Plan Your EMIs for Home Loan

Buying a Housing Property is a very big financial commitment on the personal front. Attractive and aggressive home loan schemes coupled with tax incentives has made it easier for younger people to invest in housing properties. Buying a Housing property and financing it through home loan has many benefits; however it requires a certain amount of financial planning on the individual's part in order to make the process easier throughout the easy loan tenure. Before choosing the home loan you can compare online home loan rates and also check eligibility for Home loan through Home Loan Eligibility Calculator.

Trends of Interest Rates

The interest rates cycles have shrunk over the past couple of decades. We are seeing a lot of volatility and cyclic trends in the interest rates. Real estate, especially the home property market has seen a major shift in the last few years. The globalization has brought in many factors that influence the macro economy conditions in general which impacts the interest rates. Since home loan is a long term commitment, it is important to mentally prepare for cyclic trends in the lending rates and do financial planning to be able to pay higher interest rate during certain period of entire loan tenure based on market conditions.

Planning for Financial Commitments

A home loan is a very long term commitment with a payment tenure being more than 10 years in most cases. Therefore, it is important to think about other personal and financial commitments and chalk out a strategy to manage personal finances accordingly. People should also be careful while signing for attractive looking teaser home loan rates schemes which promise a lower interest rate during first few years and higher floating rates after a couple of years. These are some of the important aspects that borrowers should keep in mind while planning their financial aspects for purchasing a housing property from Housing Finance Companies.

It is important to create a financial cushion which can be utilized to fund any extra financial burden during certain periods. People can invest in equity or debt based investments based on their risk appetite. This accumulated fund can be used for the financial requirement to reduce the EMI burden in case of high interest rates periods.

[Source: http://www.sooperarticles.com/finance-articles/loans-articles/plan-your-emis-home-loan-55978.html?]

Budgeting Your EMI in Your Income

Did you ever wonder why your EMI is generally restricted to 30% or 40% of your monthly income? Here is why. Salary details, qualifications, employer/business, years of experience, growth prospects, alternate employment prospects and sources of other income, if any, all are aspects that determine the amount of loan you are eligible for.

Generally, the repayment schedule is worked out in a manner that allows not more than about 40% of your monthly gross income to be repaid as EMI. It is restricted to 30 % or 40% keeping the following factors in mind:

10% of your income is spent on other loans, if you have any or if you avail one in the future.

25% of your income gets deducted by way of statutory deductions and for investment purposes.

25% of your income is generally spent to meet your monthly expenses.

This leaves back 40%, which is taken as your repayment capacity for this loan.

For self-employed applicants, profit is the benchmark that determines loan value. 

The longer the time frame for repaying the loan the lower the EMI and this also means you can opt for a larger loan amount. The loan amount you are eligible for is also dependent on other factors like the company you are employed with, the location of your residence and your credit history.

A long term loan like a home loan from Housing Finance Companies is a debt that is part of your budget every month. If you invest too much into it, there might not be adequate funds to manage a huge list of other expenses that will tend to accumulate with time. For e.g. You need to make allowances for future expenses like education expenses for children, emergency funds for a job loss or the loss of one income in a situation where two people have taken a joint loan.

The might be spikes in interest rates. In such a scenario usually banks will increase the loan tenure in order not to put the loan taker in a tight spot by increasing his EMI. In such a scenario if you have adequate funds in hand you could prepay at intervals, allowing scope for closing your loan early.

[Source: http://www.sooperarticles.com/finance-articles/investing-articles/budgeting-your-emi-your-income-303924.html?]

How to Get Best Home Loans in India

One's house is where his heart lies. Hence, owning a house is one of the biggest dreams and goals for many people. Years ago, buying a home was a daunting task for common masses with the huge rates of property. However, today you can get best home loan from several schemes available in India which enables even common masses to buy their dream homes easily!

Process of approval of such schemes in India is very simple. Also home loans are available for different interest rates. One can also get a scheme which depends on one's ability to repay. Apart from this, one can easily select for an EMI scheme as per his/her budget & affordability.

You can avail housing schemes as per different options & flat rates & floating rates of interest thus providing various choices to the borrower.

The borrower can mortgage his property or land against the scheme. If you're a salaried individual then you need to show your documents as a proof of your earnings to the bank. Other related identification documents and proofs vary across lenders.

Today there's intense competition in the mortgage market. As a result, one can obtain home loans at high competitive rates. There are lots of companies who show various offers to lure potential borrowers. Therefore, one needs to be prudent while selecting home loan schemes and select the best home loan after studying the loan provider and related documents carefully.

Another way to get best home loan is online from Housing Finance Companies. Selecting schemes online and comparing loan offers from different lenders and banks becomes so easy. Instead of visiting lenders physically, you can get the best home loan deal by simply navigating various websites online. Also applying for online home loan, one gets the benefit of minimal paperwork and just need to follow simple one-time procedure. There are various premier banks which offer housing schemes in India. One can get best home loan at favorable interest rates. The rates can range from 7.5 per cent to 16 per cent. However, further negotiation can get you further discount in rates.

