shootfinance-blog

[shootfinance-blog]

How to get an interest free home loan

Availing a home loan, although easy in this day and age, comes with a burden of interest. The total interest payable on home loans are usually a substantial amount since it is usually a large sum availed for a long tenure. Therefore, people have been looking for ways to save up on this since as far as home loans have existed. One of the few ways in which borrowers can benefit from a housing loan is by applying for tax exemption. A certain amount of the interest payable towards the loan can be exempted from tax. However, yet another way to desensitise yourself from the burden of interest rate is by investing in SIP (Systematic Investment Plan).

Let’s say that you have availed a home loan for Rs.20 lakh for a tenure of 20 years, and an interest rate of 9.5% p.a. The total interest payable to the bank is close to Rs.25 lakh. If you would take 1% of the loan amount, i.e., Rs.2,000 and invest in SIP, the principal for 20 years will amount to Rs.4.8 lakh. Assuming that the SIP will fetch you 15% interest, you get back close to Rs.30 lakh. Even after deducting the principal, you make up for the interest lost in paying off your home loan. In fact, you make slightly more than the total interest paid on your home loan.

Therefore, if you feel that the burden on interest on the home loan weighs you down, investing in a SIP will neutralise the burden and help you pay off your home loan without the inherent stress usually associated with it.

[shootfinance-blog]

Tax Benefits On Home Loan

Availing a home loan can be an expensive affair. However, the positive aspect is the tax benefits. An individual with a home loan can avail tax rebates and ease the tax burden substantially. Read the article to understand how to avail tax benefits.

What are the laws on home loan tax exemption?

Currently, property owners that have rented out their property, after adjusting the rent earned, can deduct up to Rs.2 lakh p.a. on the housing loan. Any amount over the Rs.2 lakh can be carried forward for eight assessment years. Borrowers who have obtained a home loan and are residing in the same house are also entitled to deduct up to Rs.2 lakh only on the interest paid on the home loan. However, if a property that is purchased is sold within 3 years, the profit from this sale will be taxed as per the tax slab the individual fall under.

What are the various tax benefits on a housing loan?

Home loans are qualified for tax benefits under three different sections of the Income Tax Act. Your home loan consists of two components: Principal and Interest. You may be eligible to claim tax benefits for these components based on certain criteria. For starters, you must be either the owner or co-owner of a home loan.

Interest payment under Section 24(b) – it allows for tax deduction on interest payable on a loan taken to buy or construct a house.

You can also claim this benefit for repair or reconstruction of an existing property.

Processing fees and prepayment charges will also be treated as interest payment.

This benefit is available for residential and commercial property as well.

Owners of let-out properties can claim full interest payment, but exemption for self-occupied properties is restricted to Rs.1.50 lakh per annum.

This tax benefit is also applicable for loans taken from friends and family.

Principal amount under Section 80 C – A Hindu Undivided Family (HUF) or an individual can claim tax benefits on the principal of the home loan.

Commercial property and home renovations or additions on existing property is not eligible under Section 80C.

Life Insurance Premium, NSCs, EPF, ELSS can be claimed along with the home loan, subject to an overall deduction of Rs.1 lakh in a year.

The loan should be taken from banks, HFCs, Central & State governments, LIC, NHB, Public Company or a Public Sector Undertaking.

Stamp duty and registration charges are also eligible for deductions.

[shootfinance-blog]

Home Loan Balance Transfer

Home loan balance transfer is the process where a home loan is transferred from one bank to another. Also known as refinancing, this is done in order to reduce interest rate, obtain better customer service, etc. In the event that a bank is not willing to reduce the rate on interest on the loan even after you’ve been paying off the loan religiously for a while, the option of refinancing can be looked at.

Reasons To Refinance Your Home Loan

Transferring the balance of your home loan can help you lower your EMI, depending on the bank

The interest rate on the loan can also reduce in many cases 

It can help increase your credit score as well

If you opt for a shorter tenure, the loan will get paid off much earlier

When looking out for a new bank, often times you can choose one that provides better service

The documentation needed to refinance a home loan is minimal and hassle-free. It is also a quick and easy process to refinance your home  loan

Method To Refinance A Home Loan

In general, the following steps is followed to refinance a home loan

Obtain the documents from your current lender necessary for the refinancing process

After receiving the documents, provide the same to the lender you wish to transfer the loan to

Subsequently, the home loan will be transferred from the old lender to the new lender

The old loan account will then be closed and all future payments will have to be made towards the new lender

The old lender will then pass on the property documents to the new lender, formally completing the refinancing process

Why Must You Refinance Your Home Loan? Why?

