HOME LOAN

Loans For Investors Getting The Most Out Of Your Equity! - To get the most out of your equity it is essential to establish a loan structure that will provide you with flexibility for the future. Having some usable equity in the home is the only way in which most people can take that step of buying an investment property. Establishing the right balance for your Investment Property Home Loans, will allow you to make decisions in the future about where and when you might add to your investment portfolio, wether that be in property, shares or some other form of investment.

Home Loan to access equity in the family home; A line of credit facility.

Investment Property Loan; Interest Only

I recommend that both loans be with the same bank for the first investment. Many well respected investors do not recommend this. The argument being that you need to spread your risk. Interestingly as a borrower, ie you are borowing money from the bank, you are not taking the risk, the bank is. Think about this for a moment. Lets say your bank goes into liquidation, and no other bank decides to buy their assetts. Well who will you have to repay your loan to? No one...

The real situation is though, that another bank will take over your loan contract and under the law of the land you will be given the opportunity to stay or take your business elsewhere. Alternatively, should you have funds to deposit with a bank it may be a good idea to not put all of your funds in the one place, just in case...

I advocate having your initial loans with the one lender as this will make obtaining the loans much simpler, and will take much of the stress out of the situation. Dealing with one bank is hard enough, let alone 2 at the same time. Now because we are going with the one bank, my next point is essential. Each of the 2 loans must work independent from each other, do not allow your bank to push you to cross collateralize.

By Steve Kingsley

How to Save Tax Using Home Loans - Not everybody who wants to invest in property can afford to pay it out off his or her own pocket. People usually take home loans from banks and other financial institutions.

This home loan can be used as an instrument to claim tax benefits. Therefore, if you take a home loan from a bank in order to buy a property, you will be able to get a deduction on your total income. Your taxable income becomes less and as a result, you pay a lower amount of income tax.

The good news is that there are tax benefits that can be claimed on both the principal and the interest amount of the loan. You can claim deductions of up to Rs. 2.5 lakh on your net taxable income.

Get Tax Benefits on the Interest

According to Section 24B of the Income Tax Act, 1961, there is a tax deduction on the interest payment. According to this section, you will get a tax benefit of up to Rs. 1,50,000 or the interest amount paid, whichever is lower, on your net taxable income. The condition is that the property construction needs to have been finished within three years from the end of the financial year when the loan was passed.

In case you have paid a part of the interest during the pre-construction phase, then you can claim a deduction on that amount in five equal installments after the construction is finished.

The upper limit tax deduction of Rs. 1,50,000 is applicable on properties that are self-occupied. However, in case you have bought a property that you are letting out, then you can claim a tax deduction amount equal to the entire value of the interest.

Get Tax Benefits on the Loan Amount

According to Section 80C of the Income Tax Act, 1961, you can also claim the principal amount of the home loan, as a tax deduction. To claim this deduction, you need to make sure that the construction of the house has been completed in the previous year. The benefit that you can claim is restricted to an upper limit of Rs. 1 lakh. This upper limit is inclusive of other tax saving instruments, like LIC, Provident Fund, and Employees Provident Fund.

Tax Benefits due to Loss from Property

You can claim a deduction on your income due to loss from property. If the rent you received from your house is less than the total maintenance and interest amount that you paid, then the difference is the loss from property.

For example, suppose you receive a rent of Rs. 1 lakh on a property that you have had to pay an interest amount of Rs. 75,000 and a maintenance charge of Rs. 30,000. So now the total amount that you had to spend on interest and maintenance is Rs. 1,05,000, which is Rs. 5,000 more than the rent that you received. This Rs. 5,000 is deductible from your taxable income from the house property.


by Karan Kamble

4 Tips to Secure Approval for Your Home Loan Application! - Applying for home loans with banks is not easy especially in the light of the recent increase in fraud cases, dwindling economic conditions and the restricted flow of cash within the market. While there is always the option of choosing private lenders who will ignore a few details and lend you the money without asking many questions. But, the challenge with private money lenders is that they charge you a very high rate of interest. In fact, there are cases where the borrower ends up paying twice as much as he had borrowed. Therefore, applying to banks for home loans continues to remain one of the safest and most effective options.

