Blogs – HomeCapital Blog

How to finance your home renovation

Posted on March 17, 2023March 17, 2023 by HomeCapital Team

Home renovation is an exciting but expensive process. From changing a few things in your living room to giving your entire home a new look, renovation requires a good budget. After finalising the details of your renovation project, the most important aspect is setting a budget and finding the right financing option. While using your savings may be an easy choice, it may not always be feasible. Luckily, there are several ways to finance your home renovation, such as personal loans, home equity loans, and more.

In this blog, we’ll explore these financing options and provide you with the information you need to bring your dream home to life.

5 ways to finance your home renovation.

From using your savings to applying for a home improvement loan, there are several ways to finance your home renovation. Here are five ways to finance your home renovation that you can consider:

1. Dip into your savings

One of the easiest ways to finance your home renovation is by using your savings. If you have accumulated some savings over the years, you can use them to fund your renovation project. So, you will not be concerned with interest rates or repayment terms. However, keep in mind that using your savings for a renovation project means that you won’t have those funds available for emergencies or other investments.

2. Apply for a home renovation loan

If you’re not comfortable using your savings or don’t have enough saved up, you can consider applying for a home improvement loan. While all banks don’t offer home renovation loans like home loans, you may still go for a personal loan through an NBFC. Financial institutions offer home furnishing loans of up to ₹ 10 lakhs, which can help cover your home renovation costs. Personal loans have fixed interest rates, repayment terms, and the funds can be used for any purpose.

3. Consider a home equity line of credit.

A home equity line of credit is actually a home equity loan that allows you to borrow funds based on the equity you have in your home. It’s similar to an overdraft facility or line of credit facility. The term is generally decided by the lender and at the end of the term, the borrower must repay the amount borrowed with the affixed interest rate. This option is suitable for those who are planning a long-term renovation project as it allows for flexible borrowing.

4. Take out a home equity loan

This type of loan is secured against your property, and you can borrow funds based on the equity you have in your home. The amount from a home equity loan can be used for any purpose, and there are no restrictions on the end-use. Keep in mind that you’ll need to mortgage your property against the loan amount you wish to avail, and failure to repay the loan may result in the lender seizing your property.

5. Use credit cards for minor renovations.

Credit cards are a convenient way to finance small home renovation projects, such as buying new appliances or materials. However, using your credit card for larger projects may not be a good idea. Firstly, credit cards have a set limit, and you may not be able to finance the entire project with just one card. Secondly, credit card interest rates can be high, which can result in additional expenses in the long run. If you choose your credit card, make sure to pay your bills on time and stay within your credit limit to avoid penalties and additional charges.

Things to consider for a home renovation loan

When considering a home renovation project, it’s important to take certain factors into account when applying for a home renovation loan.

Firstly, weigh the pros and cons of renovating your home to determine if it’s worth the time, effort, and money.
Determine your monthly budget and affordability by getting quotes from contractors and using a loan EMI calculator to know how much you can borrow and if you can afford to repay the loan.
Consider the type of loan you want to avail, whether secured or unsecured.
Prepare the necessary documents, such as your PAN and Aadhar cards, salary slips, and bank statements. Be aware of the interest rate and repayment options, such as fixed EMI or step-up EMI payments.
Lastly, check for any hidden fees associated with the loan, such as processing fees, documentation fees, pre-payment charges, or penalties for missed payments.

Conclusion

Financing your home renovation is a big decision that requires careful evaluation of several factors, including affordability, type of loan, interest rate, and repayment options. With the availability of interior loans and personal loans, it is easier than ever to finance your home improvement projects. However, it is essential to find a trustworthy lender and understand all the terms and conditions of the loan before signing up.

The future of online home loan lending and how it will continue to shape the homebuying process.

Posted on March 15, 2023March 15, 2023 by HomeCapital Team

The homebuying process has seen a significant shift towards digitalization in recent years, and the trend is only expected to continue. Digital home loan lending has made it easier for consumers to apply for loans, receive approvals, and complete the documentation process. With the advancements in technology, the home loan industry is poised to transform further, offering an even more streamlined and convenient experience for borrowers.

This blog will explore the future of online home loan lending and how it will shape the home buying process.

The current state of online home loan lending

The current state of online home loan lending has significantly simplified the homebuying process for customers. With just a few clicks, customers can apply for and avail of home loans from the comfort of their homes without the need for physical branch visits or handling reams of paperwork. This digital lending process allows customers to digitally sign loan proposals, submit documents electronically, and receive approvals based on income documents.

The benefits of digital lending go beyond just convenience. Digital lending reduces the complexities of availing a home loan and caters to customer queries in the fastest possible time, regardless of location constraints. This not only saves time and money for customers but also maintains flexibility in home loan terms and eases the process of comparison and analysis of multiple loan options.