If you are paying a substantially higher rate of interest to a bank that usually provides a lower interest rate, you should think about refinancing your home loan

In the even that your bank refuses to reduce the rate of interest on a loan after a certain time frame, you should look out for banks that will offer a lower interest rate

If other banks are offering lower rates of interest, it is quite natural to want to transfer the home loan balance to that particular bank

When Must You Refinance Your Home Loan? When?

A home loan can be refinanced after twelve to eighteen months of availing the loan. However, ensure that the EMIs have been faithfully paid off  before you opt to transfer the balance on your housing loan.

Hurdles To Overcome Before Refinancing Your Home Loan

Although the procedure of refinancing you home loan is effortless, one must be aware about the hurdles that come with it. Impulsively transferring your home loan may cause an individual more damage than benefits. The following points must be adhered to before refinancing your home loan.

Credibility – Before opting to refinance your home loan, it is important to do a background check of the company you wish to transfer the loan to. Make sure the company is a credible one.

Make Sure All Payments Are Made – If all the payments towards the old loan hasn’t been paid, quite naturally, the loan will not be closed. Sometimes, even if you have made all payments towards the loan, it may take time for the bank to process it. Make sure the bank has processed the amount before refinancing your home loan.

Discuss The Disbursement Date With The New Lender – Make sure you are available when the refinance process is happening. In case you are not present, your current bank will not accept the payment from the new lender. In this case, you will end up paying the interest twice.

Make Sure You Obtain The No-due Letter – A no-due letter is a letter provided by your current lender stating that all payments towards the loan have been paid off. It is possible to face some hurdles in future in case you haven’t receive this letter.

Foreclosure Letter – Always make sure to obtain a foreclosure letter from the existing bank before you opt to refinance your loan. A foreclosure letter acts as proof stating that you wish to close the loan with the current bank. Apart from this acting as proof, this also provides the opportunity for you existing lender to reduce the rate of interest on the loan, freeing you from the burden or refinancing the loan.

Inform The Current Lender Of Closure – It usually takes a few days or even weeks to refinance your home loan. It will take even more time for your current lender to close the existing home loan. Therefore, it is important to keep your current lender informed regarding the closure. This will help you save time and also prevent you from paying any additional amount towards the loan.

Go Through The Fine Print – It is essential to go through the fine print of the document before choosing to refinance your home loan. Although you may benefit from saving money with a lowered rate of interest, it should not be the case wherein you are bombarded with hurdles that compromise on customer service, payment method, etc. Reading the fine print will eliminate this risk and also keep you informed of the policies of the new bank.

Consider All Costs – Refinancing your home loan can attract charges and fees. It is important to go through all the hidden costs and charges before you refinance your home loan. If the costs like stamp paper, documentation charges, processing fee, etc. outweigh the savings you receive, it becomes illogical to refinance your loan.

Quality Of Service – Occasionally, it can be noted that the marginal savings that a bank can offer via refinancing your home loan is irrelevant simply because your current bank provides you with an impeccable customer service. Don not fall into the trap of bad customer service. Always do your research on customer service before opting to refinance your home loan.

Get All The Necessary Approvals From The Co-borrowers – Make sure all the co-borrowers have signed the agreement to close the loan before refinancing it. If the co-borrowers hasn’t given his/her approval, the loan will not be closed.

[shootfinance-blog]

Documents Required for Home Loan SBI

State Bank of India (SBI) is the largest lender in the country and offers various financial services. One of its most prominent products is their home loans. Low interest rates clubbed with impeccable customer service has made it the bank to go for housing loans. The bank is also renowned for having one of the lowest lending rates in the market, quick and seamless loan processing, and impeccable customer service.

Purposes of home loans offered by SBI

SBI offers home loans for the following purposes

To purchase land with no intention of construction immediately

To purchase a fully constructed house

For construction of a house

For renovation or repair of an existing home

To purchase an existing flat, apartment, or a house

To furnish a house

To reimburse costs incurred by the homeowner towards purchasing a home. This type of loan must be availed within 12 months of repair, purchase, extension, or renovation.

