Home Loans That Suits The Need Of An Average Investor.

The year 2009 saw lowering of the real estate prices and also scaling down of the home loan rates

. Though the private houses like the ICICI home loans, Standard Chartered Bank, and others were slow to respond, however the nationalized banks like SBI quickly pulled down the interest rates to almost 8 % for the first year. Now some players in the market are offering the home loans rates below the psychological barrier of 8 % at 7.95 %. This will further fuel the competition and prompt more incentives, like Punjab National Bank and Central Bank of India, have decided to waive off the charges for processing and documentation, for certain category of housing finance loans.

Before you sit down to compare home loans, pay adequate attention to the total loan amount that has to be borrowed. Base the selection of your house within the budgeted amount. The monthly installments should not exceed 40 % of the monthly income. The interest rates are of two types Floating and Fixed. The Floating home loan rates means the rates would depend upon the existing market conditions and the fixed rate essentially means that the interest rate would remain constant throughout the repayment term. The other feature of home loans in India is the down payment that needs to be paid upfront and can range between 15 to 20 % of the total loan amount.

There are other charges and fees associated before the disbursal of the housing finance loans which are as follows are:

o Processing fee

o Legal and technical fee

o Stamp duty charges

The equated monthly installments (EMI) can be calculated by using the Home loan calculator which is available on the website of the housing finance loan company. The monthly installment amount is the addition of two components i.e the interest and principal, the proportion of these components changes as the years go by. Initially the interest component is higher than the principal component; however, this situation is reversed as the years go by. Once the loan is underway, there are other charges upon which one can compare home loans, which are:

Prepayment or foreclosure charges

Duplicate statement charges

Charges for delay in payment and cheque bounce

The home loan India taxation benefit is available up to an amount of Rs 1, 50,000 for the interest component and Rs 1, 00,000 for the principal component. One last aspect to ensure security for the loans is the insurance cover for the housing finance loan and also for the home.

by: ruchi

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