EXERCISE: RETAIL SOLUTIONS: MODULE_7_MORTGAGE LOANS

PART-A: BASICS OF MORTGAGE

1. Compare Equitable Mortgage with Equitable Mortgage on the following parameters.

Parameter Equitable Registered Mortgage

Mortgage
How Created?
Where Created?
Stamp Duty
Registration
Notice to Public
On default of Loan
On Repayment of Loan
CERSA Registration

2. Match the following.

Sr No Document Match No Description

1 Search Report Record of handing over of the title deeds by
the borrower to the lender
2 Valuation Report To trace the flow of Title
3 Revenue Receipts To verify whether any prior charge exists on
the property
4 NIL-encumbrance To ascertain value of the property to be
Certificate mortgaged.
5 Chain of Documents To verify whether the property tax have been
paid up to date
6 Memorandum of To ascertain clear, unencumbered and
Deposit of Title Deeds marketable title.

3. State True or False:

a. Mortgage means transfer of title in a specific immovable property in favor of lender.
b. Mortgage cannot be created for an existing debt.
c. The security under mortgage may be existing or future.
d. In case mortgagor is a joint stock company, it is enough if the mortgage is registered with
ROC.
e. Mortgage cannot be created for Non-fund facilities.
f. The limitation period of a mortgage is 12 years.

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PART-B: TERMINOLOGIES IN MORTGAGE LOANS
1. Identify the following products as PURCHASE products or LEVERAGE products.

Type of Product Purchase or Leverage product?

Home loan for acquiring a Flat
Home Loan – Balance Transfer
Home Loan – Top Up
Loan against Property
Land Loan for Residential plot
Loan for acquiring Non-Residential Property
Lease Rent Discounting
Land Loan for Commercial Plot
Purchase of an existing house (Second sale)

2. Match the following.

Sr No Concept Match Explanation

1 EMI Tentative sanction of loan to a borrower before identifying a
property
2 LTV Percentage of obligations to gross apprised income
3 Margin Simple interest paid on disbursed amount during
construction phase
4 FOIR Partial bulk payment into Loan account over and above EMI
5 INSR Legal & technical scrutiny of the entire builder project
7 Pre-EMI Moving from one ROI to another
8 Cost of Offer for loans generated based on banking behavior of a
property customer
9 APF The amount the customer pays every month towards
repayment of loan
10 Switch Moving from one type of repayment method to another
11 Swap Percentage funding of the bank on the property value
12 PQ offers Ratio between proposed EMI to net salary
13 Pre-Sanction Difference between the TOTAL cost of the property & loan
Amount contributed by the borrower.
14 Prepayment Does not generally include cost of stamp duty and
Registration charges

3. Mention the basis of LTV in respect of following loans.

SR No Type of Loan Basis

1 Home Loan Example: LTV of home loan depends on Loan Slab
2 Land Loan
3 NRP
4 LAP
5 LRD
6 BT
7 Top-up

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4. Cost of property comes to Rs.30 lakhs. Calculate property-based (LTV based) eligibility
for home loan.
5. A person has a monthly appraised salary of Rs. 50,025 (without any other EMI
obligations) EMI per lakh is to Rs.935. Calculate FOIR based home loan eligibility.
Consider FOIR at 60%

6. A person with appraised salary of Rs. 70000 and net salary of Rs 60000/- having an
existing Car loan obligation of Rs.9000 for 24 more months. EMI per lakh – Rs.910.
Calculate Home Loan eligibility based on both FOIR & INSR? (FOIR: 60% & INSR: 65%).

7. A person with apprised salary of Rs. 75000 and net salary of 68000/- has an existing
obligation of Car Loan of Rs.9000 for 24 more months & Personal Loan of Rs.5500 for
10 more months. EMI per lakh – Rs.900. Calculate the loan amount that you will
sanction based on the inputs given. (FOIR: 60% & INSR: 65%).

8. The cost of property is Rs. 45 lakhs, monthly apprised salary is Rs.53456, Net Salary is Rs
42000/- Existing Car loan EMI Rs 9000/- (24 months more). EMI per lakh for the
proposed Loan is Rs.935. Calculate Eligible Loan amount based on LTV, FOIR & INSR.
How much Loan will you finally sanction? What is the EMI payable by the borrower?
(LTV : 80%, FOIR: 60% & INSR: 65%).

