5 Things to Know before Signing on as a Home Loan Guarantor.

Acquiring a new home has to be one of the most momentous milestones in life. Apart from the security it offers, a home can be considered an invaluable asset in terms of overall net worth. However, purchasing a new home can be financially taxing and real estate prices rarely decline to fit into the budget of the average Indian.  This sustained rise in property prices has been one of the key drivers of home loan applications and disbursements across India.

The bulk of the Indian population can be usually grouped into the middle income bracket with salaried individuals as one of the key groups that apply for home loans. As such, a home loan may be the only option that the average person can use to purchase a property. Opting for a home loans means that the homeowner can slowly, over a period of approximately 20 years, repay the loan through monthly installments or EMIs. This in turn would save him or her from having to compromise their personal liquidity / savings, while allowing them to realize the dream of owning their own home.

Role of a Guarantor in Home Loan

Home loan providers have quite a long list of terms and conditions which borrowers need to meet in order to be eligible for a loan. There are cases where, even if the individual borrower meets the eligibility criteria outlined by the lender, he or she might be asked to have the loan document undersigned by a guarantor.

Lenders usually ask borrowers to enlist a guarantor in the following cases:

• If the amount to be borrowed is beyond a certain limit as per bank policies
• If the borrower has relatively weak financial standing i.e. a low credit score
•  If the borrower’s credit history is not particularly clean i.e. previous loan/credit card debt settlement
• If the borrower is employed in a high risk job or is at an advanced age
• If the borrower is self employed or earns less than a pre-determined minimum income level

Banks and lending institutions generally ask a borrower to have a guarantor undersign loan applications in order to ensure that the loan can be paid back, especially in case the primary applicant defaults.

Things to Note before You become a Guarantor

As a home loans guarantor, you need to ask yourself a few questions before you commit to undersigning the loan document. Once you sign the papers, you will be legally liable to repay the loan in case the actual borrowers fail to repay the loan amount due.

1. Are you signing on as a financial or non-financial guarantor?Lenders usually ask the borrower to identify the guarantor as either a financial or non-financial guarantor. A non-financial guarantor is kept on the records and only acts as an alternate contact for the bank in case the primary applicant cannot be reached. However, unlike a financial guarantor, a non-financial guarantor is not held financially liable for any failure to repay the home loans on the part of the borrower
2. What obligations are you accepting as a guarantor?The obligation of a financial guarantor is usually limited to repaying the outstanding home loans along with any interest and late fees due, in case the lender fails to honor the debt. The law is also of the opinion that this should be stringently enforced, especially if the primary borrower is identified as a willful defaulter.
3. Does undersigning as a guarantor have any impact on your own loan eligibility?As far as lenders are concerned, the extent of your liability as a financial guarantor is equal to that of the primary borrower. Therefore, as far as credit histories are concerned, any defaults or late payments made against the mortgage by the primary borrower will have an impact on the guarantor’s credit score, making him or her look financially unstable.
4. What is the tenure of the home loan?Although it does not seem to have any direct co-relation with the guarantor, the term of the loan is important in the sense that the guarantor will remain liable till the loan is completely paid off. Once the loan is repaid in full, the guarantor will need to seek a no objections certificate (NOC) and a release of guarantor ship from the lender to complete the process.
5. Are you financially secure and aware of the terms of the loan as a guarantor?Although it might seem obvious, you as the guarantor need to be sure of your own financial standing before assuming the responsibility of being a guarantor in case of another person’s loan. You need to begin by assuming the worst and using that to figure out if you are capable of making the home loan EMI payments in case the borrower fails to make his. Moreover, you need to be completely aware of the terms and conditions outlined by the loan document so as to be on top of the situation at all times.

{Source: http://www.paisabazaar.com/home-loan/articles/9789-5-things-to-know-before-signing-on-as-a-home-loan-guarantor/}

10 Secrets to get a perfect home loan.

Although anyone who is above 21 years of age and has a good CIBIL score can apply for home loans, there are a few secrets to get the best loan at the best price.

1). Eligibility: To increase your home loans amount, you can take a joint loan with your spouse. The monthly income of you and your spouse is added and taken as one by the bank. This results in a higher loan amount sanctioned in your name.

2). Negotiate: Don’t leave any stone unturned. You are purchasing a house. Do all you can to get the best rate from the bank? Use your negotiation skills and get a better rate of interest. Try negotiating towards the end of the month. The sales personnel may just give in to achieve their sales targets for the month. This could be your best leverage.