If you are amongst the many people who are troubled by the regular rejections of their home loan applications, here are few simple tips that can help you tilt tables in your favour and help you secure the approval

Don't apply randomly

Most of the banks have a series of home loan packages, don't they? However, this does not give you the liberty to apply randomly to any of the banks. Always remember that randomly applying can also increase the rate of rejections. Instead, invest time and effort to go through the options offered by the banks in your neighbourhood. You can also talk to friends and family for references. Accordingly, shortlist the banks that you want to apply to.

What does the bank want?

Once you have shortlisted the banks that you want to apply to, start with figuring out as to what the bank wants. Analysing the bank's requirements will take time. You may also want to visit the bank's representative to understand the requirements in a better way. After all, you will need to prepare your application in accordance to the bank's requirements.

Improve your credit history

Having too many debts on your head or being unable to make payments on time leads to the person accumulating more of bad credit. As a result of this bad credit, banks are more likely to reject your loan application. Therefore, we would strongly recommend you to improve your credit score prior to putting your application at any of the banks.

Be confident about your repayment options

When you apply for a loan, it is equally important for you to figure out the repayment options. Additionally, the repayment part is what interests the bank. In simple terms, be very clear as well as confident when you are talking about your plans of repayment during the loan application process.


By Emily Moorey

Repay the Home Loan Without Any Prepayment Penalty - The last decade has witnessed an unprecedented growth trend due to the development of organized retail and IT sector, expansion of large corporate houses to the upcoming metros and state capitals and the increased disposable income in the hands of Indian youth. Owning a home is no longer a after 40 affair. The increasing trend among the Indian youth is to own a home in the early thirties. The sky rocketing price of real estate is also fueling the scenario. Real estate is no longer associated with the mere residence purpose, rather treated as a smart investment option.

The redemption of early payment penalty has come up with the increased Repo rate of the RBI. Repo is the rate at which the central bank lends money to bank in the banking system. The central bank has also increased the cash reserve ratio or the CRR. The cash reserve ratio is the percentage of deposits banks must keep with the apex bank. as the CRR and the Repo rate has been increased, the banks were bound to increase the home loan rate and as a consequent result home loan EMI increased. Most of the Indian banks raised their lending rates 50 basis points to 100 basis points. The state bank of India has raised its rates by 50 basis points while private players like ICICI Bank and HDFC by 75 basis points. In such an expensive credit situation, in order to give respite to the customers the banks are looking at aggressively encouraging part-prepayment. The tight liquidity conditions and the high cost of funds will be some how countered by this facility.

The penalty free prepayment facility will help banks to access cheap funds from consumers and this fund can be redeployed to high interest earning segments like personal loan plans and corporate loan plans .The number one private bank, ICICI, allows its customers to prepay most of the home loan but made it mandatory for the last 12 months' home loan EMI to continue. Simply, the customer can make repayment of 14 years if the loan plan is of 15 years.

The prepayment penalty of home loan was of 2-3 per cent on the amount paid (over and above the cap). the banks used to levy such penalty because the lose out on the interest income. Since the banks are encouraging the customers to prepay the loan amount due to the hike in interest rate, they are avoiding the penalty for any early payment. According to the Industry estimate, 15 -20 per cent that customers will repay without any penalty.

However the waiver of penalty is not followed by the banks without any discrimination. Some of the Public sector banks are considering the penalty waiver on a case-to-case basis when customers prepay to keep home loan EMI and tenure unchanged. When the customer has taken another loan to prepay the home loan, the banks charge him a fee and it is treated as a source of fund generation for the banks.

By Addi Vardhaman