What are home Loans
A home loan, also known as a mortgage, is the amount of money a person borrows, usually from banks and lenders. The borrower must repay interest on the Easy Monthly Installments or EMIs for a period that may vary between 10-30 years depending on the type of loan. When you do a home loan, a bank or financial institution accepts the goods you are buying as collateral. This means that it retains the legal right to the property in case it is not paid.
A bank or financial institution charges interest in exchange for its lending services. The interest rate depends on the amount of the principal and the time you will repay the loan. Interest charged on a home loan is tax-deductible, which means you can claim the cost if you file income tax.
How to get a home loan during covid 19
The Covid-19 epidemic has hit the world economy on an unprecedented scale. As the number of Covid cases continues to rise steadily, India is also on the decline due to the effects of the epidemic. Household income has been hit by low business activity. Would it be wise to apply for a mortgage during a crisis? Every dark cloud has silver objects and the current situation is no different.
The government and the central bank have taken a number of steps to reduce the impact of the epidemic since the national closure in March. Among other things, the Reserve Bank of India has significantly reduced its repo value. The fall in prices has been a hidden blessing for potential home buyers.
Having a home is a basic need for most Indians. Most homes are affordable, especially those offered by banks and real estate finance companies. Home loans are very different from other types of credit facilities such as car loans and personal loans, mainly because of their longevity.
Home loans are a long-term commitment, lasting more than 20 years. There are two types of home loans – the principal amount and half the interest. Even a small reduction in interest rates can lead to a significant reduction in the total loan over time. Contrary to popular opinion, interest rates on home loans are not determined by the individual. Home loan interest rates are linked to external banks.
Previous lenders used to point out interest rates on mortgages on Marginal Cost-based Lending Rates. In October 2019, the central bank issued a circular asking lender to use new mortgage benches. While the RBI offers a number of options, most lenders have chosen a repo value as a sign of a home loan. The model is known as Repo Rate Linked Lending Rate or RLLR.
The repo rate has had an indirect effect on mortgage interest rates under the MCLR-based lending program as the extra financial costs include borrowing costs. Under the RLLR type, any change in repo currency has a direct effect on interest rates on home loans. The RBI has reduced its repo value by 115 basis points since February. The reduction came after a cut of 135 points last year. Reducing the three-digit repo rate has led to a reduction in mortgage rates, making home ownership cheaper. Lower interest rates coupled with depressed prices have made the Covid-19 epidemic a great time to buy your dream home.
How to apply for a home loan during COVID-19
Consolidate your financial statements – Having accurate answers to your home loan application questions can prevent surprises if the lending process continues. If you provide the loan documents with the relevant assets in advance, you may have a smooth experience of the collateral.
Know the basic requirements for a mortgage loan – In the world of lending, minimum mortgage requirements are based on a “three C” note – the amount, collateral and credit reputation. In simple terms, they refer to your debt-to-income (DTI) rate, your credit score, and assets. If you do not know how to apply for a home loan, knowing the following guidelines will help you better understand how lenders evaluate your application.
Choose the right type of loan – The loan authority reviews your loan application to see if it meets the loan requirements for various programs.
Think of the things that are not in the mortgage – When you apply for a home loan, you are committing to one of the biggest loans you can take out of your life. These tips can keep you applying for more loans than your budget can pay you and can help you look at home ownership costs in addition to your monthly mortgage.
Decide on your “comfort level of payment.” Just because lenders allow you to borrow up to 43% of your total income (or more, in some cases) does not mean that you should use that money. Lenders do not take into account your lifestyle or daily expenses, so when choosing a monthly payment, make sure you leave the area: Health care costs, child care costs, educational goals, resources, stores, savings goals
Choose the right type of lender – Make a list of mortgage companies and get loan rates from at least three to five lenders. Or use a rate comparison tool so that lenders can contact you before completing an asset loan application. Fortunately, you will not be short of options, including:
Mortgage bankers. Mortgage banks offer a variety of services, and the entire lending process is handled internally. This could translate into faster closures and more flexible working with borrowers with different backgrounds.
