Tips for Real Estate Buyers in India

By: Neel Saini

A shorter repayment term ensures lesser amount of money you will have to pay back. Therefore it is always better to have a shorter term if you can afford to pay the higher equated monthly installments or the EMIs without having a monetary crisis. The following example may help you to understand the differences of short term and long-term repayment tenures.

You pay Rs 6,04,080 against a loan amount of Rs. 2,00,000 in a 20-years term with an EMI of Rs. 2517 and Rs. 2,91,300 in a 5-years term with an EMI of Rs. 4855. The 20-years term takes away Rs. 3,12,780 more from you. The interest rate is 14% calculated on annual reducing basis in both the tenure. You can decide a repayment term considering your current income and current expenditure as well as your future income and future expenditure. You can keep the inflation into consideration as it influences the value of rupee. Keep other factors into consideration. The processing fees and the administration fees also accounts for a good amount, which you will need to pay. One percent administration charges plus one percent processing fee on a loan amount of Rs. 500,000 would be Rs. 10,000. These fees may vary from one percent to three percent of your total loan amount. Sometimes one fee may come into force with higher percentage, which accounts for a higher amount. You need to keep a substantial amount ready with you because you will not get the full amount from the financier. Your current income also may influence the loan amount you get from your financier. It is better to have 15 to 20 percent of the total value of the property ready as cash with you; your financier may take care of the rest amount.Interest rates may not speak the truth. A daily reducing deal eventually proves better than a monthly one; similarly a monthly reducing deal is better than an annual one.

A flat rate may give an idea of a cheaper deal but it is quite misleading and normally not charged by the financiers. An extra influx of money may lead you to make prepayment of the loan amount. But the financiers may not encourage it. It is wise to check the prepayment charges with your financiers. The EMIs get restructured according to the prepaid amount. The financier may charge a predetermined amount as a penalty for prepayment or it may vary as a certain percent of the sanctioned amount. There may be different computation also for prepayment charges. In case you need to pay higher penalty for the prepayment, it is better to invest your fund in a smart way that gives you much higher return than the amount you would have saved by the prepayment. You can calculate your savings by subtracting the revised EMI (after prepayment) from your current EMI and deduct the penalty from the savings to get the actual figure you save after the prepayment. If you earn a better income by investing your fund than the savings you make by prepaying your loan, then it is not wise to prepay. Moreover, it is unworthy to prepay the loan when it is nearing the maturity. A housing loan offers you tax benefit on your income and you should keep this fact in consideration while deciding to prepay your loan. What is to be considered when a loan is being sanctioned? You should select a financier who is capable enough to meet your requirements. The financiers look into your income and verify your ability to spend 35 to 40% of your gross income as EMIs. You need to keep your fund ready for the amount you do not get as loan. If you were asking for a loan amount of Rs. 5,00,000 for a property worth Rs. 1 million, the financier would ask about the source of the balance payment. Age of the loan seeker is a factor that influences the loan amount. The financiers would not approve a higher amount of loan to a person approaching his retirement age. But, a person in his or her mid thirties would get a higher loan. You have a reduced chance of getting a big loan if you are concurrently running with another loan account, because your disposable earning are reduced and you have lesser funds to pay back the new loan. The number of dependents on you also influences the loan amount. A financier will sanction a lesser amount of loan if you are the only earning member of your family than a person who is supported by the income of the spouse and parents. If you have lots of investments favoring you, the financiers may approve a higher loan amount even if your income is not so high.Your qualifications and your steady employment in a growing industry are the important factors of your evaluation as a loan seeker for property in India. Please note that the financiers will give loan to you on their terms. Therefore, you should consider your own strengths and weaknesses and ask for the amount if you are confident and comfortable to repay regularly. You can take a lower amount of loan if you are uncomfortable with higher EMIs. To know more about financial options to fund real estate in India, visit MastGhar.com.

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