When you need to get a new home loan, you need to provide a number of documents. This differs, depending on the nature of your occupation. Salaried applicants have to provide salary slips as evidence of their financial ability to pay back the loan. Self-employed individuals need to provide banking details and ITR records. After taking the loan, you not only need to pay the principal amount in full, but also the interest and the MCLR.
There are two kinds of home loans: Housing loans and LAPs.
Housing loans are what we normally consider home loans. LAP, or Loan Against Property, is where a property is on the line when you wish to get a new loan. In the case of a housing loan, the collateral can be a sum of money, but in the case of LAPs, the collateral is always property. As you can understand, the amount of money is proportional to the property’s value.
Of course, the LAPs are riskier. In case one is unable to pay back a LAP home loan, the chances of recovering the property are not great.
So what happens when one wants to buy a new home with a loan?
Well, first you’ll need to search for the property you want, of course.
Second, you approach the seller of said property and express your desire to buy it.
However, since you do not have your own funds to buy the property with, you take a loan from a bank of your choice.
But here’s the catch! The bank does not transfer the funds to you. It transfers the funds directly to the seller. Surprise!
This is not a bad thing. In fact, it makes matters easier for you. The bank takes up the job of transferring the money, which you would have had to transfer anyways to the seller.
Here’s an example. Let’s say that you have spotted your dream home and asked the seller what its price is. They tell you that the property can be bought for Rs. 5 lakhs. Not having that much money, you approach a bank. The bank forwards the loan, but not to you. The loan is given to the property seller.
There’s another point to understand here. The property’s documents are not immediately transferred to the buyer. When the bank forwards the loan amount to the seller, he or she gives the property's documents to the bank. The bank keeps the documents and only gives it to the buyer when he or she repays the loan. In case the buyer is unable to repay the loan, the property belongs to the bank.
With such a loan, the buyer can purchase a plot, a plot plus a flat, apartment, etc.
One good news is that you can apply for a home loan at low EMIs. We’ll show you how soon.
Great question! Here’s how it works. Let’s say that you take a loan from HDFC bank. Banks normally have funds ready to disburse for loans. Where does this money come from? Banks can’t print their own money!
They get funds from HFCs or Housing Finance Corporations, which in turn get their funds from the NHB or the National Housing Bank. The NHB gets its money from the Central Bank of India. Money comes from the top to the bottom, but at each step, the bigger bank or organizations watch the ROI that is possible from the investment.
This is where Balance Transfer and BT Savings come in.
Here’s an easy example.
Let’s say that a person takes a home loan in 2016. It has an 11% interest rate and the amount of loan is Rs. 45 lakhs.
However, the person now gets a better offer from a second bank, which offers a lower interest rate. Thus, he decides to go to the second bank to get this advantage. It pays to have lowest interest rate on a home loan.
Additionally, as he has already paid a part of the loan in the first bank, he will only have to pay the remaining amount here.
BT Savings are calculated in the back end by taking inputs from the customer. The information is conveyed in a note to the customer saying that a certain amount will be reduced in one's home loan EMI. Let's say that the home loan EMI is Rs. 23,000, After Balance transfer, the home loan EMI will be Rs. 21,000. Thus, the total savings for the customer would be Rs. 2000 per month. Therefore, per year, the total savings comes to Rs. 24,000.
mymoneykarma calculates your benefit beforehand and then requests the customer’s consent to go ahead with a balance transfer.
We then convey a list of documents to get started with the process, such as property documents and income documents.
Once this is done, we take the appointment date and time for the documents to be picked up.
At the mymoneykarma website, you can view and compare home loan interest rates.
With the right information in hand, it is quite possible to reduce your home loan interest rate. You can indeed get the best interest rates at lowest EMI. If you need any help with this, we at mymoneykarma are always at your service.