Consumer buyers. Loan lenders work with multiple lenders to offer more options than a single collateral bank. However, lenders often rely on banks to approve and finance your loans and have no say in whether your loan is approved or rejected.
Institutional banks. Your local bank may offer a lower interest rate if you have a higher deposit balance. Depending on the bank, however, loans can be limited.
Complete the mortgage application – Once you have completed the above steps, the actual application process should be quick and easy – you just need to decide how you want to apply. Each lender is required to provide a loan rate (LE) within three business days after receiving your loan application. Keep copies of each rate you receive to negotiate your interest rate and later closing costs.
Mortgage loan vs Home loan
In a broad sense, the term ‘mortgage’ represents an agreement based on which a bank, building society or a lending institution lends money at interest. This agreement is made in exchange for holding the title of the debtor’s property. Mortgage, Pledge, and Hyphenation are different terms that are used to create a charge on the assets which is given by the borrower to the lender. A Home Loan is a loan paid in advance to the borrower to buy a house or flat.
A Home Loan is a secured loan and the property purchased by the borrower is held as collateral by the Bank or the lending institution through the tenure of the loan. The features of the Home Loan are created such that the payment of the borrower (in the form of an EMI or a part of the capital amount) can be extended over a long time, sometimes as long as 20 to 25 years. The eligibility for the Home Loan is decided by using the Home Loan eligibility calculator. It is very important to know here that a Home Loan is disbursed successively as the construction of the house progresses.
Benefits of home loan
Tax Benefits: – To encourage more people to buy their own houses, the Indian government provides a tax deduction for the principal and interest paid on the home loan. A person is entitled to claim a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax of India 1971 Act during the financial year. When deducting up to Rs 2 lakh is allowed on the interest rate under section 24B of the Indian Tax Act. The deduction for income tax is only available after the house has been built. You cannot apply for an income tax deduction during construction. Read: to know more about home loan deductions.
Second House Tax Benefits: – In the event of a second house, you are eligible to apply for a reduction in the total interest rate on the home loan paid under section 24B of the Income Tax Act.
No prepayment costs: – Unlike other loans where lenders charge prepaid bills on mortgage loans, there are no prepaid rates on floating home loan rates. So, whenever you have a lot of money, you can use it to make a portion that pays off your mortgage and reduce your burden. However, there will be prepaid rates in the event of a floating home loan.
Balance Transfer Service: – In the event of a home loan you have a place to transfer your home loan to a different lender if he lends you a lower interest rate. Check out our Balance Transfer Calculator to find out how it will benefit you to transfer your loan amount.
It makes it easier to buy a dream home: – For many people buying a house with their own money is not possible, a mortgage as it can be repaid with simple monthly installments makes it easier to buy a house.
Highly-paid rental: – Among all types of loans, home loans have the longest repayment period of up to 30 years, so one can reduce the burden of a fixed monthly installment by extending the lease term. Use our home loan calculator to know how EMI changes as you change the duration of your mortgage loan
Enjoy a great deal of money: – You will also benefit from rising commodity prices over time.
Saves you from paying rent: – Since rent in big cities is so high they put pressure on your monthly budget. It’s best to pay for EMIs and have a home.
How can we help you get a home loan
Thanks to technology, these days, applying for a home loan online has become easier and faster. There are various online platforms that offer a simple loan application. One can use the Credit Bazaar to apply for a home loan online with a few simple steps. Here is a quick guide to home loans online.
Visit the Credit Bazaar, go to the loan menu, click on home loans and come to the next page.
On this page, you need to provide your basic information including your name, contact details, residential address, and so on. Here you also need to provide details about the amount of the loan you want, the repayment period, your monthly salary, and other current installments. You will also need to provide details about your previous loan if you have taken anything. Now, hit the submit button.
After this, you will access the next page. Here you will find to see detailed comparisons provided by different lenders. Here you need to carefully compare the various options available for important parameters such as estimation, interest rate, cost charge, prepayment, etc. Take the initiative to meet your needs.