Recently, many banks have raised their BPLRs but teaser loans still continue to be provided by many banks and financial institutions. Along with soft interest rates, host of innovative schemes are being offered to attract customers, informed industry experts and bankers.
For instance, LIC Housing Finance has introduced variable EMI (equated monthly installment) product to target the young salaried class, who are planning to buy a house but cannot afford high EMI. The scheme offered by them would structure the repayments in such a way that EMIs remain low at the start of the loan and will increase as the loan period progresses. The scheme has been designed assuming that the repayment of capacity of the customer will increase as salaries increase.
The company is offering product at a floating interest rate of 8.75 per cent for loans up to Rs 1.5 crore.
RR Nair, managing director and chief executive officer of LIC Housing Finance points out, “This product is for the young salaried employees, who would like to own a big home but do not have the salary to match. There is a lot of scope to be innovative in the home loan market, as there are varied customers with a variety of needs.”
Punjab National Bank, a public sector lender is giving choice to the customers to extend even margin money payments over a period of time and is also offering home loans at a lower rate of interest.
Recently bank has launched a home loan festival bonanza, in which it has slashed interest rate to 8.50 per cent (fixed) on loans up to Rs 50 lakh for three years across all repayment tenures and has also waived off processing fees and documentation charges. Bank has also waived off prepayment charges.
Already HDFC and State Bank of India (SBI) are offering floated fixed/ floating rate products, under which fixed interest rate is offered for a specific period of time and then it will be reverted to floating rate of interest.
SBI has been doing good business in home loan segment as it is offering an invitation rate of 8 per cent, which is the lowest in the market.
LIC Housing Finance has also introduced a product in home loan segment called Advantage 5, in which it offers a fixed interest rate of 9.25 per cent for five years thereafter will be reverted to a floating rate.
More banks and home finance institutions are offering similar fixed-cum-floating rate products to attract customers.
Sumeet Vaid, chief executive officer of Financial Freedom, a financial planning company based in Mumbai says, “In a rising interest rate regime, it is beneficial for customers to get into a fixed loan scheme, so that the interest rate is protected for a short duration. Banks are looking at very aggressive strategies to win home loan customers.”
Friday, August 27, 2010
Monday, August 23, 2010
The factors that determine home loan amount eligibility
Many of us plan to take home loan but don’t know the factors that banks take into consideration for fixing loan amount.
1. Age: Borrowers age is the most important factor. If the borrower is working in public sector and is closer to the retirement then the loan amount will be less. The reason is, the number of working years will be relatively lesser and the EMIs will be higher. This will increase the burden on the borrower therefore banks will taken into account the age of the borrower while deciding the eligibility.
2. Income: The monthly disposable income is the most important factor for loan eligibility. Usually the EMI is to be set in accordance to a fixed percentage of the applicant’s disposable income which will enable the borrower to repay the loan installments comfortably. This reduces the chance of default.
3. Source of Income: Before sanctioning the loan banks check the source of income. The borrower has a secure job or steady and assured stream of income if he owns a business. In case the borrower is unemployed or does not have secure job then in spell of unemployment it would be difficult to keep up the EMI payments.
4. Securities: In case the borrower is not earning good salary but his financial background is strong this will also help him in getting a higher loan amount. If the borrower has other securities such as fixed deposits or good amount of insurance, this also helps in getting a higher amount of loan. If the borrower’s repayment record is good then also bank tends to offer a higher amount.
1. Age: Borrowers age is the most important factor. If the borrower is working in public sector and is closer to the retirement then the loan amount will be less. The reason is, the number of working years will be relatively lesser and the EMIs will be higher. This will increase the burden on the borrower therefore banks will taken into account the age of the borrower while deciding the eligibility.
2. Income: The monthly disposable income is the most important factor for loan eligibility. Usually the EMI is to be set in accordance to a fixed percentage of the applicant’s disposable income which will enable the borrower to repay the loan installments comfortably. This reduces the chance of default.
3. Source of Income: Before sanctioning the loan banks check the source of income. The borrower has a secure job or steady and assured stream of income if he owns a business. In case the borrower is unemployed or does not have secure job then in spell of unemployment it would be difficult to keep up the EMI payments.
4. Securities: In case the borrower is not earning good salary but his financial background is strong this will also help him in getting a higher loan amount. If the borrower has other securities such as fixed deposits or good amount of insurance, this also helps in getting a higher amount of loan. If the borrower’s repayment record is good then also bank tends to offer a higher amount.
Thursday, August 12, 2010
Banks don’t give joint home loan to friends, cousins, live-in couples
To increase home loan eligibility you can go for joint loan. But housing finance companies (HFCs) provide joint home loans to father-son duo or spouses, but don’t give to siblings, cousins, sisters, friends and live-in couples.
