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No processing fees for Home Loan and Take over HDFC : Offers a Choice to choose your loan as Partly Fixed or Partly Floating. HDFC has launched Dual Rate Home Loans - a new limited period 8.25% fixed interest rate product. GIC : launches Home Guard Loans a unique Home Loan with option of life insurance. ICICI : Offers Free Personal Accident Insurance with Home loan Kotak Bank : Offers Free Personal Accident cover with Home Loan. DHFL : Offers "Samarth" a unique home loan plan for the self employed. LIC : Offers "Fix-O-Floaty" loans at a competitive rate of 8.90 % fixed up to March 31, 2012, for loans up to Rs. 1.50 crore & thereafter on floating basis. Another new product "Advantage 5" offers fixed rate of interest at 9.25% for 5 years & thereafter on floating basis. SBI : Launched new product Easy Home Loan which offers interest rate 8% p.a. during first the year. Interest rate during next two years is fixed at 9% p. a Standard chartered Bank : NO Guarantors required for taking a Home Loan
Housing Finance Companies Axis Bank Ltd. Bob Housing Finance Ltd. CanFin Homes Ltd. CitiBank (India) Ltd. Corporation Bank Ltd. Dewan Housing Finance Ltd. GIC Housing Finance Ltd. HDFC Ltd.
you must decide how much of the cost can be funded by a loan. How much must you leverage? Having found a Rs. 10 lac property that you want to buy.HSBC (India) Ltd. Normally Housing Finance Companies will loan you about 80-85% of the property value. You need to make a minimum down payment of 15-20% of the property value. (unless you have rented out the home) your ability to repay the loan depends entirely on your salary or regular income from a stable business. Kotak Mahindra Bank Ltd. IDBI Bank Ltd. LIC HOUSING PNB Housing Finance Ltd. How much can you afford? As the investment in a home does not yield any monthly income. State Bank of India (SBI) Choosing a Loan: There are several features of a Home loan that you must consider based on an analysis of your specific needs. Please also . HUDCO ICICI Bank Ltd.com gives you the ability to find the Maximum loan that you can afford among the companies in the database. IDBI Home Finance Ltd. Standard Chartered Bank (India) Ltd. Finance companies would normally give you a loan to the extent that your monthly repayments are less than 35-50% of your gross monthly salary. IndusInd Bank Ltd. AbodesIndia.
com will try to lower costs.a. 3. cash in a Bank FD etc. It is prudent to lock into a large loan today rather than a smaller one.5% post tax) by investing in shares or in a business. Processing and administrative fee (1. Also remember that the government is keen to give more concessions to the housing sector and the overall cap on tax breaks will go up in the future. (about 13. In AbodesIndia. You may not qualify for the full tax break if your loan is relatively small.com helps you get some idea of your credit standing and the maximum value of the home loan that each Finance Company would be willing to make to you. In this case borrow up to the limit of 80-85% of the property value rather than withdraw cash from the other savings to make the down payment on the loan. If your investments are in Fixed Deposits that are giving you about 11% p. Convenience always comes at a cost! ««««AbodesIndia. However. If you have identified other profitable avenues of savings that are expected to give you 1520% returns p. 4. Longer tenure loans have smaller monthly installments. As the value of the loan amount increases. The tax breaks are directly related to the level of interest and principal repayments made each year.com use the Tax Planning Tool to help you check post tax costs under different tax policy scenarios you can construct.remember that you have to normally bear the following fixed costs before your loan is disbursed: 1. This happens because salaries invariably .a (about 7. You can still get a large loan on a relatively small monthly salary by choosing to take a longer period loan. if you expect to make over 20% p.a.5-2% both included) Legal fees Stamp duty charges ( for resold property) Property insurance premium Accident insurance premium Make sure that You have an asset base that is easily converted to cash (e. longer period loans maybe more expensive (higher rate of interest) even though the monthly installment payment is lower. You may feel tempted to take a smaller loan by funding the large down payment (the difference between the value of the property and the loan you have applied for). AbodesIndia . However. the interest rate charged usually also increases. after tax) and the effective post tax cost of you Home Loan is 10% (about 15% before tax) then this is a good idea. by withdrawals from other investments. with an over all upper limit. Another important consideration is your tax bracket and the extent of using available tax breaks. you can use the Home Loan as a way of getting a cheap loan.a.4% p. 2. Statistical evidence also shows that most people take a longer tenure loan of 10-15 years but end up prepaying the same in 5-6 years. 5. then you must borrow as much as you can on the Home Loan and not withdraw money from your other investments.g. What is the tenure of the loan? Loans are usually for a maximum period of 15 years (which may go upto 20 years in some cases).) to cover all charges including down payment.
