Housing Finance

Presented ByRahul Patil

Agenda

1. Basics of Home Loan a) Types of Home Loan b) Some salient features of home loans

c) Home Loan Process– Sanction– Disbursement

2. Interest Ratea) Principleb) Interest

Part 1

Basics of Home Loan a) Types of Home Loan b) Some salient features of home loans

c) Home Loan Process– Sanction– Disbursement

What is a Home Loan?

• A home loan is a loan taken for buying or constructing a home or to make improvements to a residential property. You can get a loan from banks and registered housing finance companies

• Your home loan is secured against the property that you buy. This means that in case you are unable to repay the loan, the lending bank will have the right to take possession of your home

Home Loan Types

• Basic home loan1. For new properties2. Resale3. Resale- Re-finance4. Balance Transfer (BT)5. Loan against property (LAP)6. Commercial loan

Some Salient Features Of Home Loans

• Loans are available for salaried, self employed and Non Resident Indians (NRIs)

• Loans are available for builder flats, under construction properties, and residential plot with construction due to start

• Flexible repayment options, ranging from 12 months – 300 months (1 year – 25 years)

• Repayment with easy Equated Monthly Installments (EMI)• Loan transfer facility in case you want to change your lender• Pre-payment facility in case you want to pay back more of

your loan

Home Loan Process

SANCTION1. Collection of documents2. File checking and Inward3. Loan A/C No generation

(CIBIL)4. Verification (Office and

Residence) 5. Sanction: System

generated SMS & e-mail6. Sanction Letter

DISBURSEMENTOriginal Property docs1. Technical site visit2. Disbursement Date Fix 3. Disbursement

Part 2

Interest Rate• Principle• Interest

Interest Rate

1. Principal amount:This is the total loan amount that the lender gives you2. Interest rate:This is the cost of the loan that you pay to the lenderThe amount of the loan, i.e. the principal, that you can avail of is decided by the lender based on:– Your income– Your loan repayment capacity– The house (property) you wish to purchase

Interest Rate

As a borrower, you can choose the type of interest rate that you will pay. You can either pay:– Fixed rate: Where the interest rate remains fixed during

the life of the loan– Floating rate: Where the interest rate floats or changes

depending upon market interest rates

Rate of Interest Factors

• Fixed rate: A loan in which the interest rate does not change during the entire term of the loan. opposite of adjustable rate

• Floating rate: Any interest rate that changes on periodic basis. The change is usually tied to movement of an outside indicator, such as the prime interest rate

Rate of Interest Factors

– Prime Lending Rate (PLR) or Retail Prime Lending Rate (RPLR)Both, PLR and RPLR, are the same. PLR is a bank's benchmark interest rate. Based on this rate, banks fix rates on various loan products. For instance, let's assume a bank fixes its home loan floating rate at 0.5 per cent above its PLR. So, if the PLR of the bank is, say, 10 per cent, then the floating rate on its home loan will be 10.5 per cent.

• Rate is depend on RPLR - (spread) = rate` 16.50% - 6.00% = 10.50% (Floating)

NOTE : Spread is applicable @ the time of disb & it is fix for entire tenure.• In future if RPLR goes up or down u will get effect on rate of interest• For example RPLR - 15.50% -6.00% =9.50%• For example RPLR - 13.00% -6.00% = 7.00%

Summary

• Basics of Home Loans• Interest Rates• Process of Home Loans

Short Break

Session 4

ByMr. Rahul Patil

Agenda

• Session 1– Home Loan Transaction Cycle– Enquiry– Call– Fix Meeting– Home Loan Requirement– Queries Solution

• Session 2 – Sanction Eligibility

• Session 3 – Disbursement Eligibility

1. Home Loan Transaction Cycle

• Enquiry• Call• Fix Meeting• Home Loan Requirement• Queries Solution

2. Sanction Eligibility

It depends on monthly income.

Formula:Loan Amount =Monthly Fixed Income*50% / Per Lac EMI

Sanction EligibilityRatio divided into 2 Parts• IIR• FOIR

What is Installment to Income Ratio (IIR)?

Installment to Income Ratio is also used by the lender. It is used to generally used by the banks or the lender companies to evaluate the eligibility of the borrower. It is very similar to FOIR. But it is presented in the form of percentage. Under IIR, there is a percentage of installments of home loan paid each month. This is normally near about 50%.

IIR Formula = Monthly EMI / Gross Salary

What is Fixed Obligation to Income Ratio (FOIR)?

• It is type of ratio which is done through bank or company providing loans. Through FOIR, they lender tries to evaluate the eligibility of the borrower. This ratio refers the EMI to be paid by every month by the borrower. PF, profession tax, LIC premium, Recurring Deposit scheme, charity to a trust etc. are not included in it in the form of default EMI (Fixed Obligation).

FOIR Formula= Present EMI + All EMI /Gross Salary

3. Disbursement Eligibility

• Financial Institute disburse the amount against 80% of Cost of Property.

Cost of Property = Agreement Cost (Area x Rate) + SD + REG + MSEB + PARKING + STAX + VAT

Summary

1. Home Loan Transaction Cycle.-Enquiry-Call-Fix Meeting-Home Loan Requirement-Queries Solution

2. Sanction Eligibility3. Disbursement Eligibility

Session 5

ByMr. Rahul Patil

APF Process

LIST OF DOCUMENTS REQUIRED FOR APF1. Partnership Deed/Memorandum of Articles of Association. 2. Copy of approved plan (Approved layout and building plans).3. Copy of the agreement between land owner/s and the developers.4. Copy of the Power of Attorney.5. Latest Property Card Extract / 7/12 Extract.6. Latest Title verification Report and a detailed search report.7. Draft copy of Agreement for sale.8. Brochures on the project, if any.9. Copy of the NA permission and receipt for the N.A Taxes paid.10. Legal details duly filled

APF Process

11 Copy of U.L.C Permission.12 Copy of the Commencement Certificate.13 Copy of plinth checking certificate.14 List of bookings with contact telephone numbers.15 Affidavit from developers as per enclosed draft.16 Any other relevant documents.17 Cost sheet Details of payments to Land Owner Profile/ Background of the developer Details of Bank Account of project.

Summary

• Basics of Home Loans.• Interest Rates• Process of Home Loans• Tax Benefits• APF

Thank You