Loan Against Property

Criteria banks use to evaluate home loan applications

Buying a dream house is an aspiration most individuals wish to fulfill in the course of their lives. The process involves a huge commitment of time, energy and, most importantly, funds. To make such a large-scale investment, proper research and preparation needs to be done.

Home loans help in making such an investment and, in the process, making the dream of owning a house come true for many. Therefore, it is important to understand how credit institutions evaluate home loan applications and what is required to ensure easy access to the loan.

Documentation

The first thing a lending institution seeks from you is the document detailing the house you are looking to buy. The institution wants to know whether the property you have chosen has all the requisite clearance from the local government. Once that is established, you will be required to furnish proof of income, at least six months' salary slips, last three years' income tax returns documents and other details like date of birth, present address, PAN, bank’s statements, among others. Make a checklist of the requisite documents and keep their copies ready along with the originals.

Income to Debt Ratio

It is important for you to declare if you are paying EMIs (equated monthly installments) on any other loan at the time of application. This is one of the deciding factors for your loan application. To understand how a loan application gets reviewed, here are two scenarios.

Credit Report and Score

To sum up, while a high credit score, strong credit history and high income will help in loan approval, they, by no means, guarantee one. Property Loan Interest Rate Having manageable debt levels also plays an important role. Lenders are always keen to provide loans and credit cards to disciplined consumers who have a high credit score and a healthy credit history.

The credit score works as a first impression for the lender, the higher the score, the better is your chance of the loan being reviewed and approved. However,

One must remember that the decision to lend is solely dependent on the lender and the credit information agency does not decide if the loan should be sanctioned or not.

It is crucial for every individual to improve their credit score and maintain it to ensure he or she gets credit when needed. One should pay all one's credit card dues and EMIs on time to avoid having a poor credit score and report. Not paying the dues on time can eventually lead to a bad score and your application for a loan stands a high chance of rejection.

[Source: http://economictimes.indiatimes.com/wealth/borrow/criteria-banks-use-to-evaluate-home-loan-applications/articleshow/53539534.cms]

Home loans: Additional Rs 50,000 tax benefit for first-time home buyers starts

Home loans: First time home buyers from Friday will get additional tax benefit for purchase of residential properties of value up to Rs 50 lakh. The Finance Bill 2016, which is likely to be approved by Parliament during the second half of the Budget session, provides for up to Rs 50,000 tax benefit on loan up to Rs 35 lakh taken for residential house.

The government's proposals coming into force from Friday is aimed at promoting its ‘housing for all’ scheme and bolster the real estate sector which is facing a huge slowdown for last three-four years. "In furtherance of the goal of the Government of providing 'housing for all', it is proposed to incentivize first-home buyers availing home loans, by providing additional deduction in respect of interest on loan taken for residential house property from any financial institution up to Rs 50,000,

This incentive is proposed to be extended to a house property of a value less than Rs 50 lakh in respect of which a loan of an amount not exceeding Rs 35 lakh has been sanctioned during the period from the April 1, 2016 to March 31, 2017. "It is also proposed to extend the benefit of deduction till the repayment of Loan against Property continues

The proposed deduction is over and above the limit of Rs 2 lakh provided for a self-occupied property under section 24 of the Act. The tax incentive will encourage first-time home buyers and increase the demand significantly.

After the Finance Bill is passed by Parliament, the amendments in this regard in the Income Tax Act will take effect from April 1, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.

With a view to incentivize affordable housing sector as a part of larger objective of 'Housing for All', the Bill also propose to amend the Act so as to provide for 100 per cent deduction of the profits of an assessed developing and building affordable housing projects if the project is approved before the March 31, 2019.

[Source: http://www.financialexpress.com/photos/budget-gallery/231529/home-loans-additional-rs-50000-tax-benefit-for-first-time-home-buyers-starts-april-1/6/S]

3 Reasons Why a Loan against Property is Beneficial

The Reserve Bank of India (RBI) always keeps a tight check on the loan against property segment of the lending business. And rightly so. It is the reckless borrowing and lending in this segment that happened in the US that brought the world to the brink of economic disaster. However, in India, the case is different. A 30%-35% margin requirement ensures that lenders are safe and prevents asset bubbles from brewing. It is with such policies that a loan against property becomes an asset for the responsible borrower. Here are the reasons why this is so.

Benefits of Loan against Property

It is cheaper: A secured loan is always cheaper than an unsecured one. The obvious reason is that the lender has recourse to tangible property if you default. This is why loan against property can save you a lot of money in interest costs.

A 2%-3% drop in the interest rates can save you close to Rs5,000/- to Rs7,000/- per month (assuming a principal amount of Rs50 lakhs). You could use these lower interest rates to get rid of some of the expensive overdraft facilities or factoring for your business or for personal reasons like a marriage in the family.

It is versatile: A loan against property is available for almost any purpose that you may desire funds for. The lender will not ask too many questions about the usage of funds. This also reduces the amount of paperwork required by significantly. You may have to declare your intention about using the funds, but it is neither mandatory nor legally binding. In most cases, it is just for the lender's knowledge, a mere formality.

It is easily available: When a lender has a tangible security backing their loans, they have very little to worry about. No wonder a loan against property is available at express speed. It usually takes less than a week from your first point of contact to having the funds in your loan account. Professional lenders may do it over a couple of nights.

However, here is a word of caution for prospective borrowers. A Property Loan is a good way to borrow at lower interests if you are in control of your finances, i.e., you are sure that you will be able to make the payments even in the worst conditions. Failure to make these payments can have very unpleasant consequences. Just like all financial instruments, it is a tool, use it wisely!]

[Source: http://www.sooperarticles.com/finance-articles/loans-articles/3-reasons-why-loan-against-property-beneficial-578802.html?]