A land loan is different from home loan

A land loan is different from housing or home loan granted by banks or financial institutes for those borrowers or buyers who aren’t ready to begin construction at this time or just wants to buy a plot.Most banks specify a limit for the loan-to-value ratio that they would finance for a land purchase. It could vary from 70 to 80 percent of the registered value. The maximum loan amount that banks or financial institutes lend for the purchase of a plot of land differ from one bank to another.

The repayment of the loan is through equated monthly installments (EMIs), just like in case of other home loans. However, the tenure of these loans is usually shorter – up to 10 years. The interest paid on the money borrowed for the purchase of land is not eligible for income tax deductions. However, once the borrower converts the land loan into a housing loan to finance the construction of a residential property, he can avail the tax benefits.

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Loan Against Porperty- An easy bank loan

Loan against property (Lap) has come as a boon for borrowers who need large sum of money to fund their emergency financial needs.In Lap, customers can avail up to 50 per cent loan of the existing property value. The interest rate in Lap is around 200-300 basis point higher than bank home loan. This is a floating rate loan.


If the property is currently not under any mortgage, the process to avail a Lap is simpler as compared to a mortgaged one. You can take Lap as a lump sum amount, wherein you will have to repay Lap in equated monthly instalments. You also have the option of taking Loan against property as an overdraft account, which lets you draw more than your available bank balance.

In the past one year, banks have actively beefed up their loan against property portfolio. Lap was essentially a domain of foreign and private banks.Bankers said that mostly salaried customers take Lap when they need money for marriage or foreign education of kids, when buying a new property or renovating their house. Self-employed seek this loan to fund their business needs and to pay off debt.Red flags about Lap is easy but make sure that you repay loan on time. If you don’t, you run the risk of losing the property you pledge.

Reverse Mortgage is a loan for senior citizens

A Reverse Mortgage is a loan for senior citizens where they do not have to repay loan as long as they continue to live in their home. The owner’s responsibility to pay back the loan is delayed until the owner dies or the home is sold, or the owner moves.The loan becomes due when you sell the property, moves to another house or dies. If one of the spouses dies, the other can continue living in the house.

Valuation of the residential property would be done at such frequency and intervals as decided by the reverse mortgage lender, which in any case shall be at least once every five years.The homeowner’s obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (i.e. moves to aged care).

In case you and your spouse die your heir can settle the overall outstanding loan and retain the house. If your heir fails to retain or settle the overall outstanding loan, the bank will proceed to settle the outstanding loan and give the rest to the heirs.Reverse mortgage is loan and not income, hence the same will not attract any tax liability.

Useful link to refer

Workings of Reverse Mortgage

Buying property with home loan for NRIs

If you are of an Indian Origin and holding an Indian Passport then you are entitled to buy any property. Person or Persons of Indian Origin need not require any approval by the Government of India to buy immovable properties. If you are buying the property through your NRE (Non Resident External) accounts, then you could repatriate your sale proceeds and rental income to your foreign account.

When Buy your property with a home loan,Your personal documents required for your home loan pre-approval only. Disbursement will happen only when you buy the property.

Documents required by salaried (Non Resident Indian)

1. Loan application form duly filled and signed. Two photographs of both the applicant and the co-applicant with signature on front and back.
2. Copy of passport. (Along with latest visa stamp and date of entry stamp), Proof of residence in India. (Electricity / Telephone bill / Ration card / Society maintenance bill / LIC Policy / Mobile bill / Utility bill like Gas Supply bill), Proof of residence in Abroad (Electricity / Telephone Bill / Mobile Bill / Utility Bill e.g. Gas Supply bill / Driving License), Copy of Identity card / Social Security card / Work permit (Hikama) Copy of credit card. Last six months bank statements of all the NRE / NRO account in India.
3. Last six months bank statements of bank account held abroad where salary is credited Copy of Contract / Employment Certificate Copy of Annual Salary Certificate specifying the mode of payment (If payment is fully or partly received in cash) Salary Slips for the immediately past 06 months.
4. Copies of Sanction Letter of Loans availed in India and abroad Self Declaration of Residential Status Initial Processing fees cheque of Rs 5612/-, this is charged by the Bank, we can do away with this for the time being and once you want to have the application approved you please send this to us.
5. Please note that all the above documents need to be certified by the Indian Embassy abroad. Documents relating to income / salary needs to be attested as true by your employer.
6. All documents in foreign language need to be translated in English.