9. COP is Rs.85.50 lakhs, monthly appraised salary comes is Rs. 62,350, Net Salary is
51000/- and existing EMI payable for 17 months comes to Rs. 4,550 & Payable for 9
more months comes to Rs.5345. Tenure 20 years. EMI payable is Rs 893 per lakh.
Calculate (a) Eligible Loan amount (b) EMI payable on sanctioned loan (c) Total amount
paid by the borrower for the entire tenure (d) Total interest paid.

10. You have identified a prospective Home Loan client, Mr. Samarth. Mr. Samarth is planning to
buy a ready built flat at a cost of Rs.65 lakhs. He wants to know the processes involved in getting
the Home Loan sanctioned by the Bank. The processes involved for sanctioning a Home Loan
are given below, in random order. Please arrange it in proper order, to explain the process to
Mr. Samarth.

Sr No Activity Proper Proper Sequence Description

Sequence No
Documentation 1
1
2 Disbursement 2a
3 Legal Opinion 2b
4 Due Diligence 2c
5 Application 3
6 Charge creation on securities 4a
7 Valuation of property 4b
8 Processing & sanction 5

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PART-C: MORTGAGE LOANS
1. Mr. Raju has been sanctioned a Home loan of Rs.50 lakhs for construction of an independent
house on a plot of land gifted to him by his father. Total cost of construction is estimated at
Rs.75 lakhs. Construction of the building will be completed over a period of 12 months.

During your interaction, Mr. Raju wants to know the following.

a. How will the loan be disbursed?
b. What are the options available to him regarding repayment of the loan?
c. Should he pay the full EMI from the first month?
d. Can he get any relief from paying the EMI during construction period?

Please give satisfactory replies to Mr. Raju. Additionally,

e. How will you ascertain the correctness of estimate given by the borrower?
f. What is the type of charge created?
g. What documents will you obtain for creation of charge?

2. Mr. Mahesh has applied for a Home Loan for purchase of a flat. The information furnished by
him regarding the property are furnished below.

Particulars Amount/rate Actual amount

Area of the property 3000 Sq FT
Rate per Sq Ft Rs 6000
Amenities Rs 4500000
One time maintenance Rs 200 per Sq Ft
Electricity Deposit Rs 200000
Water Deposit Rs 100000
Stamp Duty & Registration 6% of agreement
(6% of Agreement value) value
Cost of Property considered By Bank for Loan
Total Cost of property to be arranged by the
borrower

a) Calculate property-based eligibility at LTV of 75%

b) If Loan eligibility based on FOIR is Rs.150 lakhs and based on INSR is Rs.155 lakhs, what is
the actual loan amount sanctioned to the borrower?
c) What would be the margin to b brought by Mr Mahesh?

3. Mr. Suresh has applied for a Home Loan for purchase of a flat at Mysore. The information
furnished by him regarding the property are furnished below.
Particulars Actual Amount
Area of property 500 sft
Rate per sft Rs.1900
One time Maintenance Charges 0
Electricity Deposit 25,000
Water Deposit 10,000
Stamp duty & Registration fees 5% of property value
Cost of Property ?????
Total Cost to borrower
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 A. Calculate the loan amount that can be sanctioned with the following data:
i) Property based eligibility with of LTV of 90%
ii) Loan eligibility based on FOIR – Rs.10.00 lakhs.
iii) Loan eligibility based on INSR - Rs.10.50 lakhs.

B. Calculate the amount that Mr. Suresh would be required to contribute to complete
purchase of the flat.
C. What would be your decision, if the area of the proposed flat was 350 sft. ?
D. What would be your decision if the loan amount required by Mr. Suresh is Rs.5.00 lakhs?

4. Mr. Manish has applied for a Home Loan for purchase of a flat at Patna. The information
furnished by him regarding the property are furnished below.
Particulars Actual Amount
Area of property 450 sft
Rate per sft Rs.1600
Amenities 0
One time Maintenance Charges 50000
Electricity Deposit 25,000
Water Deposit 10,000
Stamp duty & Registration fees 5% of property value
Cost of Property ???
Total Cost to Borrower ???

