Long term benefits of home loans

For many homebuyers opting for the home loan is a preferred choice as the many interested buyers aren’t able to pay the total amount to the real estate developers; thus, they need to opt-in for the loans to buy the dream homes. The borrowers need to maintain a good credit score to avail of the loan facility. The borrowers also need to submit all the necessary documents to fulfill the applicant’s loan eligibility criteria. The borrower should apply for the loan to avail long term credit repayment moratorium for buying the dream home. For most flat buyers, it is highly recommended to opt for loans to purchase homes in the early stages of life. If the applicant is below the age of 30 years, then, in that case, he/she can avail of the loan for a maximum moratorium of the next 30 years.

According to his/her age criteria, the applicant should avail of the loan for a maximum tenure so as lessen the burden of monthly EMI. At a lesser amount of the monthly installments, the borrower can comfortably pay the shorter amount of monthly installments and utilize the remaining monthly income for the other necessities or another household purpose. Also, on payment of EMI, the borrower can avail of the tax benefit for a longer duration to save money and reduce the tax payment burden for individuals. 

Following are the benefits of the loans being opted for the long term:

  • Tax benefits on home loans:

The borrower can benefit from tax filing to save money or lessen the burden on expenditure during the moratorium of loans. The borrower can avail of tax exemption of up to Rs.2 lakhs beyond the exemption limit of Rs.2.50 lakh. 

 

  • Long term moratorium available for the home loans:

The borrowers can repay the loans for a long duration of years, depending on the borrower’s age. The borrower can avail a maximum term of up to 30 years for the repayment of the loans if the applicant takes a loan up to the age of below 30 years. For the higher age of beyond 30 years, the borrower can avail of the loan for the duration of up to retirement age. The higher the loan moratorium lesser is the monthly installment the borrower has to pay in case of loan repayment.

 

  • Opportunity to grow your funds:

Even if the borrower can buy the property on his funds, the borrower can still benefit from tax repayment. The existing funds can be put in stocks or mutual funds by the borrower; thus, the borrower can get the returns on the investments and utilize those funds in repayment of loans. The borrower can also invest in systematic investment plans SIP to get quick returns on investments, and the increased value can be utilized to repay the installments on time. There are multiple ways to invest, like fixed deposits, mutual funds, stocks, or systematic investment plans, to get higher returns on investments.

  • Liquidity benefits:

Suppose the borrower feels a liquidity crunch and is forced to take a financing facility like a personal loan or a collateralized loan. In that case, it may cost you much more interest than your home loan interest amount. The funds can help protect the financial difficulties and help other financial goals.

 

  • Due diligence of property by the bank:

Banks exercise strict due diligence before financing a project, something that reduces the risk to a great level. They verify the scheme-related documents, their title, and clearance before approving a loan. So if the home loan is taken from the bank, it becomes safer than an un-approved project. There is no answer to the home loan dilemma. Using the owned funds to buy a home can be a good step when you are assured that it would not affect your finances.

 

  • Longer tenure loans assure higher eligibility:

An individual’s ability to repay the home loan depends on the individual’s ability to repay the loans on time. This, in turn, is assessing based on the disposable income. Thus for a shorter tenure, all the things are being equal, your EMI will be higher. Therefore the borrower would be eligible for a smaller home loan than the actual eligibility. For a longer tenure or higher eligibility, long-term loans are more beneficial. Also, the banks or financing companies always need a long-term recurring business to keep the active loans open.

 

  • More extended repayment have more extended flexibility in case of the long term loans:

As there are no charges applicable to pre-payment of home loans under a floating rate of interest, you can pay the entire outstanding or part of the home loan if the borrower wants to sell the house or free any debts. Moreover, if the loan is under the fixed rate of interest, you can prepay the entire outstanding every year without any pre-payment penalty. Thus the borrower can pay the debt-free earlier while retaining the flexibility of payments according to the cash flows.

 

Conclusion:

Thus, we conclude that if the borrower opts for the longer duration home loan, the applicant can avail more extended duration tax benefits and lower payment of monthly installments, thus helping reduce the burden on repayment of dues. Also, the banks encourage the borrowers to take loans for a higher duration of time as they expect more and more recurring business from the individuals.

Tax benefits on the home loan you are unaware off:

The Income tax department provides tax benefits to the home loan borrowers in order to provide relief to the loan applicants from the additional burden which they have to bear for payment of monthly installments. The benefit for the loan applicant is that the buyer can purchase their dream home in an early stage by applying for the loans. The earlier the buyer opts for a loan, higher is the moratorium has been provided to the loan applicant to repay the monthly installments. The exemption for the income tax is liable under income tax act 80C.

There are some capping been put in the order to put some restrictions on the borrower to take benefit of the tax exemption. The borrower can avail the maximum benefit of upto Rs.2 lakhs per annum beyond which exemption cannot be granted to the loan applicant. The borrower needs to repay the installments on time and requires to submit all payment related proofs on time so as to avail of tax benefits.