but will take a severe beating if interest rates rise. Further. The PLR (Prime Lending Rate) varies from company to company and changes as frequently as once in 3 months.g HDFC floating rate loans). changes depending on the demand and supply of money. In this example.5% means that interest rate on the loan will change from 14.5% if PLR goes up from 14% to 15%. both costs could have been avoided by taking just a 5-6 year loan.2 or 3 years on a long tenure loan and subsequently decide to float his loan. With other companies the monthly installment amount was kept fixed but the tenure of the loan reduces if interest rates in the economy falls ( e. Normally. How will interest rates move? Till recently you did not have to make this decision as all loans were given on a FIXED RATE basis. The interest rate on these loans changed every time the interest rate in the financial system changed. The first is the Prepayment penalty of 1-2 % and the second is the higher interest rates quoted on longer tenure loan (especially over 20 years).. floating interest rates are quoted in the form of "PLR plus premium". FLOATING RATE loans were recently introduced. However. In order to reduce this disadvantage of a the floating rate loan some progressive banks like HSBC have introduced a HYBRID LOAN.improve with time. Life was simple. the customer gains if interest rates fall. The monthly installment falls if interest rate in the economy falls ( HSBC home loan product) . Example«« A floating rate quote of PLR+0. There are two costs that could have been avoided through better planing. You could easily plan for the future as your cash flows each monthly after the loan repayments were very predictable.5% quote from another as the PLR levels for each may differ. interest rates in the economy. interest rates move up and vice ±versa. When industry is booming and everyone needs money to do business. For example«.5% to 15. There is no point paying a higher interest rate for a longer tenure loan of 15-20 years.5% quote from one bank is very different from a PLR +0. For the customer¶s convenience. In a floating rate loan. take a 5-10 year loan only. Also a PLR +0. This means that the interest rate is fixed for the full tenure of the loan and so is your monthly repayment amount. In this case a person can decide to fix the interest rate on his loan for periods of 1. . when rates subsequently fell. if you intend to sell the home after about 5-10 years. Home loan customers became unhappy about having to pay a very high interest rate that they were locked into. if you intend to PREPAY the loan in 5-10 years.
This is because the value of One Rupee today is vastly different from the value of a Rupee 10 years ago. 1. 2.com will help you with that. You may want to sell the home during the tenure of the loan and you find prepayment costs are an unnecessary burden. choose a loan with no prepayment fees. For example««« If you had taken a taken a 15 year loan of Rs.a you would have paid Rs. Your earning capacity will normally increase with age and a prepayment fee deters you from completely retiring your debt before time. switch immediately to a fixed rate loan. often saving as much as 50% of the total interest you may have paid on a simple Fixed rate loan. Your ability to refinance the loan if interest rates subsequently fall gets constrained 3. you will have enough time to make the move «.5% difference in interest rates can cost you a lot of money over time. You will want to stay on with a Floating rate loan as long as you feel that interest rates are expected to fall further.. Using a Discounted Cashflow Model that calculates the Effective interest cost depending on when the EMI amounts are being paid solves this problem. Is there any prepayment penalties? Each monthly installment consists of a portion that goes towards repaying the original loan principal and the balance going towards interest on the outstanding loan. AbodesIndia. 5 lacs at 15% p. The Total Effective Interest Rate (TEIR) vrs the EMI comparisons: It is very important for you to understand the total cost of the loan and try to minimise this cost to the extent possible.. If you may need to do any of the above. As home loans are of a long duration even a 0. As these changes never happen overnight.5%. after which you have the option to convert to a floating rate loan. AbodesIndia. 31000 less than a 15 year loan of Rs 5 lacs for 15. the excess amount is construed to be a loan prepayment. If you think that interest rates are about to fall them you will opt for a floating rate loan after 3 years. But««there is a cost ««. If you pay anything over the amount that would go towards principal repayment.com does it all for You.provided you watch interest rates carefully. Most Housing Finance companies charge a fee of 1-2% on the amount being prepaid. This can be misleading as you are ignoring the "time value of money" which means that you need to look at when the EMI is being paid. . This can be a big disadvantage in several cases. This additional flexibility can be capitalised to substantially lower the cost of the loan. Most of us compare the cost of the loan by comparing the EMI¶s (Equated Monthly Installments).the trouble of tracking interest rates and taking a forward looking view on interest rates««. If interest rates were to rise during the 3 year period you are fully protected as you had locked in a rate for 3 years.You can take a 15 year loan specifying that you will have a fixed interest rate for the first 3 years. The moment you expect interest rates to start rising.
