax bracket.

Also, property, along with equity, has proved to be an asset worth investing for decades. Both are necessary for any individual's portfolio.

Not only do you need to invest in property for your living but also as a piece of investment. Pick your property with the right loan product.

( Courtesy: )

List of Housing Finance Banks & Companies


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