Following are the benefits to the borrower related to the tax exemptions:

· You can claim tax benefits even if you missed the Emi:

Unlike the deduction on property tax or principal re-payment of home loans, which are available on a paid basis, the deduction on the interest is available on accrual an basis. Even if the borrower has missed some of the EMI in few months then also the applicant can expect exemption under the income tax act 80C. However all the documents showing the deduction can be substantiated if questioned by the authorities.

· Processing fees is tax deductible:

The processing fees of around Rs.5,000 or Rs.10,000 is being charged to the applicant in order to process the loan of the applicant. The charge is one time being taken by the lender from the borrower so as process the loan of the applicant. The same amount is also liable to be taken into consideration for the tax exemption to be opted by the borrower.

· Principal repayment of tax if you pay before 5 years:

If in case if the borrower sells the property before the period of 5 years from the date of the purchase of the property then the tax exemption is reversed back by the income tax department under income tax act 80C. As per the rules under the income 80C in respect to the principal repayment of housing would get reversed to the added to your annual taxable income in the year in which the property is sold and you will be taxed at the current rate. The amortization tables are such that the repayment schedule is interest heavy and tax reversal rule under income tax act 80C.

· Loans from relatives and flats is eligible for tax deductions:

Under section 24 of the income tax act deduction is applicable for the loans being provided by anyone for the purchase of loan or construction of the property. The applicant can also claim the tax benefit for the purpose of reconstruction or repair of the property. The loan does not

necessarily be taken from the bank. For tax purpose the loan is not relevant the usage is. The taxpayer should be able to satisfy the assessing the officer how the loan needs to be utilized for construction or purchase of the house property completion or construction within 5 years and other conditions are met. The lender should pay the income tax return paying the income tax on it. The interest charged should be reasonable and a legal certificate of interest should be provided by the lender along with the name, address and PAN. Tax benefits are not applicable on principal repayment if the borrower does not apply for the loan from the bank or a financial institution registered with the reserve bank of India. Also the additional benefit of Rs.50,000 under section 80EE is not available.

· The borrower may not be eligible for tax benefit if he/she is just a co-owner:

You cannot claim tax benefits if you may be the one who is paying the EMI. For example if the borrower pays the installment for the property owned by the parents and pays the EMI on behalf of the parents then the tax benefit cannot be claimed unless the person is a co-applicant in the property. The applicant needs to be both the owner as well the borrower to claim the tax benefit. If either of the titles missing then the borrower is not applicable for the tax benefit.

· You can claim the pre-construction period upto 5 years:

The borrower can start claiming the construction benefits once the borrower receives possession. You cannot claim principal repayment but the interest paid during the period can be claimed and post-accrued. The law provides a deferred deduction on the interest payable during the period that can be accrued or post claimed post possession. The deduction on such interest is available equally over a period of 5 years starting from the year of possession.

Conclusion:

Thus we can conclude that the borrower can claim tax benefit under the income tax act 80C so as to get the reduced burden on the tax payment as the borrowers are already burdened with the liability to pay the installments. The borrower if opts for the tax benefit for the property purchased then it is mandatory to be retained for at least the duration of 5 years otherwise in another case the property owners tax benefits can be fortified in the subsequent payment of income tax returns.

8 Tips on how to manage the home loan EMI:

Whenever the applicant takes a loan, it is mandatory for the buyer to repay the EMI on time before the due date is over. The loan installments payment should be given due importance as the late EMI payment may attract a penalty to the borrower. If the borrower stops paying EMI, the borrowers may be liable to pay a fine, and the CIBIL score may worsen if the borrower does not pay EMI on time or else refuses to pay. The borrower should ensure sufficient savings in their bank account to repay the home loan EMI on time.

Before opting for the loans, the borrower should ensure that he/she should have sufficient funds to pay the EMI and have stable income prospects. In case of default of the loans, the borrower may have to mortgage the property or surrender if unable to pay the EMI. The loans can help the buyer opt for tax benefits from the income tax department up to the exemption limit prescribed under the income tax act 80C.

Following are the ways to manage home loan EMI:

· Scour cheaper interest rates:
This is the first and foremost recommended step of research before opting for a home loan. It is advisable to compare the interest rates and zero in on bank offers the cheapest one on your home loan, so that the EMI is not an issue on the same.

· Prioritise and schedule:
Another important tip is to make your re-payment a top priority, as paying the EMI within the stipulated time-frame enhances credibility with that particular bank. The wise thing to do to schedule a payment close to your due date to avoid default due to insufficient funds in your account. As mentioned, you must never miss your EMI as it may lead to downfall of CIBIL ratings, thus restricting the borrower from opting for future credits.

· Try keeping a high amount:
While this might seem like a challenge, the borrower should try to maintain the high amount of bank balance to clear your dues before home loan tenure ends and generate the equity to increase the loan amount.

· Opt for lump-sum:
Experts always suggest using maturity proceeds or bonuses for pre-paying the parts of the EMI on the lump sum. This process helps in repaying the loans in a faster way. These consider to a large extent in reducing the loan tenure considerably, especially if paid during the loan tenure.

