Why it makes more sense to switch your home loan after this interest rate cut

If not all then at least the old borrowers who have been servicing their EMI's based on the erstwhile base rate system of lending, stand to benefit. Even though bank's base rate hasn't come down as much, they now have a stronger reason to switch to the current MCLR-based lending. With the recent interest rate cuts on loans by banks the differential between base rate at which old borrowers are servicing their loan and the current MCLR is widening.

For those who had taken loans after July 1, 2010, but before April 1, 2016, the loans are linked to the bank's base rate. And for most of these borrowers, the home loan interest rate is around 10 per cent. After the recent rate cuts announced by banks, the average MCLR has fallen to about 8.75 percent or even lower. This differential of 1-1.25 percent in base rate and MCLR will help old borrowers to switch to MCLR and save on total interest outgo.

Why to switch now

The primary reason to switch from base rate to MCLR has to be the sluggishness seen in banks' passing on the benefits of RBI rate cuts to borrowers. RBI's repo rate cuts were not reflecting in the bank's base rate but are a part of the factors that goes into calculating the bank's MCLR so, the moment repo rate changed, MCLR was impacted.

Further, the MCLR takes into account the marginal cost of funds which includes the rate at which the bank raises deposits and other cost of borrowings. With banks flush with funds post demonetisation, the bank's CASA deposits (current account-savings account) have swelled and have given the banks the leeway to go for such major rate cuts.

The base rate, on the other hand, has seen only marginal reduction since last 24 months. Post demonetisation, banks are expected to wait and see the impact once the restrictions on cash withdrawals are removed. If the funds don't move out from the banking system in significant amounts, further rate cut is expected.

MCLR based borrowers

For the new home loan borrowers who have taken loan after April 1, 2016, there's not much immediate benefit from the recent rate cuts. For most MCLR-linked home loan contracts, the banks reset the interest rate after 12 months for their home loan borrowers. So, if someone has taken home loan from a bank say in May, 2016, the next re-set date will be in May, 2017. Any revisions by RBI or banks will not impact their EMIs or the loan till the reset date it is done through Home Loan Emi Calculator

What's MCLR mode of lending

A new method of bank lending called marginal cost of funds based lending rate (MCLR) was put in place for all loans, including home loans, given after April 1, 2016. Under the MCLR mode, the banks have to review and declare overnight, one month, three months, six months, one year, two years, three years rates each month.

Watch outs

In a falling interest rate scenario, quarterly or half-yearly could be a better option, provided the bank agrees. But when the interest rate cycle turns, the borrower will be at a disadvantage. After moving to the MCLR system, there is always the risk of any upward movement of interest rates before you reach the reset period. If the RBI raises repo rates, MCLR too, will move up.

Options for base rate borrowers

When the interest rate on your loan goes down banks, on their own, typically reduce the tenure automatically (instead of reducing EMI amount) and thereby, transfer the benefit of lower rate to the customers.

The base rate borrowers now have two options - switch to MCLR based lending with the same bank or else transfer i.e. get the loan refinanced from another bank on MCLR mode. One may also continue the loan on base rate, especially if the loan term is nearing the end.

The RBI has made it clear that banks should allow base rate borrowers to switch to MCLR. The existing loans can run till maturity or borrowers can switch to MCLR on mutually agreed terms.

Switching from base rate to MCLR within the same bank

It makes sense to switch if the difference between what you are paying and what the bank is offering now as MCLR is significant. And also in cases where the time for the home loan to finish is not near.

Switching loan from base rate to MCLR with another bank (refinancing)

If your bank is offering a high home loan interest rate (MCLR plus spread) then look for refinancing. Gets the loan refinanced from a bank offering a lower interest rate. You may have to incur processing fees. However, banks are not allowed to charge foreclosure or full repayment charges. Other charges may include lawyer's fees, mortgage charges, etc. Remember, the bank may ask you to buy a home loan insurance cover plan, which is not mandatory. Get the loan insured through a pure term insurance instead, in addition to any insurance that you already have.

[Source: http://economictimes.indiatimes.com/wealth/borrow/switch-home-loan-on-base-rate-to-mclr-to-cut-interest-burden/articleshow/56326321.cms]

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Use the interactive home loan emi calculator to calculate your home loan EMI. Get all details on interest payable and tenure using the housing loan calculator

Become a Proud Home Owner with the Help of a Home Loan

The society that we live in is changing with every passing year. This is not just limited to the spending habits of the public, even the basic mind-set of the people has been evolving. Traditionally, joint families were the ideal form of living. However, nowadays more and more people are opting for nuclear homes rather than living with their parents.

Thus, it goes without saying that the number of home owners has increased in the recent past. It order to make the house an asset that is within the reach of the general public, banks offer loans that are especially designed for the purchase of property.

With the help of these loans, purchases can be made on credit and the amount can be repaid to the bank in installments. This amount is calculated taking a number of different factors into consideration. This includes; the principal amount, rate of interest, tenure of the loan and the method of computation. You can find this figure yourself, using an EMI calculator.

These calculators are available online and will help you compare the offers of different banks before narrowing it down to a couple. A home loan emi calculator will help you to get an overview of how much you will have to pay the bank on monthly bases, in order to repay your loan in time. This is an extremely beneficial tool as it will help you understand how much of your income will go towards repayment of the loan. It is important to avoid a loan that is more than 60% of the monthly income, as it will be difficult to make payments in time.