Documentation process of State Bank of India

The documentation process of SBI is easy and seamless. These are the documents SBI requires you to provide in order to avail a home loan:

A loan application, either online or offline, form that is duly filled

Passport size photographs that are self-attested

ID proof: Driving license, Aadhaar card, Voter ID, PAN card, passport (any one)

Address proof: Telephone bill, gas bill, water bill, electricity bill (any one)

Non-salaried applicants will have to provide proof of business

Last 6 months bank statements or updated passbooks

Liabilities and assets statement of the applicant

Attested signature identification from existing bank

Pay slip of the last 3 months in case the applicant is a salaried individual

Tax deducted at source certificate in case applicant is a salaried individual

Form 16 in case applicant is a salaried individual

Attested income tax returns copy of the last 3 years in case applicant is self-employed

Copy of income tax paid receipt in case applicant is self-employed

Documents required in case of a guarantor

ID proof: Driving license, Aadhaar card, Voter ID, PAN card, passport (any one)

Liabilities and assets statement of the guarantor

Address proof: Telephone bill, gas bill, water bill, electricity bill (any one)

Attested signature identification from existing bank

Proof of business in case guarantor is self employed

Proof from employer in case guarantor is a salaried individual

Property Documents

Sale deed or agreement of sale copy of the property

Copy of the plan of construction, extension, etc., attested by the architect

Copy of permission granted by the respective authority

Estimated cost of the project

Valuation report that is approved by engineers or architects

Possession certificate, tax paid receipt and location sketch authorized by the revenue department

Allotment letter by society or builder

Receipts of any payments made towards the property

Copy of possession certificate and tax paid receipt

No objection certificate provided by the authorities of revenue

Non-encumbrance certificate from an advocate for the last 13 years

No objection certificate from the housing society

Detailed cost of construction estimate

Letter from the builder with their account number

[shootfinance-blog]

Impact Of Budget 2018 On Home Loans

Budget 2018 brought with it quite an advantage for home buyers as it proposed a tax relief for them by allowing the properties to be valued up to 5% below the circle rates for capital gains and calculation of stamp duty. While the introduction of the Real Estate Regulation and Development Act 2016 (RERA) turned out to be an important benefit for the home buyers, Budget 2018 is being looked upon as a step towards safeguarding their interests.

Both these proposals are being touted as one of the most important events that will help the home buyers to invest mindfully. While presenting the budget, the finance minister of India, Arun Jaitely had announced that no adjustments will be made in case of transactions with respect to immovable property. In such cases, the circle rate value does cannot exceed more than 5% of the consideration.

The budget also had significant impact on the home loan rates across banks. Mentioned below are some of the major impacts that Budget 2018 caused:

Improved benefits for yet-to-be constructed properties: The interest that home buyers pay on a home loan that is availed on a pre-constructed property can be claimed in 5 instalments after the completion of the project. For instance, if the interest is Rs.6 lakh, post completion, the home buyer can claim Rs.1.2 lakh per year for 5 years. Although it might seem a bit ambitious, in total, an individual can claim up to Rs.2 lakh towards pre-construction under the guidelines of Section 24.

Enhanced tax benefits for first-time homebuyers: In case an individual has bought a property between April 1, 2016 and March 31, 2017, according to the guidelines laid down by Budget 2017, the claim can be a deduction on the interest, of as much as Rs.50,000 per year, until they clear the loan. If chosen meticulously, the homeowner can bag excellent benefits from the home loan they opt for. Hence, a little research can go a long way and can help one reap endless benefits in the long run.

Better housing set-off limit: According to the Finance Act of 2017, an individual who has incurred loss from a property can set them off against any other income. The cap on this facility is Rs.2 lakh. Moreover, they can also carry forward the amount that exceeds Rs.2 lakh and modify it against the rental income that they earn in the following years.

[shootfinance-blog]

Factors That Influence Home Loan Interest Rate

You want to buy a house, and you have decided to take out a loan for the same. You are sure that you can pay back the loan and with the appreciating cost of the house, you are sure that you will have a very good return on the investment in the long term. While this is good, you should also know that a home loan is one of the most expensive investments that you can make because repayment of the loan does not take months but instead, years. While you are already probably mentally prepared for this, you should have an idea of the interest rate that you can expect. It might surprise you that the interest rate varies from person to person. It depends on a number of factors which also vary from person to person.

So, what factors affect, or rather influence, your home loan interest rates?

The first and the foremost factor is your credit score. Any time you want to take out a loan, whether it be a home loan or a personal loan, the first thing that lenders will ask for is your credit score. Your credit score will only give the lender some assurance that you will indeed repay the loan on time. Therefore, it is advisable to have a credit score that is, at minimum, above 750.