These schemes are available at different interest rates which depend on the repayment tenure. Also one can easily avail EMI options as per her own budget & affordability. These schemes are available as per different requirements. One can get best schemes at flat rates & floating rate of interests thus providing huge range of choices to the borrower for favorability.

[Source: http://www.sooperarticles.com/finance-articles/loans-articles/how-get-best-home-loans-india-1352288.html?]

How Much Cheaper Can Your Loan Get After The Repo Rate Cut?

Most home buyers, irrespective of how much they earn, feel the pinch when they have to shell out money every month to pay for EMIs on Home Loans. Any drop in the EMI amount would bring cheer to existing and new Home Loan borrowers.

With the Reserve Bank of India cutting repo rates by 25 basis points from 6.5% to 6.25%, which is the lowest in six years, loan borrowers are hopeful about a decline in interest rates, which would translate into a reduction in EMI amounts.

Additional Reading: 6 Common Mistakes Made By First-Time Home Buyers

The relation between repo rates and loan EMIs

Repo rate is the rate at which the Reserve Bank of India lends money to commercial banks. As a lower repo rate would mean paying less to the RBI for the banks, it would mean paying back loans at a lower interest rate for the borrowers. The fall in interest rate would see the number of borrowers go up, thereby, increasing profits for the banks?

However, a repo rate cut does not always lead to a decline in interest rates. Only if the banks reduce the base lending rate, the loan EMI comes down. Also, the banks need to check if they are able to have enough margins by compensating for loan defaults and NPAs before passing on the benefits to borrowers.

Current Home Loan rates and interest rates once banks pass on rate cut benefits

Will a mere 0.25% decline result in adequate savings?

A 0.25% decline in interest rate may appear too small to make a substantial difference in a short period of time, but it could help you save in the long run.

For example, if you have a Home Loan of Rs. 50 lakh to be paid back over a tenure of 20 years with an interest rate of 9.5%, your loan EMI would come down to Rs. 46,607 with a total payable interest of Rs. 61,85,574. So, at the end of the loan tenure, you would end up paying a total amount of Rs. 1, 11, 85,574 including principal and interest.

If your bank cuts down the interest rate to 9.25%, the loan EMI would be down to Rs. 45,793, translating to a total payable amount of Rs. 1, 09, 90,402 at the end of the loan tenure.

Thus, you would end up saving up to Rs. 1.95 lakh on the total payment of your Home Loan.

Drop in repo rate: Ideal time to consider home loan refinance?

If you’re not happy with the rates being offered by your current financer on your Housing Finance, you have the option of moving to the MCLR regime within the same bank or to an MCLR-linked loan at another bank. Even a 0.25% difference between the two interest rates could potentially save you lakhs of rupees in the long run.

All you need to do is pay a processing fee along with a legal fee to your new lender which amounts to a small percent of your due loan amount.

Additional Reading: When Is Home Loan Refinancing A Good Idea?

If your Home Loan is nearing completion, the rate cut would not impact you much. So, if you have an existing loan, do keep an eye on the total interest saved either by reducing the tenure or EMI or moving your loan to another bank.

[Source: https://blog.bankbazaar.com/how-cheaper-can-your-loan-get-after-the-repo-rate-cut/]

The Quickest Way to Find Out How Much Home Loan Can You Afford

When people buy homes, their primary focus tends to shift from affordability to dreams. Though, with the easing cost of houses and housing finance in India, it is impossible to stay in a surreal stage for a long time. However, it is possible to dream within your means. That's why the housing companies in India have created such amazing and useful online tools to help you along the way. So, if you are a first-time borrower, here is how you find out the home and home loan you can afford.

Step 1: Use home loan eligibility calculator

This is the most basic form of home loan calculations. But, it is a useful way to identify the suitable principal amount for your housing loan. But, as you may not know it is just the first step. You are far away from identifying the home loan you can actually afford. There is another step you must take. Then you can estimate the home loan you can afford.

Step 2: Use home loan EMI calculator

You know the rough amount of home loan you can get. However, you will need to have the repayment ability to pay the applicable EMI of that loan each month. This repayment ability is measured in two vital factors. Firstly, you must be able to set aside sufficient amount to pay the housing loan EMI each month. So check out the home loan EMI calculator to calculate the approximate EMI you will need to pay. You will need to run several housing loan EMI calculations to ensure that it fits well into other monthly expenses. For example, credit card bill, utility bills, insurance premiums, etc. So, after making these calculations, you will have a decent idea about the home loan you can afford.

Step 3: Check your credit history

This is not a mandatory step. But, things can go wrong without it too. You need to know your credit score and basic credit history. This plays a crucial role in home loan approval. In simple terms, online tools are really helpful. But it does not account for the realistic state of your finances. Any Housing Finance Companies

Will check your credit history once you submit a housing loan application. So, it is best to find it out yourself. It will allow you to eliminate the housing finance companies that will not accept your application. Most banks and housing finance companies state their eligibility criteria on websites. Their representatives answer questions regarding the expected credit score. So, you must take a simple online credit report for s clear understanding of your finances.

[Source: http://www.sooperarticles.com/finance-articles/loans-articles/quickest-way-find-out-how-much-home-loan-can-you-afford-1378285.html?]