All You Need To Know About Property Tax

If you have been looking into the market of home loan, you might have come across the term ‘property tax’ more than once. Though property tax varies from state to state and depends on the valuation of your home, you must remember that your home loan depends on the property tax. Each home loan has the provision that in case you fail to pay off the property tax in an “event of default”, the lender could even foreclose on your property even when all your mortgage payments have been done in a punctual manner.

Why should you concern yourself with property tax?

In India, property is a source of income for many and hence, it was only but natural that tax would be levied on any property you purchase, is it a humble shop or godown, flat or a proper residential building, provided you are using it to earn money in any form. The amount of property tax that you need to pay would depend on the value of the property that is being taxed in the first place.

Why is the property tax being charged at all?

The fact that the local municipal authority is the force behind the property tax being levied must tell you a lot about how the money you pay goes to towards the maintenance of the basic civic services in your city. The property tax in India is only charged on the real estate building and not on the plots of land, which don’t have any establishment in its vicinity.

How is the property tax calculated? What is Annual Value?

The property tax you need to pay is decided on the basis of the annual value of the let out or self-occupied property. For the self-occupied properties, the annual value is taken to be zero. However, if that property is rented, the property tax is calculated accordingly.

What are the tax benefits of your Housing Finance?

 Under Section 24, you are empowered to claim up to Rs 200000 or the actual amount of repaid interest. However, you can only make the claim when you are in possession of the house.

 Under Section 80C, you can claim the principal up to the maximum limit of Rs 150000 across all the investments made under the section 80C. However, you might be needed to show the lender’s statement showing the not only the interest and principal components but also the repayment for the year.

How can a new homeowner avoid property tax traps?

Every homeowner should go to the pains of confirming the tax rate before signing on the dotted line to save himself from the reassessment and hikes of rate of interest. The estimate of a real estate broker of the approximate tax bill might prove to be helpful but even then you might be required to pay more tax in the subsequent years. You can potentially open up an escrow account in order to set apart the funds that would be drained to provide for the taxes.

[Source: http://loanyantra.com/blog/]

Factors to Be Considered For Home Loan Comparison

Home Loan comparison is very vital when you decide to take up a home loan. Buying your dream house is possible by making a wise choice of the home loan. Most of us choose the home loan based on the interest rates, but there are various other points that come into play when you make a home loan comparison. A detailed study of the various financial institutions and their terms and conditions is the first and the foremost step. You need to gather information regarding the eligibility criteria, interest rate, EMI, other charges, and so on.

Every bank will have their own criteria for deciding on the eligibility. When you do a home loan comparison, it's very important to get the maximum eligibility so that your cash down payment can be reduced to a greater extent. The eligibility depends on your income level and also the credibility. If you work in a listed company, you could manage to get higher eligibility. This is because your job is considered much secure in a listed company. The banks will analyze your credit standing to ensure timely repayment of the loan. You could club your spouse's income, if any, to increase the eligibility amount.

The most important factor that any common man would look for is the interest rates. Along with the rates, it's also important to select the type of interest, that is, fixed or floating. For this you need to study the market conditions. Fixed rate is the one where the rates are fixed during the duration of the loan. In case of floating rate, it is dependent on the base rate of the banks. If the base rate increases, the loan interest will also increase and vice versa. If you expect a future decline in the interest rates, you could choose floating rates. But if you are a kind who doesn't want to take up any risks, fixed rates will be a safer option. Analyze the table of EMI to ensure that it fits into your monthly budget. You must be confident enough to save the required EMI every month and beside leave out some money for any kind of personal commitments too.

Housing Finance comparison will be incomplete if processing fees are not taken into consideration. This is the charge by the bank for getting the approval for your loan. This does not guarantee that your loan will be sanctioned. To get the approval and complete the formalities, the bank will charge a small percentage of the loan amount as processing fees. This is not refunded to you even if your loan is not sanctioned.

There may be times when you get an appraisal in your income and you are capable of repaying the loan principal amount. Under such cases, if the prepayment is done to close the loan, the bank will charge a percentage as prepayment fees. This differs from banks to banks. Some may not even charge such fees, whereas others do as a policy decision. This also has to be considered during the home loan comparison.

[Source: http://www.sooperarticles.com/finance-articles/loans-articles/factors-considered-home-loan-comparison-491580.html?]