· Use EMI calculators:
Several banks that offer home loans also have an essential feature, their EMI on home loan installments you can pay every month, basis your income, expenses, and several other factors. Moreover, it provides accurate insights into EMI payments, interest rates, and the cash down payment for the loan. All of this makes it a practical proposal to clear the home loan quickly.

· Switch the lenders if required:
It is a situation that will arise wherein you will find the expense for servicing is too high. It is recommended that the borrower should check for an alternate option by transferring the loan to another lender. Multiple competitor companies provide attractive floating interest rates to home buyers.

· Pay an extra EMI:
This may come across as complex in initial phase, but it pays off in the long haul. The borrower can set an sip on an annual basis which provides better dividend payouts to the borrower thus repaying the debt in a faster way. Through this you can extend the principal outstanding amount at large. If this is planned diligently, it will be easy to manage EMI efficiently.

· Try partial pre-payment:
The longer the duration higher would be the EMI re-payment required. Thus the pre-partial payment of a lump-sum amount can help the borrower reduce debt. The borrower’s various source of funds are fixed deposits, asset sales, selling off the mutual funds or stocks which the funds can be used to repay faster EMI’s.

Conclusion:

Thus we can conclude that the borrower should repay the loan in a faster way. Therefore, reducing the debt by pre-payment of the loans faster and availing the benefits of payment of lower interest on the principal amount. The borrower can also make provisions for the early re-payment by withdrawing the funds from fixed deposits, public provident fund, stocks, mutual funds, .etc. To do faster re-payment of loans. The borrower should take care that the monthly EMI should never be delayed
or skipped as it can result in the reduction of CIBIL score, thus restricting the future benefits of credit benefits.

Inexpensive Home loans available in India

Inexpensive Home loans available in India:

The home loans in India are becoming cheaper day by day, as the repo rate in India is falling day by day. Thus the interest rates on fixed deposit goes on decreasing on the other hand the loan taken the borrower has to pay lower interest rates as there is a continuous slide in interest rates. The interest rates of most of the public sector banks are found to be cheapest compared to others.

Due to the effect of covid-19 there is an extreme slack market for the real estate in India. As a result the Indian government has kept the repo rate at just 4% so as to lower the interest rates of lending. This has helped the banks reduce the floating interest rates. The real estate companies has also reduced the rates of the houses so as to reduce the unsold inventories and recover the cost of the investment. All these factors make this a customer friendly buying policies.

So if the borrower has necessary margin money, a stable income and adequate contingency savings, you be able to buy the property into the markets at lower interest rates and at a lower cost. Another thing homeowners need to consider is credit score which has become more relevant than ever before. Thus the repo rate linked interest rates introduced by banks typically linked to credit linked margin. Meaning the lowest possible interest rates are usually reserved eligible applicants who have stellar credit scored of 750-800. The rates for applicants with lower credit scores of low and poor could be around 100 basis points. As if you are a home loan buyer you should ensure good or excellent credit score so as to get the benefit of lower interest rates on EMI.

Thus there are 15 banks been identified as lowest interest rates providers from whom applicants can buy loans from. The actual interest rates being charged by the bank would depend on the age of the applicant, location where the applicant has opted for property, duration of service remaining of the applicant, CIBIL ratings of the applicant, gender, loan amount, lender opted for the finance of the housing project, fluctuation in the interest rates of the market lending charged by the bank. Also note that the bank may increase the repo rate thus leading to higher interest rates of the bank to be charged to the customer.

Thus the following are the interest rates of the banks being charged by Indians:

Bank Name

Interest rates of the banks

Kotak Mahindra bank

6.75%-8.45%

Union bank of India

6.80%-7.40%

Punjab national bank

6.80%-7.75%

Hdfc bank

6.80%-7.85%

State of India

6.80%

Central Bank

6.85%-7.30%

Bank of boroda

6.85%-8.20%

UCO Bank

6.90%-7.25%

Punjab and sindh bank

6.90%-7.60%

Icici bank

6.90%-8.05%

Bank of maharashtra

6.90%-8.40%

Axis bank

6.90%-8.55%

Canara Bank

6.90%-8.90%

IDBI bank

6.90%-9.90%

Bank of India

6.95%-8.35%

 

Hence it can be found out that the interest rates are mostly based in the range of 6.75%-8.00% charged by the bank. However the current floating interest rates are chargeable at 7% per annum. Because of the current low interest climate, it is an excellent opportunity for home buyers to achieve their dream of owning their house. Prospective buyers should know the interest rates and should be aware of the bank loans are benchmarked to the repo rate, which any adjustment under key policy rate will lead to rapid relative rate of interest. Homebuyers must, though make sure that they have satisfactory income to keep their debt load under balance and pay off loan on or before the deadline. Borrowers should keep in mind that the best home loan interest rates are normally reserved for borrowers with the excellent credit ratings with a minimum of 750. If your credit score is low, you can strive to strengthen it before considering the home loan. Please consider that you would consider only the floating interest rate of banks. Also based on the lender the interest rate may vary.

