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The Home Loan Deposit

August 21, 2014 1 Comment

wealthymatters The Reserve Bank of India (RBI) has decided to encourage banks and individuals to be actively involved in home loan deposits, a savings product that will help showcase the repaying ability of customers seeking to borrow money to buy a house.

The RBI feels that there is a felt need for financial innovation with respect to loan products and one such product could be savings-induced home loan or a home loan deposit.

The willing customer will be induced to generate a savings balance by way of monthly or periodic deposits. This will enable the creation of a track record for repayment of future home loan products. Once a customer reaches a threshold balance, financial institutions will consider sanctioning a housing loan. The balance in the product would act as a collateral or margin. The amount deposited every month would act as the basis of assessing repayment capacity of customers for calculating their monthly repayments.

Such a product will aid the Indian government’s efforts to promote affordable housing. The government has already laid out a plan to create 100 smart cities with the aim of “housing for all by 2020“ while reducing interest rates on home loans. This product may help lower interest rates as well, with better appraisal of potential borrowers.

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Caution 20/80 Home Loan Schemes

September 4, 2013 3 Comments

Real estate companies have been offering schemes called 20:80 and 25:75 where the builder agrees to pay interest on the borrower’s loan for a specific period. The buyer pays 20% upfront and the bank disburses the entire loan to the builder through the individual. The builder finances the construction of the project with the money, and agrees to pay interest on behalf of the borrower to the bank.

Banks such as ICICI Bank ,HDFC Bank and Axis Bank have been lending under these schemes in the hope of increasing the pace of home loan disbursement. Read more of this post

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Pros And Cons Of Buying A Flat In A Building Without A Registered Housing Society

July 24, 2012 6 Comments

There are many flats available in buildings where the developer has not yet handed over the building to the flat owners despite its completion many years ago. These flats are often in mint condition and available at a discount.Bank loans for such flats is also a possibility.So it is always tempting to buy one of these.But do proceed with caution.

First find out why the builder has not transferred the possession legally to the registered housing society.There could be various reasons for this, the simplest being that no registered housing society has been formed yet.In such a case it is a fairly simple case of buying the flat and taking the initiative to form a housing society and registering it. Read more of this post

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How to improve your CIBIL CIR ?

July 17, 2011 4 Comments

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Your Credit Information Bureau (Cibil) credit information report (CIR), other than your income, is the single most important tool used by a lender to evaluate your application for any loan or credit card application. So, it’s important to understand how to improve your CIR, so that it is viewed favourably by lenders .Here are some basic rules to improve your CIR: Read more of this post

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5 Financial Homilies To Reconsider

March 10, 2011 1 Comment

Financial advice always needs to be nuanced.What is good for one person in a certain situation many not be so good for another in a different situation. Unfortunately people are always looking for simple advice and rules of thumb.If we over-generalize on generally sane financial advice we can come to a sorry pass.

Here are some common homilies that need some reconsideration:

1. A house is always a good investment:A house is a tangible investment that you could potentially live in.You could rent it out and make some money.Maybe it will help you save tax.Maybe you could invest in one to save for retirement.Generally saving for a house to live in is good in that it gets a family to start saving.But at the time of buying a house it’s important to remember that you are buying a house and not a home.So do not go sentimental and over pay.Buying a house requires a deal of legwork and hard-headed thinking.Overpay and you will have to worry about the fluctuation in market prices.Try to buy an encumbrance-free house at a discount.It adds a greater measure of safety to your investment.Buy when the markets are down to safeguard yourself.Next how you pay for the house makes a big difference.Try to put down a large payment to save on the total interest you will pay.Shop around for a good loan if you need one.Read the fine print.Check if there is a penalty on prepayment.Lower rates matter.Also check if the interest is calculated on a declining balance.Check for hidden costs starting from the processing fee,the lawyer’s fee and structural engineer’s fee and insurance.When you consider the EMI you want to pay, don’t be too optimistic.Pay increments and bonuses might not come on time.Remember that over longer periods something is bound to go wrong.It’s the way of life.Also if you pay too much of your income into house payments you will not have any money left over to diversify into other assets and derisk your investments. Read more of this post