The next factor that will impact your interest rate is the type of house that you wish to buy. Now, why would it affect the interest rate? That is because, lenders like banks have different categories for houses and each of those has a risk category associated with it. If you are going to purchase a house that will serve as your primary residence, you are more likely to hold on to it and thus you are more likely to repay the loan associated with it. This is a lower-risk category for banks which will then offer you a lower rate of interest. In the event that you are buying a house that will serve more as a holiday home or as a second house, this would be considered a higher-risk category and your home loan interest rate will be correspondingly higher.

Yet another factor is the total amount that you borrow. The more your down payment, the lesser your interest rate for the rest of the loan amount. Also, if you opt for a home loan that can be repaid over a longer period, then your interest rates will be lower than if you opt for a home loan with a shorter repayment period. If you have a stable job that affords you a fixed monthly salary, this will cause you to be considered as a lower-risk customer by the bank. This will also help you obtain a lower interest rate.

These are the factors that influence the interest rate that you can obtain when you apply for a home loan in a bank. It is advisable to read all the terms and conditions before accepting the loan. Also, check the interest rate to ensure that it does not fluctuate from time to time. Every bank is different and every customer is different, but as long as you have the credentials to be considered as a lower-risk category customer, you can obtain a lower rate of interest.

[shootfinance-blog]

How does CLSS work?

CLSS (Credit Linked Subsidy Scheme) is an interest subsidy program initiated by the government to provide affordable housing to the people of the EWS, LIG and MIG. This is a part of the PMAY (Pradhan Mantri Awas Yojana) scheme, and the main objective of this is to provide affordable housing to everyone eligible under the scheme by 2022.

CLSS is implemented via two nodal agencies, namely, HUDCO (Housing Urban Development Corp) and NHB (National Housing Bank). Close to 200 financial institutions have registered under this scheme, mostly consisting of HFCs (Housing Financial Companies).

Only people from the EWS (Economically Weaker Section) and LIG (Lower Income Group) are eligible to obtain a housing loan under this scheme. The interest for this scheme will be 6.5% p.a. for a term of 15 years or shorter.

Let us assume that a borrower wishes to borrow a sum of Rs.1 lakh from a lending institution that gives him a subsidy of Rs.10,000. This means that the borrower will have to repay only Rs.90,000 while he has received Rs.1 lakh.

Points to be noted:

A loan amount of Rs.6 lakh is the maximum that one can obtain under this scheme

A loan under the CLSS can also be availed for modifying exiting homes, like adding a room, kitchen, etc. 

In case of a newly constructed house, the carpet area of such a home should not exceed 30 sqmt. and 60 sqmt.

[shootfinance-blog]

When and how should you file a complaint under RERA?

The Real Estate (Regulation and Development) Act, 2016, was implemented to protect the interest of prospective homebuyers and introduce transparency, accountability, and governance in the real estate sector. Even though the implementation of the Act is still in its early stages, it has already started achieving the desired effect in many states throughout the country.

However, at the same time, there are many people who still do not know how to file a complaint under the RERA rules. Furthermore, many of them are still unaware that they can file a complaint under RERA and have their grievances redressed.

The complaint can be filed either with the Regulatory Authority or the Adjudicating Officer, against a promoter, allottee or a real estate agent, for violation or infringement of the rules mentioned in the Act. In simple terms, if the promoter has broken any rules, a complaint can be filed against him/her. These can be anything, such as:

The developer has failed to register the project with the Regulatory Authority

The delivered house does not include the features shown in the catalogue

The delivery of the house has been delayed

Issues pertaining to title deeds, area measurement, et cetera

To resolve the cases pending under the National Consumer Disputes Redressal Commission (NCDRC). In this case, the pending case has to be first withdrawn from the NCDRC and then the Regulatory Authority needs to be approached

To file a complaint, following details are required:

Details about the applicant and the respondent such as registration number, address of the project, et cetera

A brief statement explaining all the facts and the issues

Compensation sought, if applicable

The application form can be found on the official website of the state RERA. For example, in Karnataka, Form ‘N’ needs to be filled to file a complaint with the Regulatory Authority and Form ‘O’ needs to be filled to file a complaint with the Adjudicating Officer. It needs to be filled as per the format mentioned in the form.

In case you are dissatisfied with the verdicts delivered by the Authority or the Adjudicating Officer, you can approach the Appellate Tribunal and have them hear your plea. The form and pattern for the same can be found on the official state RERA site.