Default payments can hamper the credit score and affect the chances of getting a good rate of interest in the future. This score is calculated taking the past finances into consideration. This includes everything from payment of credit card bills on time to bouncing of cheques. If you have a good credit score, the rate of interest changed of the loan will be low. However, if you do not have a good credit score, it will be difficult to even get a loan.

Similarly, your past financial record and the monthly income in sued to determine the maximum amount you are eligible to receive as credit. Although banks can offer a loan of up to 80% of the cost of the property, the amount actually offed depends on the state of your finances.

In order to reduce the amount to be paid on monthly bases, you can choose a home loan that spreads over a long tenure. However, while doing this, you must keep in mind that the amount you will be paying as interest will increase. Hence, it is important to make sure that the monthly installments are easy on the pocket, without having the cost of interest pile up.

It is important to take these things into consideration while selecting a loan. Steps must be taken to constantly improve credit score so that when you do apply for a loan, you are sure to get a good rate of interest.

[Source: http://www.sooperarticles.com/finance-articles/loans-articles/become-proud-home-owner-help-home-loan-1229597.html?]

An Insight into Buying Resale Property

You didn't plan, but you did fall in love with a pre-owned house in a much-coveted locality? Buying a resale property can be a smart move, however, before you make the big purchase, be aware of all the pros and cons involved in purchasing it. It is absolutely necessary that you rule out any discrepancies that could give rise to legal issues in the future.Benefits of buying a resale property

Easy on your pocket and time: You can save both effort and time by choosing to buy a resale property, as you are likely to find most amenities in place at the time of possession. With resale properties, chances are that you might be able to acquire a property at a discounted price, or come across an eager seller willing to negotiate.

Good Investment Option: A resale property in a prime location is a great investment option as there will be a constant demand for such properties. Since prime localities are saturated and there are no fresh projects, resale properties have a great potential for resale. You can avail a home loan for properties not older than 20-25 years. If you have disposable cash from a recent property sale, investing in an older property is a great option. What to Look Out for When Buying Resale Property

Never let a prime location or an unbelievable bargain take away your attention from the essential measures required to safeguard yourself from fraudulent sellers. With a little caution, you can buy a great resale property at an amazing price. Here are a few cautionary tips to be followed when buying resale property.

Look for Physical Damage: While it is a norm to renovate and paint a house before selling it, do not let the beauty make you blind to any physical damages in the building structure. It is a good idea to hire an architect to examine the property and rule out any problem areas. When you identify damage, do not let go of the house immediately. Instead, calculate the amount you'd have to spend to fix the issue and try to adjust it in the final price you'd be paying for the property. If the expense is too big, then it might be practical to strike the property off your list.

Check Documents Thoroughly: Look beyond the title deed of the property and ask the seller for the mother deed - a document that covers all the transfers the house has undergone. In order to root out any legal hassles, you could hire a lawyer specializing in real estate to put a search report together. This is a necessary caution while investing in a resale property with proper Home Loan Emi Calculator as it safeguards your ownership. Also, insist on examining the original conveyance deed as it gives you an assurance that the seller is indeed the owner of the property. Besides checking the conveyance deed, also make sure that all outstanding dues and taxes have been paid. Caution Against Legal Hassles

It is recommended that you seek the help of district court records to find out if the property has been involved in any litigation. When buying an apartment, all you need is a no objection certificate from the society. However, if you are buying an independent house, watch out for duplicate sale deeds.

[Source: http://www.sooperarticles.com/real-estate-articles/selling-property-articles/insight-into-buying-resale-property-1506940.html?]

What Should You Know Before Taking A Loan Against Assets?

We often avoid taking loans, especially when it requires one to mortgage a property or asset. Well, that concept is fast changing today. Mobilizing funds and ensuring a high return on investment is the trend. One must plan finances well and understand the schemes before taking any decisions.

Loan against asset is one such scheme wherein a person is required to mortgage an asset in order to avail a loan against it. These are secured loans the financial institutes offer to the public. Thus, the loan amount can be huge while the interest rates remain low as compared to the interest rate offered under unsecured loan schemes

Loans against assets can be quickly availed and requires only basic documents, such as proof of identity, proof of address, pan card and others. The financial institutes offer doorstep services so as to make it easier for the customer. The tenure of the loan can range between 6 months to 48 months subjective to the financial institute offering you the same.

Availing Loan against Gold in India

Loan against gold in India would require one to give in a minimum of Rs 50,000 worth of gold in most financial institutes while one can avail a loan on gold valued at less than Rs. 50,000 in the rural parts of our country.

The interest rates for a loan against gold in India are very attractive and thus one must opt for the same in order to fulfill one's financial requirements through Calculate Home Loan Emi.

The gold mortgaged can be liquidated at any given time. The financial institutes generally charge a foreclosure charge, but one may request for a waiver. This shall help you save 1% of charge on the amount payable if at all agreed upon by your lender.

The loan processing charge and gold valuation charges are minimized and one has to bear them in order to avail the loan against gold in India.

One may renew the tenure of the loan at a given charge, or pay up to 1% as a prepayment charge.

The best thing about loan against gold in India is that it can be disbursed within an hour provided the documents are in order and the verification of the gold takes place quickly. One must opt for loan against assets in order to meet unforeseen circumstances and other urgent requirements.

[Source: http://www.sooperarticles.com/finance-articles/what-should-you-know-before-taking-loan-against-assets-1429331.html?]

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