Home Loan s Advantages

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Home Loan Advantages

The need for home loans arises not because property prices are heading upwards all the time but because home loans make great sense from a longterm savings perspective. Not only are home loans a handy tool for the common man to own a roof over his head but they also help save money in the long run.

With skyrocketing real estate prices, people are increasingly opting for housing loans to acquire their dream home. Interest rates are coming down all the time and the housing finance companies are literally falling over each other to lure the prospective home-seekers.

Not with standing the tax breaks and generous lending rates, a lot of people still can't arrange resources for the down-payment, which comes out to be at least 15 per cent of the property value. Taking cognizance of the situation, HFCs are coming up with home loan products called ’zero down payment loans,’ wherein 100 per cent funding is provided for select properties. These lucrative offers are other major reasons for why people are opting for home loans.

Even if one can afford to buy a home with one's own money, home loans should be availed because they act as good savings instrument. According to industry estimates, the long term average return in investing in a home is about 20% p.a. while the average cost of borrowing funds in the market today is about 10% p.a. (considering all tax breaks).

For salaried employees, housing loans are the best way to avail tax benefits. Many people simply go for the home loans in order to avail these benefits. Interest payments up to Rs 1.5 lakh on housing loans are deductible from the taxable income and there is a further tax deduction of Rs 4,000 against repayment of principal. In case a person stays in a rented house, the cost of the loan will be nearly zero per cent since he will be saving a decent amount on rent.

Few decades back, buying a home was not a very easy task as there were hardly any lenders available to loan the ever increasing astronomical lump sum of money. However, with time, the rising property prices and the burgeoning housing finance market in the country, made the phenomenon of the home loans easy and the dream of buying a home possible. Also, the HFC’s (Housing Finance Companies) and banks have come up with so many home loan plans that they have become an answer to every customer’s necessity. Apart from this, the changing equation of market has also provided customers with several reasons to opt for a home loan. Here are few reasons to why home loans have gradually became a necessity in the society.

Eligibility     Individual(s ) of 18 years and above with steady sourse of income including persons engaged in agriculture & allied activities. Individual(s) should have to be the saving account holder in the bank Any Individual(s) can apply for loan based on their Income and repayment capacity. The priority is being given to the person(s) who are the employees of government or semi-government firm.

Purpose: 1. 2. 3. 4. 5. To purchase /construct a new house/flat. To purchase an existing(old) house/flat. To extend an existing house. To repair/renovate an existing house/flat. Reimbursement of investment made in housing [for items 1-4] from own resources.

Maximum tenor: The maximum loan tenure is 15 years. Loan amount: Loan upto RS 20,00,000 for purchase of land or plot/construction of house. Loan upto RS 1,00,000 for repair and renovation of house. Loan upto RS 1.5 lacs is being sanctioned at branch level by branch manager. More than 1.5 lacs is being sanctioned at the head office by the General manager.

Moratorium Period: For construction of new house/ flat or purchase of house/ flat on installments, a Moratorium Period(repayment holiday) till 2 months after completion of construction or 18 months from the disbursement of 1st installment of loan, whichever is earlier, may be permitted at the request of the borrower. Rate of Interest: The Reserve bank of India has all the rights reserved with it to make changes in rate of interest charged by the bank . And banks has to follow the interest rates decided by the bank. The Apex bank gives loan for 10 years or 15 years. At present the Rate of interest is: 1. For the period of 10 years: 8.75% 2. for the period of 15 years: 9.25%

For the employess/staff of bank: 1. For the period of 10 years: 8.50% 2. For the period of 15 years: 9.00% The calculation of interest will be done on EMI basis.[EMI or Eqadated monthly installments refers to the fixed sum of money that you will be paying to the bank every month. The EMI comprise of both interest and principal repayment. The calculation of rate of interest will done on half yearly basis ,in the case of loan of employees/staff of bank. Margin money In the cases of House loans margin money of 20% is fixed. Processing fee Processing fee will be charged upto RS 0.75% of loan amount or minimum of 500. The processing fee will not be charged for bank employees/staff.

Loan Through Apex Bank

Cons. Loan (for other) Cons. Loan (for Staff) House Loan (Upto 10 yrs for other) House Loan (above 10 yrs for other) House Loan (above 15 yrs for other) House Loan (Upto 10 yrs for Staff) House Loan (above 10 yrs for Staff) House Loan (above 15 yrs for Staff)

12.00% 10.50% 8.50%

12.00% 9.00% 8.50%

12.00% 9.50% 9.00%

12.50% 12.00% 9.50% 10.00% 9.50% 8.75%


























Top Purpose For purchases/construction of Houses, Modernisation Max. Loan Rs. 15.00 lacs Amount Margin Money 20.0% up to Rs. 25,000 25.0% up to Rs. 50,000 30.0% above Rs. 50,000 Interest Rate Up to 5 years Above 5years Up to 2.00 lacs 9.50% 10.00% Above 2.00 lacs 10.00% 10.50%
@ 9.5% (in case of Employees*)

Insurance Repayment Period

Insurance of house 15 years on monthly basis including moratorium up to 18 months

Security:i) Salaried Mortgage of assets + Letter of Employer /Advance Cheques Mortgage of assets/ Advance Cheques ii) Non Salaried