However LIC Housing Finance has a product in which brother-sister duo can jointly avail home loan by combining their incomes, subject to certain terms and conditions.
But joint home loan can be availed by two brothers, however there are certain conditions.
A senior official working with LIC Housing Finance said some of the HFC do accept such applications, but volume of the loan sanctioned might be low as high risk is involved in this.
The official said, the HFC has stringent internal norms for sanctioning such loans. In such cases the loan eligibility reduces by 10 per cent.
The official further said, “The residual income (income left after excluding monthly expenses and other costs) goes down when siblings avail a home loan. Thus, the loan eligibility too goes down.”
In case of father-son duo the joint home loan is sanctioned depending on the remaining tenure of service of the father if he is a salaried professional. Likewise two brothers can also avail a joint loan, if both of them are co-owners of the property.
Santosh Govardhan, chief credit officer with IDBI Home Finance, said, “Two brothers availing a joint home loan have to be working and residing in the same city. Also, the property has to be a minimum two bedroom-hall-kitchen.” He added, the terms and conditions have been made in such a way that very little room is left for default in repayment.
Bankers say in case of joint loan given to brother-sister duo, the chance of default is high because when sister gets married and moves away their joint income gets affected.
However some banks give loan to two cousins living in a joint family but it will depend on a case-to-case basis. Govardhan said, “If the profile of the customers is really good and if there is a genuine reason for purchasing a joint property, such a case can be considered as an exception.”
Moreover some banks and home finance companies sanction joint loans to a couple even when they are engaged. But the loan amount is disbursed only after the marriage certificate is produced.
Banks or housing finance company do not give joint home loan is not given to two sisters, an uncle and a nephew or a niece as the risk of default is apparently quite high in such cases.
A banker said, “There is an uncertainty of repayment when such a set of people avail the loan together. Hence, most banks shy away from extending loans to such customers.”
LIC Housing Finance too has stringent terms and conditions for a joint loan offered to a brother-sister duo. For instance, one of the conditions in such case is that the property has to be owned jointly by the applicants. Moreover, the tenure of the loan might be reduced on a case-to-case basis, based on the remaining term of service of the applicants.
LIC Housing Finance official informed, “If the company is giving concession on some terms and conditions, it tightens other parameters.”
However, the joint home loan has many benefits such as it increases loan eligibility, both applicants can avail income tax benefits under Section 80C of the IT Act for the principal repaid and under Section 24 for the interest repaid.
However LIC Housing Finance has a product in which brother-sister duo can jointly avail home loan by combining their incomes, subject to certain terms and conditions.
But joint home loan can be availed by two brothers, however there are certain conditions.
A senior official working with LIC Housing Finance said some of the HFC do accept such applications, but volume of the loan sanctioned might be low as high risk is involved in this.
The official said, the HFC has stringent internal norms for sanctioning such loans. In such cases the loan eligibility reduces by 10 per cent.
The official further said, “The residual income (income left after excluding monthly expenses and other costs) goes down when siblings avail a home loan. Thus, the loan eligibility too goes down.”
In case of father-son duo the joint home loan is sanctioned depending on the remaining tenure of service of the father if he is a salaried professional. Likewise two brothers can also avail a joint loan, if both of them are co-owners of the property.
Santosh Govardhan, chief credit officer with IDBI Home Finance, said, “Two brothers availing a joint home loan have to be working and residing in the same city. Also, the property has to be a minimum two bedroom-hall-kitchen.” He added, the terms and conditions have been made in such a way that very little room is left for default in repayment.
Bankers say in case of joint loan given to brother-sister duo, the chance of default is high because when sister gets married and moves away their joint income gets affected.
However some banks give loan to two cousins living in a joint family but it will depend on a case-to-case basis. Govardhan said, “If the profile of the customers is really good and if there is a genuine reason for purchasing a joint property, such a case can be considered as an exception.”
Moreover some banks and home finance companies sanction joint loans to a couple even when they are engaged. But the loan amount is disbursed only after the marriage certificate is produced.
Banks or housing finance company do not give joint home loan is not given to two sisters, an uncle and a nephew or a niece as the risk of default is apparently quite high in such cases.
A banker said, “There is an uncertainty of repayment when such a set of people avail the loan together. Hence, most banks shy away from extending loans to such customers.”
LIC Housing Finance too has stringent terms and conditions for a joint loan offered to a brother-sister duo. For instance, one of the conditions in such case is that the property has to be owned jointly by the applicants. Moreover, the tenure of the loan might be reduced on a case-to-case basis, based on the remaining term of service of the applicants.
LIC Housing Finance official informed, “If the company is giving concession on some terms and conditions, it tightens other parameters.”
However, the joint home loan has many benefits such as it increases loan eligibility, both applicants can avail income tax benefits under Section 80C of the IT Act for the principal repaid and under Section 24 for the interest repaid.
Subscribe to:
Posts (Atom)