Lowering of home loan rates brings cheer to homemakers

The lowering of interest rates on home loans has brought some cheer among the homemakers with house loan seekers in the Valley expecting banks operating in Kashmir following the suit.

Experts said during past some months the growth rate of housing sector in India, and Kashmir as well, was sluggish due to rise in interest rates and other restrictions by Reserve Bank of India while tightening its credit policy.

The housing and realty sectors, experts said, had felt the heat of high interest rates in the Valley as well.
“Restrictions put on the housing loan sector by the RBI during its last credit review have slowed down the housing loan market in the Valley,” said a banker.

However, a recent development in which three banks viz. Housing Development Finance Corporation, Bank of Baroda, and Allahabad Bank reduced the interest rates on home loans from 25 basis points to 50 basis points as a festival season offer, has generated a hope that banks operating in Kashmir may also follow the suit.

Head Commerce Department KU, Khurshid Bhat said, “If the banks operating in Kashmir lower the interest rates on home loans, it will have impact on the multi players like house buyers, companies dealing in real estates and banks.”

“We don’t have the big companies in the Valley in real sector. However, the small firms in Kashmir would get benefited should the major banks in Kashmir reduce the interest rates on home loans. There would be surely a positive impact on public at large,” he said.

However, many experts hold a contrary view. “Just before six month the interest rates on home loans were hovering around 8-9 per cent, which mean that the recent lowering won’t have that major impact. Home loan is still on higher side,” experts said.

A senior executive of Punjab National Bank said, “PNB is the only Bank providing housing loan at cheaper rates as compared to prevalent market rates. We charge 9 per cent on the home loan to be repaid within less than 5 year. For the loans of 5 years to 20 years duration we charge 9.5 per cent.”

Experts said: “The RBI while seeking to bring down the inflation through monetary measures has limited options apart from raising repo and reverse repo rates.”

At present reserve ratios set by RBI are: CRR 7 per cent and SLR 25 per cent.

“Factoring the risks attached to home loans, the RBI has prescribed a higher risk weight of 100 per cent for residential housing loans with LTV (loan-to-value) ratio of more than 75 per cent, under its final Basel II guidelines,” said MBA student Khurshid Amin.

“If interest rate on housing loans comes down, it will have a favourable impact on the middle class in particular and common masses in general and thereby will increase the demand for real estate”, said Finance expert, Sovais Shafi.

Assistant Vice President, Jammu and Kashmir, HDFC Bank Zubair Iqbal said, “We don’t provide housing loans to our customers at any of the branches in Kashmir. We do have a separate institute Housing Development Finance Corporation, which provides home loans in Kashmir Valley.”

Information on Home Loans

When to apply for home Loans: One can apply anytime after deciding to acquire or construct a property, even if the property has not been selected or the construction has not commenced. The loan amounts are sanctioned in principle to let buyers know what amounts they are eligible of. Actual disbursements start after satisfactory validation of all necessary documents and completion of specific procedures.

Eligibility conditions for a home loan: While determining the loan eligibility of a customer, lending institutions primarily focus on the repayment capacity. The repayment capacity is determined by taking into consideration factors such as income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation and savings history.

Maximum loan amount: Housing finance institutions generally finance upto 75%-85% of the asset value. Depending on the institution, the maximum loan amount may vary from Rs.1 lakh to Rs.1 crore.

Repayment period options: Repayment period options generally range from 5 to 15 years. A few HFC's offer a 20-year repayment period, albeit at a higher interest rate.

Payable fees and charges: Home loans are usually accompanied by the following additional costs: a) Processing fee: It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. b) Prepayment Penalties: When a loan is paid back before the end of the agreed duration a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre paid. c) Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned. d) Miscellaneous costs: It is quite possible that some lenders may levy a documentation or consultant charges.

Security for the loan: In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some companies may also require additional security like the assignment of life insurance policies, pledge of shares, NSCs, units of mutual funds, bank deposits or other investments.

