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What You Should Know About Your Housing Loan

May 21st, 2011

When there is an increase in the Prime Lending Rate (PLR), the interest rate on your loan will also go up, and your repayment would be higher. However, in most cases, financial institutions would allow you to pay the fixed amount of monthly repayment (EMI) throughout the loan tenure and would make any adjustment caused by the variation in interest rate by increasing or shortening the loan tenure, as the case maybe. Also, do note that the PLR will soon be replaced by the Base Rate (BR) from July 2010 onwards.
Owning a piece of land, a house or a property is a lifetime dream for every individual. Maslow’s law of hierarchy indicates such a dream as well. Taking a home loan nowadays has become much simpler. Each year the budget regulations seem to lean towards the housing sector and construction sector in terms of generosity!
There are many home loan providers in the market to make your dream come true. However, before you opt to take a home loan, you need to consider certain factors related to the property that you are interested in buying and also understand the features offered by a home loan provider.
Choosing Your Financial Institution
When you shop for a home loan its good to research your financial institution well before opting to go with them. Remember that when you take up a housing loan, you will be dealing with the lending institution you choose on a regular basis for a long period of time.
Therefore, you should also consider factors other than just interest rates. Some of these are:
How professional is the financial institution in dealing with customers? Does it offer quality service in terms of efficiency and reliability? What are the available loan packages and which package suits you best? What are the various charges involved?
Assessing your loan repayment capacity
You should ensure that your monthly loan instalment repayment (EMI) should not be more than around 40-50% of your gross monthly household income. If you have savings or fixed deposits, they can be used to support your loan application as financial institutions may take them into account in evaluating your eligibility. Different financial institutions have different criteria in calculating the repayment capacity. In the case of a floating rate loan, you should also note that your loan tenure or (if you so choose) your monthly repayment may increase substantially when interest rates go up.
When there is an increase in the Prime Lending Rate (PLR), the interest rate on your loan will also go up, and your repayment would be higher. However, in most cases, financial institutions would allow you to pay the fixed amount of monthly repayment (EMI) throughout the loan tenure and would make any adjustment caused by the variation in interest rate by increasing or shortening the loan tenure, as the case maybe. Also, do note that the PLR will soon be replaced by the Base Rate (BR) from July 2010 onwards.
Margin of finance
It is assessed on factors such as:

Type of property
Location of property
Age of the borrower
Income of the borrower
Generally the margin for the borrower (down payment) will be about 15% of the property as assessed by the bank/ lending institution. For mortgage loans the lending institutions will assess the value for the property based on the Distress Sale Value this is the value of the property in case it is sold on an urgent need basis. This value can be much lower than the market value of the property.

Rights and duties of the borrower and the financial Institution
Both the borrower and the financial institution have certain rights and duties during the course of the loan repayment period. Some of these include:
RIGHTS

Borrower Right to have access to all information that would affect your borrowing decision Right to be treated professionally, courteously and without prejudice
Right to be consulted on changes to the terms and conditions of your loan
Right to have accurate information on a regular basis on your loan account Right to enforce legal action in the event of a breach of contract Financial Institution Right to have full relevant disclosure of information on borrower’s credit standing Right to correct and truthful information on the borrower Right to timely repayment of interest/ installments of the loan Right to enforce legal action in the event of default/breach of contract

DUTIES

Borrower Duty to read and understand all terms and conditions of the loan
Duty to observe the terms and conditions of the loan at all times
Duty to enquire and get clarification on all aspects of the loan to their satisfaction
Duty to make prompt payment on the fees, charges, interest and installment of the loan Financial Institution
Duty to discharge borrower’s obligations as described in the loan agreement
Duty to consult borrowers on any changes made to the terms and condition, fees charged and other relevant information.
Duty to attend to all queries made by borrower
Before getting a housing loan take stock of your finances and assess your loan repayment capacity. Then shop for the best offers available. You can also approach a financial counselor for optimum allocation and utilization of your money.

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Unraveling The Truth About Selling A Property To A Sell House And Rent Back Firm

March 15th, 2011

If you have watched the news recently, you know that the country is going through a drastic economic downturn. It may be that you don’t have to watch the news in order to sympathize with the current financial problem. As the problems worsen, more and more homeowners are losing their jobs everyday. And these spiraling job losses have led to a large spike on property repossessions across the nation. In fact, a huge number of properties in the UK are now at some stage of the property repossession process.

This onset of house repossession has driven prices down throughout the housing market. Mortgage lenders and sellers now encounter major difficulty in trying to sell a property. It is estimated that some properties can be bought for around 50% less than their normal value. However, this type of sharp decline in housing value has made it very hard for property lenders and owners to recover from their losses under many circumstances.

When facing financial trouble, having some sort of plan in mind is very important. Contrary to what you may believe, lenders are sometimes willing to work out agreements with borrowers that have experienced monetary difficulty. This is often because it is very hard to sell a property in this kind of market environment. Obviously, a mortgage lender would work out an agreement rather than settle for the estimated prices found on the property market.

If, however, an agreement cannot be reached, it may be more effective to work with a sell house to rent back company instead. A sell house and rent back company will purchase a property from a beleaguered home owner, renting the property back to them. This may be a suitable way if the homeowner wish to remain in the house, but needs a financial solution quickly. But, don’t expect to be paid anywhere close to the market value in this situation. A sell to rent back company can very quickly take on a property, but they will not pay at housing market levels for it.

The market value lost in the house sale may be unavoidable if the homeowner hopes to stay in his or her property and avoid house repossession order. With more and more homeowners living from pay-check to pay-check, the loss of a job can leave someone homeless in just a month. A sell house and rent back company may be the only real means to prevent such a fate.