(Rs. in Crores) S.No. PARTICULARS 1. 2. 3. 4. 5. 6. 7. 8. 9. Share Capital Reserves Deposit Borrowings Loans & Advances O/S Working Capital Investment Per Employee Business NET PROFIT 2007-08 110.93 458.48 2440.89 1116.76 2450.12 4269.67 1227.10 7.44 26.39 2008-09 122.02 477.23 2923.21 1457.27 2293.42 5057.18 2295.12 8.15 29.97 2009-10 122.98 387.77 3290.70 1861.48 2503.43 5873.17 2856.81 9.11 17.98

S.No. 1 2 3 4 5 6 7

PARTICULARS Share Capital Reserves Deposit Borrowings Loans & Adv. O/S Investment Per employee business

Percentage of growth over previous year 0.79 % - 18.75 % 12.57 % 27.74% 9.16 % 24.47% 11.78 %

Consolited Financial Status of District Central Co-operative Bank Rs.in Crores Sr. No. 1 2 3 4 5 6 7 8 9 No. of DCCB Share Capital Reserves and Other Funds Deposits Borrowings Loans & Adv. O/S. Working Capital Profit for the year (Amt.) No. of Banks 2009-10 Tentative 38 392.23 1568.16 6041.53 1810.75 5422.75 9846.34 121.64 37 4.49 1 65.45 17 330.53 21 38 451.06 1725.65 7050.35 1919.40 5802.34 11027.90 175.70 38 0 0 94.90 19 287.73 19




38 342.77 1409.08 5226.25 1883.37 5262.44 8823.44 82.85 37 1.54 1 45.13 15 406.24 23

10 Loss for the year (Amt.) 11 No. of Banks

12 Accumulated Profit (Amt.) 13 No. of Banks

14 Accumulated Loss (Amt.) 15 No. of Banks

Growth rate during the year by DCCB

Sr.No. 1 2 3 4 5

PARTICULARS Share Capital Deposits Borrowings Loans & Adv. O/S.

Growth Rate during the Year 15 % 16.70 % 6.00 % 7.00 %

Reserves and Other Funds 10.04 %

FINANCIAL STATUS OF PACS Membership in lakhs Rs.in Crores *(Tentative)

S.No 1. 2 3 4 5 6 7 8 9


2006-07* 2007-08* 4526 57.87 32.99 306.95 83.15 452.82 3314.04 2904.88 4204.20 4526 58.71 33.58 307.79 84.32 599.66 3579.17 3224.41 4372.37

2008-09* 4526 59.39 34.18 341.29 86.84 665.24 3397.71 3415.14 4509.54



(A) No.of Societies (B) Amount

1879 43.63

1923 45.95

1945 57.76

(A) No.of Societies (B) Amount

2647 182.49

2603 181.10

2581 173.53

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Home Equity Loans

RBI Directives for Home Loans in India

The Reserve Bank of India (RBI) has given a recent and elaborate directive to Indian banks. The Reserve Bank of India has asked the banks to be fair and transparent while signing their home loan agreements with the consumers. This latest RBI Directive for Home Loans for resident Indians have followed the hue and cry raised by various consumer sections regarding home loans. RBI directive for Home Loans has stressed on the fact that while giving a home loan the banks should not combine their loans with their own prime lending rates (PLR) which often culminates in pro-bank and against consumer interest.

The recent RBI directive for home loans has also emphasized that the consumer should get proper credit counseling before signing any loan agreement. The banks themselves can provide the credit counsellings or it can also be provided by non-governmental organizations too. Consumers often cry foul about of not receiving benefits of falling interest rates as banks tie their floating rate loans with their prime lending rates or PLR and thus and even when










On the other hand when interest rates are sky rocket, the banks increase the benchmark rate, thus making customers pay a higher rate and consequently increase the number of EMIs too. The RBI ordered th banks to amend such illogical rules. Thus the elaborate RBI directives for home loans aim at making the home loan process more logical and transparent. The detailed RBI guideline for Home loan has underlined the fact that the individual borrowers should ask for the exact tenure and EMI while taking a fixed rate loan. The RBI has also promised to probe into all consumer complaints if it is bought to the regulator's notice.

1. 2.



What is banking? Basic Definition: A system of trading money which: provides a safe place to save excess cash, known as deposits. supplies liquidity to the economy by loaning this money out to help businesses grow and to allow consumers to purchase consumer products, homes, cars etc. What are banks Institutions which deals in money and credit. An intermediary, which handles other people’s money both for their advantage and to its own profits. A financial institution that links the flow of funds from savers to the users. Plays an important role in the economy of any country as they hold the saving of the public. Types of banks in India

Central Bank: The Reserve Bank of India is the central Bank that is fully owned by the Government Public Sector Banks: State Bank Group, Regional rural banks Private Sector Banks: Foreign Banks, Scheduled and Non- Scheduled Banks Co-operative Sector: State Co-operative Banks, Central Co-operative Banks, Primary Agriculture Credit Societies o Development Banks/Financial Institutions: IDBI, ICICI, NABARD 5. Commercial Role of Banking Issue of banknotes (promissory notes issued by a banker and payable to bearer on demand) Processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means Issuing bank drafts and bank cheques Accepting money on term deposit Lending money by way of overdraft, installment loan or otherwise 6. Commercial Role of Banking Providing documentary and standby letters of credit (trade finance), guarantees, performance bonds, securities underwriting commitments and other forms of off-balance sheet exposures Safekeeping of documents and other items in safe deposit boxes Currency exchange Acting as a 'financial supermarket' for the sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products 7. Economic Role of Banking Issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. Netting and settlement of payments. Credit intermediation Credit quality improvement Maturity transformation

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