3). Fixed or Floating: There are essentially two types of interest rates attached to a loan. A variable (floating) rate of interest will fluctuate depending on the market conditions. Fixed on the other hand will remain fixed irrespective of the market conditions. Ideally if the interest rates are predicted to go up in the future, go for a fixed interest rate for your loan. If the interest rate is predicted to fall, go for a variable interest loan. Statistics show variable interest rates to be better and the borrower ends up paying less.

4). Investments & Savings: In today’s costly world, expenditures are skyrocketing because of inflation. Try to save more and make bigger down payment. This will reduce your loan amount and will lower your EMI. The banks will then categorize you as less risky and this will lower your rate of interest on the loan, benefitting you. Also try and invest some money in government bonds. This could help you offset your EMI interest on the home loans.

5). Duration: This, de facto is a very essential element in a home loans. The lesser the duration of the loan, the lesser you pay overall. Similarly the longer the duration of the loan, the more you pay overall. If you do the math, you will notice the above to be true. Try to stick to a shorter duration.

6). Check for hidden charges: The cheapest is not always the best. Many a time’s banks reduce the rate of interest on loans to make it look more attractive. Look for hidden charges that banks won’t disclose at the outset such as the processing fees, legal fees, administrative fees etc. We have spoken about these hidden costs in detail in our blog here. Speak to the banks you have shortlisted and find out all the costs before hand and add it up. Then go about selecting the best bank.

7). Other Liabilities: This is a crucial element that escapes an individual’s mind. If you have other loans (ex: car loan), and you apply for a home loans, the net amount you will be entitled to will be less. The bank will deduct the EMI you have for your car from your monthly income and then decide the total amount you are eligible for. Try reducing the other liabilities before taking home loans. This will increase your chance of getting a greater sum.

8). Patience: This factor always pays off. Waiting for the right moment. Interest rates fluctuate with respect to the market. But there always comes a time when the interest rates are relatively low for a long period. Correctly predict such moments and take your loan then. It’s worth the wait now, isn’t it?

9). CIBIL Score: Do you know your CIBIL Score? If you have an account in the bank, you have a CIBIL score attached to your name. This score ranges from 350 to 900 depending on your ability to repay the loan amount on time. If you have a high score, usually above 750, you will get a loan without any issue. On the other hand if you have a low score you will not get a loan or even if you do, you will be charged a very high rate of interest because the bank categorizes you as risky. Pay your dues on time and improve your score.

10). EMI: Last but not the least; ask the bank to tell you the EMI you have to pay every month. See if you can manage the EMI along with your daily expenses. If you feel the EMI is eating a great proportion of your monthly income, increase the duration of the loan and reduce the EMI by a margin. Again the longer the duration, the more you end up paying. Try making the least costly choice.

Once you have taken care of the above essentials, you will be more than ready to Invest in your dream home!

{Source: https://www.indiabullshomeloans.com/blog/10-secrets-to-get-a-perfect-home-loan/}

Considering an NRI Home Loan? Bear these Five Crucial Points in Mind.

A lot of non-resident Indians who go abroad for business often plan to comeback someday. For these NRIs, an NRI home loan provides an ideal opportunity to buy their dream home back in India and gives them the ability to settle when they come back to the country. These home loans are given out by all major banks and can be requested by anyone who fits the description of an NRI, which is in general; a person who is an Indian citizen, holding an Indian passport, who stays out of the country for the purposes of business or work for an uncertain period of time.

This includes those who work as government officials in international organizations such as the UN, individuals who work for private companies with postings abroad or anyone else who conducts or facilitates business outside the country. For these people, buying a house back in India makes sense as they are most likely planning to come back to India upon completion of their work. But it wouldn’t be practical if they had to come to India and then start searching for a home as we all know that the process of buying a home in our country is complicated and often long drawn out. It is for this reason that many banks have provided the facility of availing an NRI home loan, which allows the individual to find and set up their house in India while they’re still abroad making the process of settling convenient, quicker and easier. For those considering an NRI home loan, it is important to bear these five crucial points in mind.

What does an NRI home loan avail you?

Just like a normal home loan, an NRI home loan entails you with the ability to purchase or develop certain properties in India. In fact, an NRI home loan entails you the same properties that a resident Indian can purchase through their home loan. The properties that are covered by this scheme are of four types; properties that are already constructed, properties that are under construction, properties that are to be constructed on an owned area and existing properties to which changes are to be made. In each of these cases a home loan can be requested from a bank to purchase or develop the property except in the case of creating alterations to a pre-existing property; in which case there will be a variation in the type of loan that is provided. This is besides the fact that every bank will have different terms and conditions for the loan they provide.

How much can I request for as my loan amount?