A. Calculate the loan amount that can be sanctioned with the following data:
i) Property based eligibility at LTV of 90%
ii) Loan eligibility based on FOIR – Rs.7.50 lakhs.
iii) Loan eligibility based on INSR - Rs.7.25 lakhs.
iv) Amount to be contributed by Mr. Manish to complete purchase of the flat.
B. Mr. Manish has heard about the Pradhan Mantri Awaas Yojana and wants to avail the
benefits under the scheme.
His annual family income is Rs.5.00 lakhs.
i) What is the maximum interest subsidy Mr. Manish will be eligible for?
ii) Can he register the flat as sole owner?
iii) Will the interest subsidy be calculated on the full loan amount?
iv) Will Mr. Manish be required to pay Processing fee?
C. If Mr. Manish’s wife already owns a pucca house in her name at her native place
(Chennai) can this case be covered under PMAY ?
D. If the project was to add two extra rooms to the existing house, can it be considered
under PMAY?

5. Mr. Ratan has availed a Home Loan of Rs.60 lakhs for construction of an independent house
at a cost of Rs.80 lakhs. The loan was sanctioned on 01.03.2020. EMI payable is Rs.46,500.
Mr. Ratan has been paying full EMI from April 2020 onwards. During the period April 2020 to
March 2021, Mr. Ratan will pay Rs.2,10,000 towards repayment of Principal and Rs.3,48,000
towards interest.

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 a) What is the maximum amount of exemption available under Section 80C, for repayment
towards Principal amount?
b) What is the maximum amount of exemption available under Section 24, for payment of
interest?
c) Can Mr. Ratan claim Income Tax exemptions under Section 80C & Section 24, for the
Financial Year 2020-21? Justify your answer.

6. Calculate the Home Loan eligibility based on FOIR and INSR from the following information
pertaining to Ms. Anjali.

 Gross salary: Rs.80,000

 FOIR - 60%
 Net salary: Rs.65,000
 INSR – 65%
 Existing Car Loan EMI – Rs.10,000 (20 more EMIs to pay)
 Existing Personal Loan EMI – Rs.15,000 (9 more EMIs to pay)
 Credit Card balance outstanding – Rs.85,000
 EMI per lakh at ROI of 7% & repayment period of 240 months – Rs.775

7. Mr. Naveen wants to apply for a Home Loan with ICICI Bank. Mr. Naveen works for a Multi-
National software company. His income during the previous year was :
 Salary – Rs.12,00,000
 Incentive – Rs.2,00,000
 Bonus - Rs.3,00,000
 Re-imbursement of hospitalization expenses – Rs.74,765
 Re-imbursement of petrol expenses - Rs.24,000
Mr. Naveen wants to know whether all the said income will be considered for calculation of his
Home Loan eligibility. Please explain.

8. Mr. Sanjeev has a Housing Loan of Rs.50 lakhs, with ABC Bank, which was availed in 2017.
Present outstanding balance in the loan account is Rs.46 lakhs. You have approached Mr.
Sanjeev to avail Balance Transfer Loan from ICICI Bank. On perusal of the loan statement and
CIBIL Report, you observe that Mr. Sanjeev has been very irregular is paying the EMIs. Will
you go ahead with the proposal? Explain your decision.

9. Mr. Mohan had availed a Housing Loan of Rs.60 lakhs from ABC Bank in the year 2014
(repayment period 240 months) for purchase of a ready built flat costing Rs.80 lakhs.
Present balance outstanding in the loan is Rs.47 lakhs (completed period 84 months)
You have approached Mr. Mohan to avail Balance Transfer facility from ICICI Bank.
Mr. Mohan is interested in the proposal.
Mr. Mohan is also interested in a Top Up Loan and wants to know what is the maximum
amount of Top Up Loan that we can sanction. Present market value of the property is
assessed at Rs.150 lakhs by our approver Valuer.

a) Calculate the maximum top up loan that can be sanctioned, assuming LTV of 80%

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 b) What will be the rate of interest applicable for the Top Up Loan? (HL ROI is 7% & LAP ROI is
11% )
10. Mr. Bhaskar wants to avail a Loan against Property.
During your interaction, Mr. Bhaskar indicates that he can offer any or all of the
undermentioned properties as security for the loan.

a) An Independent house owned by Mr. Bhaskar, where his family is residing.

b) A residential flat owned by Mr. Bhaskar, which is given on rent.
c) A commercial property owned by Mr. Bhaskar, jointly with his wife and used as his Office.
d) A commercial property owned by Mr. Bhaskar, which is given on rent.
e) An industrial shed owned by Mr. Sudhir (Mr. Bhaskar’s friend) which houses Mr. Bhaskar’s
factory.
Which of the above-mentioned properties can be accepted as security for the Loan Against
Property? Mr. Bhaskar also wants to know the basis on which the eligible amount of Loan
Against Property is calculated.