Links to visit
Investing in a Second Home

Insurance for Home Loan

Planning for Home Loan

Banks and lending company has reduced its interest rate and simplified home loan process. Low interest rate and competitive scheme has made home loan easy reach of common man . If you are first time buyer or planning for home loan, here are guidelines for you to plan your home loan.

Know your lender: Before you choose or sign for a home loan, know your lender. Make good market research on rate of interest, processing fee, penalties and charge for pre-closure. Choose the lender who offers best deal that suits your need and requirement.

Hidden Charges: Hidden charges are not really hidden but borrowers may fail to note or ask lender before signing or applying for loan. For home loan, borrowers need to pay down payment which may be about 20 to 25 percent of property price. In addition to the down payment, borrower will have to pay processing fee and other expense on sanction of home loan. Be prepared to pay some extra other than these charges.

Credit history: Credit history is history of your past borrowings and repaying behaviors. These factors help lenders determine whether to extend credit, and on what terms.

Income Proof: When applying for loans or advance, you will have to show your income source. It can be either from your business, salary or other source. For income proof, you need to provide bank statement for last six month and two years financial if self employed.

Know your insurance company: When you are buying a home or applying for home loan, you need to insure your property and home loan. In case you loss your job or met with accident or in case of death, insurance company will help your family to payoff outstanding loan without causing burden of loan or interest.

Your lender or lending company may not be best person to ask for advice. Make good market research and discuss with your accountant or financial adviser. Contact as a many lender as possible before choosing one for loan or advance. Choose the home loan that best suits your need.

Caution against unincorporated Lenders

Lending and borrowing is common in today’s world. There are number of banks and financial institutes come up with new scheme or offer to attract borrowers or customers. RBI cautioned public to verify the credentials before dealing with unincorporated lenders.

RBI caution public to verify the credential of bank or institutes before approaching for personal loan or paying processing fee for them. It is recommended to deal with bank or institutes who have years of experience in lending loans and advances such as personal loan, car loan and other long term loans.

The central bank said it noticed that certain entities are issuing a spate of advertisements in newspapers offering personal loans, loans against property and other loans, at a very low rate of interest. In the advertisements, these entities indicated their mobile phone numbers for the prospective borrowers to correspond, the bank added.

It has also come to the notice that some of these entities are cheating the public by charging processing fees upfront and disappearing thereafter. Reserve bank cautioned public before dealing with unincorporated lenders. Borrowers are advised to exercise utmost caution and verify the credentials while dealing with them.

Reference

RBI cautions public against unincorporated loan providers

Guidelines for Easy bank loan

Bank and financial institutes play vital role in helping you or customers to meet their immediate requirement and overcome financial debts. Good planning and market research helps you to get bank loans easily and payoff the debts without any burden or increasing your monthly expense. Here are some tips for you to get easy bank loan.

Tips for Easy bank loan

Right lender for your loan: It is important to get a right lender who offers special or attractive offers exclusively for you. First and important thing for bank loan is right lender. You must contact two or more lender before you choose right lender. It is important to take some time and be a little selective, when loan is for home loan or loan for long duration.

• Scheme: Some banks or financial institutes follow fixed interest rate or fluctuating interest rate. In some schemes, the rate is fixed, but only up to certain duration and subject to some terms and conditions. Therefore it is important to check the track record of interest rate and check the scheme for processing fee, penalty, late fee etc.

• Budget: In some case, interest rate may fall or be lower than interest rate when borrowing loan. In other case, borrowers will have to pay higher interest rate based on market condition and terms and condition of bank or lending company. Borrowers must have budget to afford higher interest rate or other expense relating to loan.

Take some time and make good market research to find the loan affordable by you and the lender who helps you to clear your debts easily. Right scheme and right lender plays vital role in getting loan easy and make prompt payment.