Conclusion:

Thus we can conclude that the while applying for the home loan the borrower should do thorough check of the home loans interest rates applicable. There are some banks who charge more attractive interest rates as compared to their competitors. Also the interest rates of the bank varies as per the amount of loan taken, CIBIL ratings should be good or average then the interest charged is lesser. The duration for which the loan is taken should be less in order to save on interest credit.

Ways to Use a Personal Loan to Build Your Credit Score

Personal loans are one the simplest forms of lending that enables a borrower to use the availed funds for any purpose. It is an unsecured loan that a borrower can apply for and get immediate funds even in case of an emergency.

As there is no collateral security attached, it gets disbursed quickly based on the applicant’s monthly income, credit score, and payment history. However, most people overlook the fact that a personal loan can also be used to build their credit score, which further helps them in the future when they have to apply for larger loan amounts.

A borrower having a personal loan can improve his credit history by making regular payments. The data of your payment history is sent to various credit agencies that build your good credit history. Unless you can’t afford a personal loan, the lending does not harm your credit rating.

5 Simple Ways to Improve Your Credit Score with a Personal Loan

There are certain factors associated with a personal loan that positively impact your credit score –

1. Payment track records- Your repayment history is the most decisive factor that indicates your financial capability. If you pay your pending instalments regularly, it builds a positive repayment history that invariably leads to a higher credit score.

2. Credit basket- Your credit score also depends upon your credit basket and how well you manage it. If a borrower has a mix of credit cards, personal loans, auto loans, or student loans within his/her limit, and they pay the instalments regularly, the credit score improves vastly as opposed to just having a single loan.

3. Debt amount- You can use a personal loan to pay off your credit card bills to reduce your credit utilization ratio. A credit utilization ratio is how much you currently owe divided by your credit limit. For example, if the credit balance you can utilize is ₹50,000 with a credit limit of ₹1 lakh, your credit utilization rate is 50%. By taking a personal loan,

you can pay off your credit card bill to bring down the credit utilization ratio thereby increasing your credit score.

4. Debt consolidation- If you have a large debt with multiple EMIs to be paid every month, debt consolidation can help to avoid a situation of being bankrupt and improve your credit score. Suppose you have more than two credit cards with outstanding balances, then you have to make payment at three different interest rates. However, if you take a personal loan and pay off the outstanding balance of three credit cards, you’ll only be repaying a single EMI. It becomes easier to make one instalment a month at a specific interest rate. If the personal loan is available at a lower interest rate, it also allows you to save money. The process of debt consolidation can help in lowering your credit utilization rate which is a key determiner of the credit score.

5. An option of credit builder loan- A unique form of lending is a credit builder loan. It is an intention to build your positive credit report by paying a fixed amount month over month for a specific amount of loan. Here, you don’t get the borrowed money until you pay the full amount plus interest. The ultimate objective is to build a good track record with regular payments to improve your credit history. As soon as the payments are made, the lender sends the information to the credit agencies to update the regularity of payments. As no amount is due, you are entitled to receive the full amount sanctioned. It is very similar to putting money in a savings bank account with an opportunity to improve your credit score. It is not a very popular option among both lenders and borrowers. It also not suitable for every borrower as it requires a fee to open a loan account.

Risks attached with using a Personal Loan to Build Credit Score

Before considering the above options to avail a personal loan, it is necessary to overview your financial health and repayment capacity. It is recommended to study the suitability factors of taking a personal loan to improve your credit report. If this is the right choice for you, it would surely help to enhance your credibility. But in case you go wrong, certain risks can arise –

· Strict inquiry-

When a borrower applies for a personal loan, a strict inquiry is initiated. An inquiry temporarily drops your credit score and it lasts for a few months. It creates an adverse situation if you have

been applying for a loan at different institutions in the recent past. The credit report would show multiple inquiries on your credit report that would end up lowering your credit score.

· Increase in debt-

Even if you are taking a personal loan to improve your credit score, debt is debt. Increasing your debt is not good for your financial health. Before applying, you must consider your repayment capacity and limit.

· Attached Fees-

In a personal loan, you pay the processing fee, prepayment fee, as well as interest on payments. Hence, you are paying more than the amount which is disbursed to you. Hence, you should factor in the total fees attached to the personal loan.

A Detailed Guide on Tax Benefits on Business Loans

A Detailed Guide on Tax Benefits on Business Loans

Business owners often look for business loans to fulfil their requirement of short-term as well as long-term needs. The disbursed loan amount can be used for business expansion, procurement of materials, purchase, installation of machinery, renovation of the premises, shifting to a new office, etc. A business loan can be secured or unsecured.

The business loans are beneficial for owners as they are tax-deductible. The interest amount payable on a business loan is deductible from the gross income. This means that the principal loan amount does not offer any tax benefits. If you have taken a personal loan for business purposes, the interest amount is still eligible for tax-deduction. Tax deduction on interest payment for a business loan helps business owners reduce the liability of taxation.