There is no set lower and upper limits for the loan amount you can request for. Each bank sets its own terms and conditions on the amount of loan that you can avail from them. The amount you can avail usually depends on three main factors; your educational or professional qualifications, your place or country of residence and you gross monthly and net monthly income (GMI and NMI). In the case of educational qualifications, if you’re looking for a home loan in India, you will have to be a graduate or higher for a bank to even consider you for a loan. Apart from that, your level of qualification also affects the loan amount you can avail. The same goes for any professional qualification you may hold. The next factor is your place or country of residence. Most major banks have their offices in many countries and the economic status of the country you’re residing in plays a major role in deciding the amount of loan you can request for. Depending on the relative value of the currency, financial situation existing in the country and a host of other factors, banks set a minimum criterion for earnings based on which you can apply for a loan. As it differs for each country, you should do research for the country you live in before applying for a loan. The final factor is your income. In most cases, banks provide for an advance of around 80-85% on the value of the property based on your gross monthly income. Usually, the maximum amount of loan a bank is willing to grant is in the range of 36-40 times your gross monthly income. In some cases the banks may also look at the ratio between your equated monthly installments (EMI) to your net monthly income (NMI).

What is the rate of interest and tenure of loans I can look forward to?

As an NRI is not working in India and it is uncertain for how long the person would be present abroad, there is a greater risk in the repayment of loans. It is for this reason that in the case of an NRI Home Loan the tenure and rate of interest differs from that of a residential home loan. While a person living in India can look forward to tenure of thirty years for their home loan, an NRI is restricted to tenure between five to fifteen years based on the bank and the loan amount. Also, it is usually found that an NRI will have to pay a further 0.25 – 0.50 % more on the base rate of interest as compared to a resident on a residential home loan.

What are the documents that I need?

The documentation required for an NRI home loan is different from a normal home loan. To apply for the loan you will need; copies of your passport, a valid visa and permit for your work, your employment contract, a work experience certificate showing the amount you’ve worked, your salary circulars, statements from the bank of your NRE or NRO accounts and if you are residing in the Middle East, you will have to provide your employment card as well. Although so many documents are required, submitting and having them verified isn’t difficult. Many banks have their branches present overseas and some of them even provide the facility of submitting your documents online. In case you would like a resident back home to do your submission, you will have to grant that person a Power Of Attorney so that they can complete the process for you.

How do I repay my loan and what happens if my status changes to reflect a resident?

In order to repay the loan, you will have to possess a non-resident external (NRE) or a non-resident ordinary (NRO) account. Payments will only be accepted from either of these types of accounts and payments can only be done in Indian rupees. If by any chance, during the process of repayment or anytime during this entire process you happen to become a resident of India and change your status from that of an NRI, the various aspects of the loan such as the loan amount, tenure and rate of interest will also be changed in order to reflect your new status.

Keep in mind that although the process is usually common across the different banks, every bank can have slight variations in their mode of operation. So it is best that you learn of these variations beforehand so that when you do apply for your loan, the process is streamlined.

{Source: http://homesathand.com/blog/considering-an-nri-home-loan-bear-these-five-crucial-points-in-mind/}

Home Loans Guide.

Choosing a house to buy can sometimes feel relatively easy compared to preparing to apply for home loans.

There is a lot of information, processes and fees that you need to take into consideration so it’s important that once you have narrowed down your home loans search to a preferred lender with great interest rates, that you prepare for your next step – applying.

We will get you started down the right path by highlighting a list of things you should consider to be best prepared for the home loans application process.

Repayments

As a rule of thumb your loan repayments should be no more than 30 percent of your income.

Flexibility

When calculating how much you can afford to make in repayments, ensure that you allow for at least a 2 percent buffer for rate increases and changes to your financial circumstances.

Deposit

Make sure you have saved a deposit and can show a proven savings history of at least three to six months by either depositing money into a linked savings account on a regular basis (at least once a month) or increasing your balance in your transaction account. Most loans require a deposit of at least 5 percent and you will also need to save for establishment fees and other upfront charges.

Documentation

You will need to have copies of all documentation required, such as pay slips to prove your income, bank statements to show your savings, bills or rental receipts to prove your credit history and identification.

Fees and Charges

Do your homework so there are no expensive surprises. Be aware of all the fees, charges and ongoing costs.

Extra Costs

Have you accounted for the other costs incurred in purchasing a home, such as lenders mortgage insurance and stamp duty? Check out our fees and charges checklist and our stamp duty calculator to make sure you’re financially prepared to sign the dotted line.

Fine Print

Finally, while it’s not the most exciting part of buying a new home, reading and understanding the home loans product disclosure statement – is certainly one of the most important parts.

{Source: http://www.ratecity.com.au/home-loans/articles/home-loans-guide-step-6-of-7-application}