Documents required at the time of application: Following are the documents that lenders require at the pre-approval stage:

Proof of Age
Copy of Bank A/C statements for the last 6 months
Copy of latest credit card statement
Passport size photograph

For salaried employees:
Salary and TDS certificate
Latest pay slip
Letter from employer

For self-employed/businessmen:
Copy of audited financial statements for the last 2 years
Copy of Registration Certificate of establishment under shops and Establishments Act/Factories Act

Tax Benefits: One can avail of tax sops both on the principal as well as interest paid on home loans. With effect from 1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965: Principal amount of repayment of loan along with other savings such as PF, PPF, Life Insurance premium etc up to a maximum of Rs 1,00,000/- will be eligible for deduction from gross income.

Insurance of Property: Many HFCs insist on insurance of the purchased property against fire and other allied perils. Even in the absence of a mandatory clause, it is advisable to insure the property against potential contingencies.

Time required for loan disbursement: The average time required for loan disbursement is 3-15 days subject to satisfactory and complete documentation and completion of all relevant procedures.

Second Mortgage Loan

A second mortgage loan can be a great way to borrow money when you are in need. Unlike a regular mortgage, a second mortgage does not have priority on your home if you default on the loan. Your first mortgage would be repaid by your home's value before any funds go towards paying off the second mortgage. Second mortgage loans are most appropriate in situations where you require a large sum of money. Two common issues that may warrant a second mortgage are large home improvement projects and debt consolidation. While it may be tempting to take out a second mortgage in order to get money, remember, if you fail to adhere to the payment schedule, you could end up losing your home.

Second Mortgage Interest rates and Fees

Typically, second mortgages come with higher interest rates than a first mortgage. This is because that in the event of a default, the second mortgage will not receive payment from the home's value until the first mortgage is paid off. This makes a second mortgage slightly more risky for a lender. Also, there are high second mortgage fees associated with the application for a second mortgage loan. Sometimes, these fees may discourage you from taking out a second mortgage depending upon how much money you need and for what purpose you need it.

How to Find a Great Second Mortgage

1. Shop around for the best second mortgage. By contacting several different banks, brokers, and credit unions, you can have companies compete to offer you the lowest interest rate on a second mortgage. Make sure to pay attention to additional second mortgage loan fees as well during this process.
2. Avoid second mortgages that include penalties for lay payments and defaulting. While there aren't any homeowners who plan on making delinquent payments on their second mortgage, sometimes the unexpected may occur and leave you unable to make a payment on time. Additionally, clerical errors may delay the posting of your payments. No matter what the situation, you don't want to be charged hefty fees and higher rates for late payments on your second mortgage, so try to avoid lenders that offer these types of packages.
3. Make sure you read and understand all the terms of your second mortgage loan. Some lenders offer second mortgages that seem to have extremely low rates - until the payments balloon and soar through the roof towards the end of the payment schedule. Make sure you pay careful attention to any documentation you sign. If you are not confident in your ability to judge the fairness of a contract, consider hiring a lawyer.
4. Be aware of all the costs involved in getting a second mortgage. Aside from the regular payments on your second mortgage loan, there are other costs to consider in the process. Appraisal fees, points, application costs, and closing costs can all increase the total amount you have to spend on your second mortgage. Keep these in mind when planning a budget.

Mortgage Refinancing

Many homeowners struggling with unpaid debt and a constant stream of bills want to know if there is anything they can do to get a lower monthly payment on their mortgage. The good news is that there are some helpful ways to get a lower monthly payment without worrying about being scammed by unethical mortgage refinancing lenders.

Mortgage Refinancing Tips

The easiest way to get a lower monthly payment is through mortgage refinancing. Mortgage refinancing will not only get you a lower monthly payment, but you may be able to pay off your entire mortgage much more quickly once you have secured some better payment terms. So how do you know what types of terms to look for in order to get mortgage refinancing that will give you a lower monthly payment? Use these tips to help make sure that you use mortgage refinancing to get you the best rate possible.