The tax liability is calculated by subtracting the total business expenses from the total business revenue. To avail of tax deductions, borrowers need to fulfil the criteria set by the lender. There are innumerable benefits of taking a business loan.

Benefits of availing a Business Loan

1. Business expansion- To run a business smoothly, you need funds. The requirement of funds can arise at any time. Business expenses are incurred to generate income for the business.

2. No Collateral required- If your business is in operation for 3 or more years and your annual revenue is up to the mark, then several lenders offer you business loans without requiring any kind of collateral.

3. Tax benefits- A businessman pays the interest accrued on the loan amount. When the loan is used for business purposes, the interest paid is eligible for a tax deduction. You can use the loan amount to buy equipment, pay salaries, pay for advertising and marketing expenses, etc.

Who requires a Business Loan?

Small and medium enterprises, traders, retailers, private limited companies, public limited companies, start-ups, sole proprietorships, etc., are eligible for a business loan. Business owners generally apply for a business loan to manage their working capital and liquidity so that their daily operations aren’t stressed.

The loan provides a dual advantage as the amount can be utilized for business purposes and the interest amount lowers the taxable amount. Hence, businessmen prefer to avail of a business loan to enjoy tax benefits. Before applying for a business loan, businessmen should ensure that the eligibility criteria such as good credit score, healthy financial records, tax returns, the existence of a business of more than 2 years, etc., are met.

Interest Paid on Business Loans as a Tax Deduction

The amount paid as interest on a business loan to the lender is treated as a tax-deductible item. The payment of interest is written off as business expenditure allowed for a tax deduction. A business generates income by incurring business expenses that are deducting from the total revenue generated through sales.

Interest payment on a loan is a useful tool for small and medium enterprises & entrepreneurs. The tax deduction lowers the liability of tax payment that can be used for expanding business. The sanctioned amount of a business loan is the principal amount that is not tax-deductible. The principal amount is not treated as a part of business expenditure. Hence, tax is not paid on the principal amount. The principal amount is a part of gross income and the tax is payable on the net income earned by the owner of the business.

Types of Business Expenses being Tax-

To generate income, business expenses are incurred to run a business smoothly. Such business expenses are used for running business operations, repairs, and maintenance. The business expenses are subtracted from the total revenue earned to achieve the total taxable income.

The business expenses include wages and salaries paid to the staff and employees, rent of the premises, payment of insurance premiums, cost of leasing, advertising and marketing expenses, gift, meals and entertainment expenses, lighting expenses, power and fuel,

telephone charges, bonus paid to the employees, office supplies, stationery, and other office expenses.

Is a Personal Loan for Business Purposes eligible for Tax Benefits?

If you have taken a personal loan to meet your business needs, the question is whether interest payment on a personal loan is eligible for a tax deduction. The loan amount sanctioned can be used for boosting working capital, payment of salaries, account payables, etc. Yes, a personal loan for business purposes is eligible for a tax deduction. The taxation rules stand the same.

The tax deduction is allowed only for the interest amount of a personal loan. The principal amount is not a tax-deductible expense. The overall interest payment is deducted from the gross profit that lowers the taxable income of the business. There is no ceiling set on the interest amount to be claimed as a deduction. The condition is that the loan amount should be used only for business purposes.

Therefore, businessmen need to submit proof of the amount incurred for business operations. As there is no upper limit, businessmen should store all the bills and receipts to show how the loan amount has been incurred for business expansion and growth. It is advisable to maintain bills and receipts to avoid any discrepancies with the IT department.

What is Reverse Mortgage Loan for Senior Citizens ?

What is Reverse Mortgage Loan for Senior Citizens ?

To provide support to elderly citizens, the Government of India introduced a “Reverse Mortgage Scheme” in 2008. It is meant for those elderly citizens who own a home but do not desire to sell it. The reverse mortgage scheme is very beneficial for senior citizens who require funds for health care treatment, children’s education, or renovation of their residential property. The scheme allows tapping the value of the residential property during their life. It is not a popular scheme due to its notions but it is expected to be in the news post the COVID-19 outbreak due to its advantages.

Features of the Reverse Mortgage Scheme

A reverse mortgage scheme can be understood as the opposite of a home loan. The senior citizen who is the borrower receives the money in instalments from a banking institution that has to be paid back later. The payments can be received in the form of a lump sum, credit line, or periodical. The value of the property is determined by the loan amount, age of the borrower, and interest rate. The maximum amount capped for the monthly payments is ₹50,000 and the maximum lump sum payment can be 50% of the total eligibility amount or ₹15 lakhs, whichever is lower.

The amount disbursed for the loan can be used for multiple purposes like medical treatment of a spouse, borrower, or any dependent person, day to day needs, renovation of residential property, etc. It must be noted that the money should not be used for business, trading, or speculative purposes.

Tenure and Rate of Interest of a Reverse Mortgage Loan

A reverse mortgage loan is available generally for 20 years when you continue to stay at your property and receive periodical payments. Unfortunately, if the borrower dies, the spouse can stay in the house till her/his death.

