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Home Loan

Home Loan

Home Loan

Here's how MCLR linked home loan works

All bank loans, including home loans, taken after April 1, 2016, are now linked to the bank's marginal cost of funds based lending rate (MCLR). Earlier, they were linked to the bank's base rate. So now when you approach a bank for a home loan, make sure you know these four important things about MCLR.

*MCLR rate: Banks publish overnight, one month, three months, six months, one year, two years, three years MCLR rates each month. Home loans are typically linked to 12-month MCLR of banks.

*Mark-up on MCLR: Banks may or may not lend at MCLR. They may ask for a spread.

*Reset loan period: If the loan is linked to the bank's 12-month MCLR, the next change will happen after 12 months.

*Home loan with a fixed vs floating interest rate: In a falling interest rate scenario, it helps to choose the latter, but potential borrowers may benefit out of the former if the rate cycle turns.

MCLR and home loan rate

Currently, the 12-month MCLR for most banks is in the 9.05-9.45 per cent range. After the mark-up (spread), the actual home loan rate on an average is around 9.35 per cent, or could be higher too.

Considering the heavy emphasis the regulatory bank has been laying on liquidity, a rate of 9.35 per cent is still extremely high. Until and unless the MCLR drops down to sub-9 per cent levels, we will not see a large enough movement in terms of loans that will provide the necessary shot in the arm for various sectors, especially real estate which has been facing a considerable liquidity issue."

MCLR mark-ups

The actual home loan interest rate can be equal to the MCLR or have a 'mark-up' or 'spread', but can never be lower than the MCLR.

Reset period makes floating rate fixed for a year

In the base rate era, when the Reserve Bank of India (RBI) reduced the policy rate, the expectation for a home loan rate cut emerged for both existing and new borrowers.

Conclusion

Under MCLR, do not, therefore, expect the EMIs to fall immediately after the RBI cuts repo rate. Instead, have a systematic partial prepayment plan in place to lower interest burden on the home loan. After all, the earlier you finish your home loan, the higher will be your own equity in the house.

[Source: http://economictimes.indiatimes.com/wealth/borrow/heres-how-mclr-linked-home-loan-works/articleshow/54971266.cms]

Home Loan

Why buy to let (BTL)? Property is great for increasing your income

Buy-to-let properties mean guaranteed, sustainable income well into your later years. That’s why many contractors are putting their hard-earned savings to work by investing in the property market.

A buy-to-let investment could guarantee you a source of revenue when contracts are few and far between, or help you build up a hefty retirement income. Improved lending conditions and rising property prices mean this investment is ideal for contractors. You could even discover that the long term profit potential is life changing.

However, there are costs involved, so it’s important to ensure that you know how to get the maximum return on your purchase, buy Home Loan. Here we share some expert advice to show you how you can make the most out of the buy-to-let market and continue earning big money long after retirement.

Can I make money from buy-to-let? - Multiply your income now!

The buy-to-let market used to be available only to the privileged few. However, a combination of more innovative mortgage products and rising entrepreneurialism has seen many contractors successfully try their hand at becoming a landlord.

What is the stamp duty charge on buy-to-let?

Unfortunately, the buy-to-let boom hasn’t gone unnoticed by the Government, which has raised stamp duty land tax (SDLT) rates for additional property purchases.

What expenses can be offset against rental tax?

Rental tax is another outgoing you’ll need to be wary of, though it’s only due on the profit made from renting out the property.

How save tax on buy-to-let – find out how you can maximize your returns!

If you’re feeling adventurous, you might opt to run your property portfolio through a company. You can do this the same way you would open a contractor limited company, and there are potential tax advantages.

For one, companies are still able to offset mortgage interest against rental tax in full. In addition to this, rent is only taxed at the 20% corporation tax rate, regardless of your personal income. These two factors combined could result in huge cash savings.

Where can I get expert advice on property investment?

Entering the property market is admittedly more involved than simply investing in stocks or a pension fund, but it’s also ultimately far more rewarding? There are initial costs involved, but soon enough you’ll find that a buy-to-let property pays for itself.

[Source: http://www.contractorcalculator.co.uk/why_buy_let_property_great_increasing_your_income.aspx]

NRI’s can now opt loans for dream project in India

As an Indian while staying abroad, we all aspire to own a dream home in our homeland. Either you plan to shift back home in India, once your dream project is completed or you may opt to come back to your motherland once retired from work life. But the dream is always cherished in our hearts. In prior days, people used to work extra hard to accumulate the requisite amount to purchase any residential property in India. But, thanks to the ever emerging and modernized policies lead by Government and private sector banks and financial companies that you can now apply for NRI loans and get money to finance long awaiting dream of own house in India.

According to the definition of the Foreign Exchange Management Act, 1999 (FEMA), an NRI (non resident Indian) is the one who resides outside India for “employment, carrying on business or vacation in circumstances as would indicate an intention to stay outside India for an indefinite period.  Those Indians who stay less than 182 days during the preceding financial year will be considered as NRIs.

NRI citizens can now avail  NRI loans for the purchase of property ready for possession or under construction, construction of a property on an owned plot or for home improvement or extension, purchase of plot and home furnishings & consumer durables to the existing property. Buying of plot also comes under home loan application except agricultural lands. You can only opt for one property at a time.

There are some leading banks in India who offer interest rates as low as 9.45 %  to 9.90  on a floating basis with a processing fee of 1.25% or 11,500/-which is the maximum. You can qualify for a loan amount of around minimum Rs 5 lakhs to 10 crores. The repayment tenure will range from 10 to 15 years. In certain professional cases it may go up to 20 years.

NRI home loan to purchase dream home has been one of the best ways to secure your land purchase in India. Although, the procedure to avail loan remains more or less same like resident India, however, there are few rules that can alter at some stage of loan application.

Apart from relevant document for applying home loan some additional important documents for NRI home loan would be: Copies of the passport, work permit and valid visa, contract of employment, salary certificate, work experience certificate and bank statements of NRE/NRO accounts. Your salary certificate has to be attested from the embassy if the salary is not credited to a bank. For those residing in the Middle East, a copy of the employment card is also required.

The income and education qualification of an NRI citizen also play vital role in deciding the loan amount you get qualified for. NRI’s need to complete pre-requisites for  the loan sanction like qualifications, current job profile, past experience, probability of continuing abroad for the loan tenure and probability of servicing the loan with an extended tenure in case of return to India.

NRI also needs to provide General Power of Attorney (POA) in favour of a local relative as per the draft of the bank which should be duly attested by the Indian consulate in the country of his or her residence. If the borrower is in India, POA could be locally notarized. Banks demand for POA to ease the process of dealing with NRI borrowers. Banks sanction up to 80% of the NRI loans amount that includes your registration and stamp duty charge. It is advisable, before approaching a bank you should be well prepared upto 15 to 20 % of the remaining amount for applying loans.