Most lenders offer mobile apps and digital platforms for the benefit of their home loan customers. These digital platforms have automated mundane tasks like service ticket allocation, pending document collection, timely reminders and notifications, and other additional service offerings. Additionally, chatbots have reduced the dependency on back-office teams and proved helpful in responding to customer queries 24 hours a day.

The future of online home loan lending

One major way that technology will continue to shape online home loan lending is through the use of data analytics. With more data than ever before at their disposal, lenders can now use sophisticated analytics tools to make more informed lending decisions. By analysing a borrower’s digital footprint, including their social media presence, lenders can better gauge their creditworthiness, making the lending process faster and more efficient.

Another key technology trend shaping the future of online home loan lending is the use of APIs. Application Programming Interfaces (APIs) can help streamline lending processes, improving functionality, and reducing costs. With APIs, lenders can quickly access updated information and enable easy process accessibility across locations, leading to faster disbursals and a more customer-centric experience.

Finally, emerging technologies like artificial intelligence, machine learning, and blockchain are poised to revolutionise the home lending process. AI and ML can help automate and streamline complex credit appraisal processes, while blockchain technologies can increase transparency and remove intermediaries, resulting in a seamless loan disbursal process.

Benefits of digital home loan

The increasing use of digital home loan platforms is bringing several benefits to borrowers. Here are some advantages of using digital home loan services:

● Quick and convenient application process

With digital home loans, borrowers can apply from the comfort of their own homes and there is no need to visit a physical branch office. The approval process is also much faster, with some lenders even offering instant approvals. This saves borrowers time and money while also making the process more convenient.

● Minimal paperwork

Digital home loans streamline the application process by assessing a borrower’s credit profile and history within minutes based on the data provided by the customer. This eliminates the need for extensive documentation, making the process faster and simpler for borrowers.

● Flexible loan processes

Digital home loans offer flexible credit lines that can extend up to several lakhs, providing a level of convenience and competency that traditional lending modes can’t match. With advanced predictive models powered by AI and machine learning, lenders can even develop customised loan products for customers, offering greater flexibility and choice.

● Lower operating costs

Digital home loans are largely driven by automated technologies, which translates to lower operating costs for lenders. As a result, lending institutions can offer lower interest rates, processing fees, and other additional charges to borrowers.

● Enhanced digital capability.

With digital home loans, lenders can carry out data-driven eligibility checks, online authentication, document verification, virtual discussions, and onboarding through automated and predictive technologies. This enhances process efficiency, reduces the cost of loans, improves customer service, and helps in higher customer retention.

Homeville Group is changing the way home loans are done in the country. HomeNxt is the digital mortgages platform of Homeville Group, a technology company focused on building a housing credit enablement network through its technology platforms.

HomeNxt is a digital mortgage platform engineering the home loan process to make it fast, simple and transparent. We combine smart technology with industry partnerships to deliver lightning-fast home loans.

We are making the home ownership process simpler, faster and more accessible for billions of Indians. Our platform allows you to obtain home loans from the comfort of your home thanks to an API-driven distribution strategy on the demand side and open banking model on the capital side.

Conclusion

The rise of digital home loan lending has transformed the homebuying process and made it more accessible, streamlined, and convenient for borrowers. With the integration of cutting-edge technology like AI and machine learning, the future of online home loan lending looks promising. It is set to offer even more innovative ways for lenders to offer personalised and flexible loan options to borrowers.

If you are looking to to become a home owner, consider exploring digital home loan options. HomeCapital offers a down payment assistance program with interest-free credit up to 50% of the home down payment amount. Check out our website for more information.

What is Days Past Due (DPD) in credit report?

Posted on March 14, 2023March 14, 2023 by HomeCapital Team

Your credit report is a very important financial document that lenders use to figure out if they should give you credit. It contains a wealth of information about your credit history, including your payment history, credit utilisation, and account balances. One key metric that lenders use to assess your credit risk is your Days Past Due (DPD) status.

In this blog, we will explore what DPD means in your credit report, why it matters, and how you can improve it.

What is Days Past Due (DPD)?

Days Past Due (DPD) is a banking term used to indicate the number of days that have elapsed since the due date of a particular credit account. It is a key metric that lenders use to figure out if someone is creditworthy and how much credit risk they pose. A high DPD means that the borrower has been late with payments in the past, which can hurt their credit score and make it harder for them to get credit in the future. DPD is the number of days that have elapsed since the due date of a particular credit account.

For instance, if you have an EMI with a monthly payment due date of the 15th every month and you make the payment on the 25th, your DPD would be 10.

What role does Days Past Due have in your credit report?

The role that Days Past Due (DPD) plays in your credit report is a significant one. Essentially, DPD provides lenders with an indication of your payment history, specifically how often you repay the credit you have taken on time. Lenders use this information to figure out how reliable you are as a borrower, which helps them decide whether or not to give you a loan.