Talking about the rate of interest, it varies from lender to lender. It would roughly be around 7.5% to 9.5% based on the lender and other parameters. If you consider terminating the loan,

the borrower can pay the outstanding amount whenever they want to, without paying any prepayment charges.

As we understand that the senior citizens do not have any source of income after retirement, the borrower is not supposed to repay during his lifetime. The legal heirs, after the borrower’s death, have the authority to redeem the property by repaying the outstanding amount. It may also happen that the legal heirs do not come forward to redeem it, in which case, the banks would sell the mortgaged property and realize the amount.

Benefits of Reverse Mortgage for Senior Citizens

· A permanent shelter- Even if you have availed reverse mortgage loan, as a senior citizen, you can continue to live in the mortgaged house after the loan tenure expires. The bank does allow some kind of settlement after the borrower’s death.

· Being a co-applicant- If the loan has been applied by the borrower and spouse as co-applicants, disbursals would continue to the spouse after the death of one of the borrowers.

· No immediate liability- The senior citizens can leverage the benefits of the reverse mortgage loan as there is no immediate liability. The outstanding amount can either be paid later or settled by selling the house after the death of the borrower.

· Benefit from equity- You can enjoy the benefits from the equity created by you and continue to live in the home without making any payments on the loan.

· Receive regular loan payments- The loan payments can be received from the bank in a flexible mode. Depending upon your requirements, you can receive the loan payments as monthly, lump sum, quarterly, or periodical payments.

Eligibility for a Reverse Mortgage Loan

Senior citizens who are above 60 years of age having a residential property can apply for a reverse mortgage loan.

The borrowing limit is-

· Minimum of ₹3,00,000

· Maximum of ₹1,00,00,000

The limit is based on the value of the property and the age of the borrower/s. A borrower can receive up to 60% of the value of the residential property as a reverse mortgage loan. Apart from the above eligibilities, certain important terms and conditions are associated with the loan.

ü The residential property of the borrower is the permanent primary residence

ü The borrower must a responsible citizen paying the taxes and insurance related to the residential property

ü House is maintained properly

ü The residential property does not have any issues, pending cases, or any other liabilities

Documents Required for a Reverse Mortgage Loan

The reverse mortgage loan is a simple process as the eligibilities include papers of the residential property, KYC documents, and bank statements. The mandatory documents include the PAN Card and Application form. You can submit any one identity proof such as an Aadhaar Card, Passport, Driving License, Voter ID, Government Employee ID, and ID issued by the Government of India.

Apart from that, you have to submit proof of date of birth, income, signature, and address. As soon as you submit the documents, the banks start the process and sanction the loan within 5-7 Days.

Buying a Home vs Renting – What’s Best in the Current Market?

There’s no question that the outbreak of COVID-19 has adversely impacted the country’s economy. The repercussions of the pandemic translated to the closure of businesses, loss of jobs, stagnant manufacturing, and a high rise in unemployment. As a result, individuals have experienced rising insecurity in relation to income and long-term employment.

While at the same time, many individuals are still confused as to the best way to invest their savings. Gold prices have shot up and the stock market remains quite unpredictable. With the rise in need of security, real estate has always been the most preferred option for investment that yields good returns.

Is Buying a House Profitable Now?

Despite the fallen real estate prices in various segments, experts believe that the industry will bounce back in the next couple of years. This means prospective buyers can capitalize on the low real estate prices right now. Another factor is that after the outbreak, individuals are realizing the importance of having an owned asset as both an investment and shelter.

The idea of buying a house is safe and profitable. Investing in a property generates both income and price appreciation. The new normal of working from home has increased the demand for owning a home. Many companies are still operational via work from home and avoiding public transport. Therefore, employees are looking for affordable homes closer to their workplace.

Apart from the reasons for owning an asset and having a feeling of security, lower home loan interest rates are also persuading individuals to purchase a home. The home loan rates are at an all-time low thanks to RBI’s decision of cutting down repo rates, and even the rates of property are stable and affordable. The current time is ideal to invest in residential property and leverage the investing benefits.

Earlier in urban areas, individuals preferred to go for a rented house rather than investing in a property and locking their capital. The reasons included: lack of savings, avoiding a permanent property in a particular location, or reduction in savings. However, if you are looking for a good return on investment, then buying a property is a great idea.

4 Benefits of Buying a House in the Current Market

Buying a home or living in a rented home is a challenging decision. However, you’re assured of the following benefits when you choose to invest in a property –

1) Invest in a physical asset and build equity- By investing in a hard asset; you obtain peace of mind while also building your equity. It provides ultimate security to you by assuring a monthly cash flow if you choose to rent it out. During uncertainties, being in your home reduces cash outflow and unnecessary stress of looking for shelter.

2) Availability of ready-to-move-in property- You can buy a residential property like ready-to-move-in apartments. In modern times, you can buy a full-furnished apartment eliminating all types of market risk. The pricing of such properties is different from those that are under construction.