11. Mr. Prashant owns four properties:

Type of property Lessee Lease period Remaining Lease Rent (Rs)

Commercial Property WIPRO 10 years 2 years and 6 months 1500000
Commercial Property ACCENTURE 8 years 6 years & 6 months 1000000
Commercial property Grocery 5 years 4 years & 9 months 25000
Shop

Can we consider his request? Explain with reasons.

12. Mr. Shashank owns a commercial property in Bangalore, which is rented out to M/S Infosys Ltd.
Details of the property & lease are as under :
 Lease period: 10 years
 Remaining lease period: 6 years 9 months
 Monthly rent: Rs.10,00,000
 Present Market Value of the property: Rs.8 crores
 LTV: 70%
 Multiplier Grid is furnished below:

Balance period of
3 4 5 6 7 8 9 10
lease – in years

Multiplier 23 29 34 39 43 47 50 53

a) Calculate the maximum amount of loan that can be granted.

b) What is the maximum amount that can be sanctioned as an Overdraft facility

13. List out Pre-sanction papers to be collected from a borrower in respect of a Home Loan

14. Fill in the blanks

a) LTV on Home Loans are decided by________
b) Minimum amount of loan considered under Home Loan by ICICI Bank is_______ lakhs
c) Minimum area of the dwelling unit under Home Loan, considered by ICICI Bank is_______

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 d) Maximum repayment period allowed for Home Loans is________
e) Extra amount of loan under “Home Loan Extraa” is guaranteed by______________
f) Fees / charges for the guarantee cover under “Home Loan Extraa” is paid by
the__________
g) The maximum period allowed for completing construction of house after availing a Land
Loan for purchase of plot is __________
h) Under home Loan, the term ‘pre-sanction’ refers to: ___________________
i) Cost of property’ in Home Loan includes: _______________
j) In housing loan, two types of interest rates are prevailing namely __________ & _________
k) The applicable LTV for Home Loan is decided as per _________________
l) Mr. Madan wants a loan of Rs. 75 lakhs to purchase land allotted by his office welfare
society. The maximum LTV that can be considered for granting a loan to Mr. Madan for
purchase of the land is:____________
m) Quantum of loan under Lease Rental Discounting (LRD) scheme is decided on the basis
of:___________
n) The minimum residual lease period to be eligible for LRD facility is ______year/s
o) Mr. Anil, an HR executive in an MNC has approached you for a loan to purchase a new
apartment costing Rs.60 lakhs. He is prepared to pay EMI from first disbursement even
though the flat will be ready for occupation only after 18 months. The type of EMI here
is________________
p) Cheque bouncing in account statement of the customer helps us to
understand______________
q) While processing Loan application, CIBIL report is considered for determining__________

PART-D: Interest Rate Bench Marks

State True or False
a) The primary source of income for banks is Interest income.
b) Interest rates in India are regulated by Reserve bank of India.
c) Benchmark rates are the reference rates to which effective interest rate charged to a
borrower are linked.
d) MCLR is a tenor linked benchmark decided by RBI.
e) MCLR is published for FIVE tenors.
f) MCLR is reviewed every month by the bank.
g) With every revision in MCLR by banks ROI to existing borrowers also is changed immediately
h) MCLR is reset once in a year for borrowers.
i) Effective 01.10.2019, interest rate of all loans are linked to External Bench Mark
j) Repo rate is the benchmark adopted by our bank for Retail Loans and MSME Borrowers
k) REPO rate is reset every quarter.
l) Banks are free to adopt different benchmarks within the same.
m) Spread decided at the time of disbursement cannot be modified subsequently.
n) Switch over from MCLR to REPO rate is permitted without charges to all borrowers

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