Can you ever ignore the New Fixed 10 Home Loan Offered by LIC HOUSING’S

This week two new home schemes launched by LIC Housing Finance Ltd which is Bhagyalakshmi plus and New Fixed 10. Bhagyalakshmi Plus scheme is for women borrowers who are the first owners or single owners of the property, the interest rate will be fixed of 10.35 percent for up to Rs 75 Lakhs for the first two years. Once the two years is completed the loan will move to floating rate. As it is converted to floating rate the borrower will get a discount on their interest of 25 basis points throughout the loan period.

VK Sharma, MD and CEO of LIC Housing Says internal study of the credit appraisal system loan book proved that women borrower’s especially single or first owners have a history of good repayment and a zero delinquency rate. The risk is less with such borrowers. So the incentive is passed for the discount of 25 basis points to the women borrowers.

LIC's New Fixed 10 Home Loan

Sharma says we have launched a loan called New fixed 10, here the borrower would be charged a fixed interest rate of 11.50 for 10 years. After five years the customers will be flexible to convert their loan into floating rate preference at that time. For the loan up to 75 lakhs the interest rate of 11.50 percent is fixed. The loans processing fee could be less as Rs 5000 to a maximum amount of 1 percent. Sharma says the processing fee can be waived of depending upon the type of customers and their ticket size of the loan. If the loan is prepaid during floating rate period than there is no need to bear the prepayment charge. Even during the fixed rate period if the prepayment is done by the own source of funds than there is no need to pay penalty for prepayment.

The New Fixed 10 is offering an interest for home loan is 11.50 percent for 10 years. But the other lenders in the market are offering fixed interest rate which ranges from 11.25 to 13.75 percent. But the question is to go for floating interest rate or fixed rate. But one of the experts says that SBI is offering a floating rate of 10.25 percent where there is no need of paying more than 100 basis points.

The truth is that no one knows when the interest rate cycle changes. But the present economy says that going for 10 or 5 years at 11.50 percent is very expensive.

How you can get yourself a cheaper home loan

Getting an approval for your home loan was once a hectic process. With the fast development in the technology world, the finance and banking world has also changed significantly. In this fast developing world, many private banks arouse and made lending easier to common people competing with the nationalized bank.

If you are seeking information on the cheapest home loan rate simply type the keywords on the Google search tab and you will instantly get all the best home loan deals based on the information you provide.

If you are aware about the home loan industry you will also be aware of the changes that happen often. Interest rates can remain steady, or rise, or fall, which will impact on loan interest rates as well.

In case if the BR (base rate) rises, it will apply to both existing and new customers, whereas the increase in spreads will apply to new borrowers only. The Reserve Bank of India defines the spread as an extra amount the banker adds to cover credit risk or profit mark-up, etc.

If you have already taken loan and if your lender raises the spread then you can shift to the older spreads by closing the existing loan and can sign a new one, or else you can shift to a new lender. However, the existing lender will allow shifting to the lower spread by paying a switchover fee, to retain you.

The aggregators, who provide bulk customers to the lenders, will also negotiate for better spreads with the lenders. An Individual borrower who has good reputation with his credit score can also negotiate with the lenders for better spreads. If you convince the lender that you have a better offer from a competitor, then chances are there that you might be offered better spreads in order to retain you.

Mr. Vipul Patel, a Home Loan Advisor of a Mortgage firm says that there is no standard formula for banks and banks can go down to 25 bps (base points) of margin over the BR, if the customer has a good credit history, or property values, or disposable income.

SBI to go for Massive Development of 22% in its Bangalore Home Loan Section

Ongoing promising trends in Bangalore’s real estate section have prompted State Bank of India to go for about 22 % hike in home loan portfolio, which would amount to nearly 2,200 crores in this fiscal term. Activities are in full swing from their end to make this happen at the earliest. This is likely to be a far-reaching move by India’s largest lender as about ninety-nine percent of their home loan sales are happening in the Bangalore city.

Ashwini Mehra, SBI Bangalore’s Chief General Manager further elaborated on plans to open new processing centers in the outskirts of city as well. The Bank has seen a steady growth and is much ahead of other nationalized home loan providers in Bangalore. The areas on focus in terms of expansion are likely to be Peenya, Hebbal or Yelahanka side.

SBI enjoys dominating presence in Tier II cities as well and is willing to explore the probabilities in regions like Belgaum, Mangalore, Mysore, Gulburga, Hubli etc. The real estate in Mangalore and Mysore is showing significant development and SBI is trying to create the same results in Belgaum, Hubli or Gulbarga.

This is in recognition of growing interest in Bangalore properties by tier II residents.

RBI asks Banks to Link Home Loans according to Stages of the Construction.

To safeguard the interests of buyers and contain the fallout of "innovative" housing financing schemes, The Reserve Bank of India has asked all banks to link the disbursal of home loans according to the stages of construction.

Because of the higher risks linked with customer suitability issues and such lump-sum disbursal of sanctioned housing loans, banks have been advised that the disbursal of housing loans sanctioned to individuals should be closely related to the stages of construction of the housing project/houses...,"

Upfront disbursal "should not be made in cases of incomplete/under-construction/green field housing projects"

The announcement follows the introduction by some banks of "innovative housing loan schemes" in association with developers/builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.

Also, under such schemes, the interest/EMI on the housing loan availed of by the individual borrower is serviced by the builder during the building period. RBI said that “These loan products are popularly known by names such as 80:20 and 75:25 schemes.

The RBI said such home loan products are expected to expose banks and their borrowers to additional risks.

The risks consist of disputes between borrowers and builders; default and delayed payment of interest/EMI by the builder on behalf of the borrower, and non-completion of the project on time. 

Repay and Save Home Loans with most effective methods

Home is one of the basic and essential necessities in life and most common dreams in everyone’s life are to have a home of our own choice. Sometimes, when we are not economically strong enough, home loans helps us to accomplish our dream to have a home of our own choice. Below are some of the essentials about repaying home loans.

At present, most of the banks offer a variety of schemes for home loan and are encouraging people to get benefited by this scheme so that they can even fulfill their dreams. Other than fulfilling the dreams, if not repaid on time, these home loans can also turn out to be one of the biggest responsibilities.

To lessen the process of repaying a home loan, the National Housing Bank and Reserve Bank of India has directed all the banks to only to consider the original interest rates and remove the floating rate penalties, thereby removing the penalty fees and giving an option to anyone to save on repaying the Home Loans.

Banks have also started offering the prepay system to sort out the loan. According to this system, one can deposit an additional amount into their account and this sequentially will break off the interest on the loan amount as well as the loan tenure. So that the banks can withdraw the specific amount from the account without disrupting the EMIs, loans can also be linked with the salary account.

Paying off the loan before the term as well has some other advantages; if required, it offers the withdrawal of the surplus amount. Nevertheless, this might trim down the advantage of lower interest rates on prepaying discussed above. This scheme can be obtained at the cost of 25-50 basis points which is relatively higher than the regular home loans.

This scheme is available with most of the banks in India; SBI, Standard Chartered Bank, HSBC are some  of the prepay offers.