3) Leverage low interest rates- The increasing rental costs such as security deposits and increase in rent up to 15-20% have made the burden of home loan interest rates much cheaper. Paying a monthly rent would never increase your equity; hence the cash outflow does not contribute to wealth creation. Even if the asset appreciates, a licensee or tenant does not benefit from it. Relatively, buying a home is a preferable option.

4) Government incentives- The government always encourages individuals to buy a home by offering various incentives and tax benefits. With the enactment of RERA, the government has enhanced the security of homebuyers. The objective of the Government has been to induce first-time homebuyers with interest subsidy, reducing tax burdens, and affordable housing. Budget is the most important aspect when you think of buying a home.

So Should You Buy or Rent?

If you earn a good salary and have job security, then this the best time to invest in a residential property. Everyone wishes to have a dream home. If you were looking to buy for a long time, then you should capitalize on the lowest interest rates, subsidy, and affordable housing options.

The current macroeconomic factors and economic scenario are tempting for both first-time and second-home buyers. There has been a price correction in the real estate properties coupled with lower interest rates. Now, buyers can bargain for the best deal and buy their dream home as there are ample opportunities like ready-to-move inventory.

Ultimately, whether to buy or stay on rent depends upon your budget and financial status. If you can arrange money for a down payment and can pay your instalments comfortably, buying a home would be a wise decision. However, if you are facing a financial crunch, staying on rent would be rational.

If we consider this example where you wish to buy a property of ₹70 lakhs with a loan of ₹50 lakh at an interest rate of 6.75%-7.10% for 15 years, your EMI would be around ₹45,000. The annual outflow would be around ₹5,40,000.

But if you are staying on rent at a similar location and property, your rental yield of 4% means a rental amount of around ₹4 lakh. If the rental yield is 3%, it means a rental outflow of ₹3 lakh. This means that a rental yield of 4% means a good capital appreciation. But a rental yield of 3% or 2.5% sees no capital appreciation in the future stating that the property is overvalued.

Before buying a home, you must ensure that you buy a home that has a rental yield of more than 2.5 -3%. If not, then it is better to stay on rent.

Why Personal Loans are Best for Medical Emergencies

If the COVID-19 crisis has taught us anything, it’s that – Life is unpredictable. Uncertainties such as a medical emergency can knock on your door anytime. Medical emergencies hurt you both emotionally and financially. If you do not have surplus funds, a medical emergency can increase the financial stress in your life.

The cost of healthcare services is increasing exponentially in India. At times, even your existing health insurance may not cover the full cost of treatment. Hence, to manage medical emergencies, you can opt for a personal loan. Personal loans are unsecured loans applied for an immediate need for funds. In the case of a financial crunch, you can easily manage the payment of medical bills with a quick personal loan.

How Personal Loans can help you Face Medical Emergencies

1. Get funds quickly

Medical emergencies can never be anticipated. When you apply for a personal loan, you can get access to immediate funds, usually in 5-6 hours in case of pre-approved loans. All other types of loans require a long processing time making them undesirable.

2. Access to Premium Medical Care

The quality of medical care plays a significant role in the treatment. Due to a lack of funds, you may not afford quality medical care at reputed hospitals. With immediate financial assistance in the form of a personal loan, you can avail the best treatment.

3. No collateral

Secured loans have a lengthy process and several formalities. However, unsecured loans need no collateral, and hence can be disbursed within 1-3 days. In the case of pre-approved personal loans, you can get funds within a few hours. Personal loans are the best for individuals who do not have any security to attach.

4. Fixed Interest Rates and Repayments

Personal loans carry fixed interest charges and fixed repayments. Every month a fixed amount gets debited from your account as a monthly instalment. With fixed EMIs, you can easily repay the loan in a specified period.

5. Minimum Documentation

As a personal loan is an unsecured loan, it requires minimum formalities. With identity, address, and income proof, personal loans get approved quickly. If you have a pre-approved loan, you do not even need to submit the KYC documents. In contrast, other loans often require multiple visits to the bank for detailed documentation.

6. Hassle-free Loan Process

A medical emergency creates a lot of stress. Arranging funds is very challenging and stressful too. The entire procedure of applying for a personal loan and getting the funds in your account can all be done online, thus making it a truly hassle-free process.

7. Flexibility in the use of funds

As soon as a personal loan is disbursed, you have the discretion to use funds as you like. You can utilize the money for payment of medical bills, for an expensive treatment, doctor consultation fee, or also use it for both pre and post-hospitalization expenses, etc. You are not required to submit any medical proof before using the funds. The condition attached to a personal loan is repayment of monthly instalments.

8. Affordable EMIs

Individuals prefer personal loans as the monthly instalments are quite affordable. You can apply for a personal loan with tenure from 12 to 60 months for a fixed rate of interest. The EMIs are affordable in comparison to credit card EMIs. As the individual is mentally prepared for making monthly repayments, there is less pressure.

Personal loans are applied for a minimum of ₹1 lakh to a maximum of ₹40 lakhs. The higher your salary/income, the higher can be your loan amount. Maintaining a good credit score is your responsibility as the credit score plays an important role in being eligible for a personal loan.