. daily rest method of quoting interest rates.. This is beneficial for those individuals who are trying to maximise their tax breaks in the initial years and expect future tax breaks to fall (we believe that the opposite is more likely!) Fixed /Floating rate: Under a floating rate loan. The reverse happens if the PLR rises. Choosing between fixed and floating loans: In the last 2-3 years the PLR has fallen as the Indian economy had slowed down and demand for money was low. You must them choose a floating rate loan with no repayment charges (one is offered by HSBC). Tax benefits that reduce the total annual repayment. Annual rest. The Finance Company will refund some of your EMI cheques and effectively compensates you by reducing the tenure of the loan. you benefit as the effective interest rate on your remaining loan falls. Glossary of terms . monthly rest. if you do not want to speculate on interest rates and need a stable loan to help . you stand to benefit from a floating rate loan. The annual rest method of quoting interest rates gives the borrower the credit of principal repaid only once a year although he is paying a portion of the principal in each monthly installment (EMI). 3. your payments every month stay the same.Other costs that go into the same Discounted Cashflow Model include: 1. the interest rate on the loan varies from time to time depending on the Prime Lending Rate fixed by the Reserve Bank. 2.Home loans Equal Monthly Installment (EMI) : Loan repayments are usually in Equal Monthly Installments over the tenure of the loan. If interest rates begin to rise again.. Some banks also offer a Variable Installment Scheme were in repayments are higher in the beginning of the loan period...com displays all rates on a monthly rest basis to aid cost comparisons. Processing and administrative fees that have to be paid at the time the loan is disbursed. However. much to your disadvantage. you can prepay your floating rate loan and lock in to fixed rate loan. This change can happen as frequently as one in six months. If you expect this trend to continue. However. A loan quoted with an annual rest interest rate is much more expensive than one quoted on a monthly /daily rest method although the 2 numbers may look identical on paper. If the PLR falls. AbodesIndia.
planning the future. Rest: Interest rates are quotes on a daily rest. However. The shorter the tenure of the loan. Commitment fees: This interest is charged if you do not draw the sanctioned loan within a period of 6-9 months. The rate of interest is usually about 1-2% a months. Prepayment charge: Most Housing Finance companies charge a fee for prepaying your loan before its full tenure is over. Interest Tax: Housing Finance companies have to pay a tax on the interest income they receive from you.g if the interet rate quoted is 14% then the actual interest rate including interest tax is about 14. They sometimes pass this on to the customer. Rates can vary from 1-2% of the loan amount. Administrative Fee: A one time fee which is normally non-refundable and payable before your loan is disbused. AbodesIndia. Your earning capacity will normally increase with age and a prepayment fee can be a big cost.28%. Such loans are therefore more expensive than a monthly /daily rest loan. This helps them plan their finances. Rates can vary from 1-2% of the loan amount. The annual rest quote implies that the company gives you the credit for the monthly principal repayments only at the end of each year. at your expense. This website has standardised all rates AFTER Interest Tax. E. the greater the effective interest rate difference will be.com has standardised all interest rate quotes from companies on a MONTHLY REST basis ( rates will therefore look different from Company brochure quotes which maybe on a annual rest basis) Processing Fee: A one time fee which is normally non-refundable and payable along with your initial loan application. if you retire a loan using money . monthly rest or annual rest basis. This fee also limits your ability to refinance the loan if interest rates fall after a few years. Refinance Charge: Some Housing Finance companies do not charge you for prepayments from your own savings. then go for a Fixed rate loan. The fee is normally in the range of 1-2% of the prepaid amount. on a monthly rest basis to aid comparison across companies. This tax normally about 2% of the interest rate charged. Always check with the company if the interest rate they are quoting includes interest tax or not.This rate is called the Effective rate.
as a down payment before the he draws on the loan. The remaining amount would have to paid by the buyer (to the seller). Some companies also give loans upto 20 years at an additional interest cost of 0. loans are given for a period of 1-15 years. . Most companies do not allow loans for a fraction of a year. Tenure of the loan Normally. you will have to pay a Refinance charge of 1-2% of the loan outstanding. Down payment: Housing finance companies would normally give a loan up to 80-85% of the value of the property.25% 0.5%.borrowed from another Finance Company.
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