• Apply for pre-approval with several mortgage refinancing lenders. Applying for pre-approval with more than one lending company will allow you to shop around for prices to make sure you are getting the best rate available. During this process, make sure these refinancing lenders are not pulling your credit history. You want to save your credit pulls for the lender that can provide you with a mortgage refinance with a low monthly payment. Each time you pull your credit score, your score suffers a little bit. Too many pulls will prevent you from getting the best rates on a mortgage refinance. After qualifying several different lenders, authorize only the companies that can give you the best mortgage refinance rates to pull your credit.
• Check to make sure your existing mortgage does not have any pre-pay penalties. Many homeowners select a mortgage that includes pre-payment or early pay penalty clauses. While the cost of this penalty may vary, it generally amounts to about six months of your mortgage loan's interest. If you want to do a mortgage refinancing that has these types of penalties, make sure you have enough funds to cover them.
• Pay attention to interest rates and closing costs. A lender might be able to provide you with a lower monthly payment through mortgage refinancing with their company, but this does not automatically make them the best choice. If interest rates or closing costs are too high, avoid the lender in question. These two variables are often the deciding factor when it comes to making a final decision about selecting a lender for mortgage refinancing.
• Get everything in writing. Once you decide on a mortgage refinancing lender, make sure you get all of your mortgage refinancing terms written down on paper. This includes the agreed upon interests rates and closing costs. It is also good to ask questions about pre-pay penalties or any other types of penalties that might be associated with the mortgage refinance. Often times, lenders will avoid this type of information if they feel it will be a deal-breaker that will prevent you refinancing with their company.

Cash Out Refi - Get Your Hands on Some Cash

Another way to make a refinance work for you is to refinance for more than the balance remaining on your old mortgage -- in effect, tapping your home equity, or "cashing out," in mortgage speak. Thanks to favorable rates, you may be able to do so without boosting your monthly outlay. For example, at 8.5%, the payment on a $200,000, 30-year fixed rate mortgage is $1,538. But at 7.5%, that same payment lets you borrow nearly $20,000 more.

The best use for the extra cash is to pay off any higher rate loans you may have. Let's say that you are carrying a $15,000 car loan at 10% and making minimum payments on a $10,000 credit card balance at 17%. Your monthly payments on those debts would total $680. Then assume you refinanced your mortgage, taking out an additional $25,000 to pay off your car and credit card loans. Result: At 7.5%, your additional monthly mortgage payment would total only $175, so you would come out $505 ahead ($680-$175=$505).

Of course, all the extra cash needn't go for paying off debts. When the Menards swapped their ARM for a fixed rate last December, they also increased their mortgage load by $34,000, from $106,000 to $140,000. They used $3,000 of the proceeds to pay their refinancing costs and another $17,000 to pay off a 10% home equity loan, which had been costing them $250 a month. Then they spent the remaining $14,000 to build a garage for Roger's antique car collection -- and they did all this for just another $19 a month.

Refinance To Build Equity Faster

Many borrowers use a refinance to shorten the term of the mortgage. And brace yourself, even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build up equity faster and pay far less in total interest over the life of the loan.

Consider Jim Neill, 48, a real estate broker and his wife Merrilyn, 55, a psychotherapist. Recently, the couple took out a 15-year fixed rate loan at 6.75% to replace an 8.13% ARM with a 30-year term. Their monthly payment jumped by $200, but now they will own their own home outright by the time they retire. In addition, the total interest on the 15-year loan will come to $95,447, vs. $222,234 on the remaining life of the ARM -- and that assumes their adjustable rate would have held steady at its current 8.13%. "This is forced savings," says Jim. "When we retire, we can scale down and take equity out of the house."

If you can't afford the payments on a 15-year mortgage, your next best means of building equity is to refinance for less than 30 years. To do so, ask your mortgage company to customize your new loan's term to match the years that are left on your old loan -- if you are five years into a 30-year mortgage, for example, ask for a 25-year loan.

The Real estate book

If you are looking for new home for living near your new job, or new home for new family. You could be looking from the Real Estate company, but you can choose another way from the website that present home for sale by state or by county such as Charleston Real Estate, Atlanta Homes for Sale. Therefore you can search by filling the postal code or state and choose by price in $ to-from and number of bedrooms-bathrooms too.Anyway, international home for sale also included. There are many homes or vacation homes in some country for sale as well. The data of home are search from thousand of home and select some home that fits for you need. Try on search system at easyestateloans.com I think you can found some homes that you assign from the search result, and see the detail picture in each home if you want.