Despite having a higher salary, if you have a poor credit score due to non-payment of credit card bills, or bouncing of cheques, your loan application can be rejected.

Eligibility Criteria

To be eligible for a personal loan, check the below-given criteria –

1. Age criteria- Individuals aged between 18-65 years can apply for a personal loan.

2. Residential status- Only resident Indians can apply for a personal loan in the banking institutions in India.

3. Income- You can only apply for a personal loan if your salary is above ₹15,000.

4. Occupation- A salaried professional or a self-employed individual can apply for a personal loan.

5. Credit score- A good credit score of 750/900 is eligible, although some lenders may offer loans to individuals having a score of 600+, albeit at higher interest rates.

Documents required for an Emergency Personal Loan

You need to submit these documents –

1. PAN Card/ Aadhaar Card as identity proof.

2. Electricity bill or any other utility bill as address proof.

3. Bank statements of the past 6 months reflecting credit of salary.

4. For self-employed, existence of business through shop registration/property documents/GST registration.

FAQs

1. Can I use a personal loan amount for IVF treatments?

Yes, you can use the loan amount for any medical treatment and payment of medical bills.

2. Do I need to submit any medical proof to get a personal loan?

No, you are not required to submit any medical proof for taking a personal loan for a medical emergency. A personal loan is applied to manage any sort of immediate needs and personal expenses.

3. Are there any hidden charges?

No, there are no hidden charges. Financial institutions charge a low processing fee for granting a personal loan. Prepayment charges may also be applied.

Why Loan against Property is the Best Way to Sponsor Your Child’s Higher Education

Savings are essential in our lives to meet the family’s responsibilities or unexpected events. However, relying only on savings isn’t enough to cover the cost of your child’s higher education. If you are planning to send your child abroad, it requires careful planning. For overseas education, apart from tuition fees, you also need to plan for additional expenses such as boarding, food, and monthly expenses. The size of your savings won’t be adequate to fulfil the financial requirements of higher education. The need for extra funds in a foreign country can be arranged with an educational loan. But in some cases, the educational loan becomes difficult to procure. The reasons are –

 

  • The loan amount requirement is above ₹20 lakhs
  • Relatively higher interest on a larger loan amount
  • The loan for a particular course may not be approved by government agencies
  • When you desire the tenure of repayment to be above 10 years

 

Focusing on the reasons above, it seems an educational loan is not the ideal choice for an immediate or higher loan amount. To fulfil the above needs, a Loan Against Property (LAP) is a much preferable option. To obtain this loan, you need an owned asset that can be pledged as collateral to the bank.

 

There are different situations in the case of a LAP such as self-occupied, unoccupied, or rented. If the property is self-occupied or unoccupied, the banks would easily offer you LAP of around 50%-90% of the market value of the property. If the property is rented, the banks would offer you a loan to value ratio of about 40%-55%. Even if the property is mortgaged, you can take a top-up loan.

 

Eligibility and Documents required for a Loan Against Property (LAP)

 

The basics of a LAP include the principal amount, interest rate, mortgage tenure, and equated monthly instalments (EMI). To be eligible for a LAP, you must be an Indian resident and a salaried employee or self-employed.

You have to submit the following documents-

 

  1. Salary slip of the last 3 months
  2. Bank statements for the past 3 months
  3. PAN Card /Aadhar Card
  4. Address proof
  5. Copy of the property papers owned by you
  6. Recent photograph
  7. Form 16/ Income tax returns
  8. In the case of self-employed, you need to submit proof of business existence, company financials, and certified income tax returns

 

After submitting the documents, your eligibility for a loan is dependent upon your repayment capacity. Multiple factors such as income, total liabilities, age, credit score, etc., play an important role in assessing your credibility.

 

Benefits of taking a Loan against Property (LAP) for a Child’s Education

 

  • A Quick Solution

As you own the property, getting a mortgage loan becomes easier. You just need to submit the required documents with an application. As it is a secured loan, lenders feel a lower risk of losing their money as the amount can be recovered by selling the property. Unlike an education loan, there is no need to wait for the university to accept the application and then visit the bank for due process.

 

  • Getting Easy Approvals

An education loan application may get rejected due to several reasons such as low income, bad CIBIL score, or if the child’s course is not approved by AICTE/UGC. In such situations, LAP is the most preferred choice for parents.

 

  • Higher Loan Amount

With intense planning, the parents need to determine an appropriate amount of loan required for their child’s education. The expenses include tuition fees, living expenses, and other additional expenses. Hence, the total amount is much higher for a child’s education when compared to just the tuition fees.

 

Thus, an educational loan is not a preferable option as it is usually capped at ₹20 lakhs. With a LAP, you can easily go for a loan above ₹20 lakhs. With a higher market value of a property, you can get a loan ranging from ₹24 lakhs to ₹39 lakhs or more.

 

  • Lower Interest Rates

Educational loans can be costly for you in comparison to Loan against Property. With lower interest rates, LAP proves to be very cost-effective.