If you have accounts that are past due, it could negatively impact your credit score, making it more difficult to get credit in the future. Lenders may also see you as a high-risk borrower, and this could result in higher interest rates or less favourable lending terms.

When evaluating your credit report, lenders usually pay close attention to accounts that are past due by more than 30 days. If you have these kinds of accounts, lenders may be less likely to give you a loan or ask for more information before making a decision.

Which keywords in your credit report indicate DPD levels?

Credit reports may have several keywords that can be used to figure out a person’s Days Past Due level. The following are some commonly used keywords that indicate DPD levels:

● STD

This stands for Standard Payment, indicating that a payment has been made within 90 days.

● NPA

This stands for Non-Performing Assets, indicating that payments are past due by 90 days.

● SUB

This stands for Substandard, indicating that payments have not been made for up to 12 months.

● DBT

This stands for Doubtful, indicating that payments have not been made for more than 12 months.

● LSS

This stands for Loss, indicating that there is no hope of repayment from an individual.

Banks consider applicants with a DBT or LSS tag to be risky, and their chances of getting loans approved are typically lower due to their low CIBIL score.

DPD Value	000	XXX	30	60
Month	1-23	2-23	3-23	4-23

000: It signifies that you have paid all your EMIs for the month on time and do not have any outstanding dues for the month. This is the safest value you could have on your credit report.

XXX: When the lender does not provide any data regarding repayment to the credit bureau, this value is shown in your report. The applicant is considered safe in this case, and it does not have any impact on the candidate’s profile.

30, 60, 90: These values on a DPD table in the credit report indicate the number of days passed after the payment due date of the loan EMI/credit card bill. This has an impact on your credit score and leads you to borrow at expensive rates.

What is a good Days Past Due?

A good Days Past Due is relative to the type of credit account and payment terms associated with it. Typically, for a credit card account, a DPD of less than 30 days is considered good, while for a home loan, a DPD of less than 90 days is considered good.

It is important to pay your credit bills on time if you want to keep a good DPD and raise your credit score.

How can you improve your DPD?

Improving your Days Past Due is crucial to maintaining a healthy credit score. Check out the following steps that you can take to improve your DPD:

● Make timely payments

The most important step to improving your DPD is to make sure you make all your loan repayments within 90 days of the due date. You may set reminders on your smartphone or calendar to guarantee that payments are made on time.

● Reduce your credit utilisation ratio

Your credit utilisation ratio is the percentage of your credit limit that you are using. You can either pay off your debts or raise your credit limit to keep your credit utilisation ratio below 30%.

● Examine your credit report for inaccuracies

Errors in your credit report or DPD payments can impact your credit score. If you spot any errors, dispute them with the credit bureau to correct them.

● Maintain a healthy credit history

A good credit history is crucial to improving your DPD and credit score. To build a good credit history, pay back all of your loans on time and keep your credit usage low.

Conclusion

Understanding Days Past Due is crucial when it comes to assessing an individual’s creditworthiness. A good DPD is a reflection of timely repayments and a low credit utilisation ratio, which are critical factors for maintaining a healthy credit score. By following the steps mentioned in this article, you can improve your DPD and boost your chances of securing loans at a lower interest rate.

If you’re in the process of buying a home and need assistance with your down payment, HomeCapital offers interest-free credit up to 50% of the home down payment amount. With flexible repayment options and no prepayment charges, HomeCapital can help make your dream of homeownership a reality. Don’t hesitate to check out their website for more information and to apply.

Things to remember before taking loan against property.

Posted on March 13, 2023March 13, 2023 by HomeCapital Team

As a homeowner, you have the advantage of tapping into the value of your property to secure a loan for a variety of purposes through a Loan Against Property (LAP). Whether you’re looking to finance a business expansion, fund a child’s education, or consolidate high-interest debts, a LAP can be an attractive option with its relatively low-interest rates and long repayment tenure. However, before you decide to take a LAP, it’s crucial to carefully consider various factors to ensure that you make a well-informed decision.

What is a Loan Against Property?

A loan against property, often known as a LAP, is a specific kind of secured loan that allows borrowers to borrow a substantial amount of money by using their property as collateral for the loan. The percentage of the property’s market value that the lender will loan you is normally up to 80 percent of the total value of the asset serving as collateral for the loan. The borrower has the option of spreading the repayment of the loan amount out over a longer period of time with affordable EMIs that make the process of repayment stress-free.

Key considerations before applying for a Loan Against Property

To ensure that your decision to apply for a Loan Against Property aligns with your financial goals and requirements, it is crucial to keep the following factors in mind:

1. Property valuation

The first and foremost factor to keep in mind before taking a Loan Against Property is the valuation of the property. The lending institution evaluates the market value of the property as per the current market rates to determine the loan amount to be sanctioned. It is important to ensure that the property valuation is accurate and fair, as it directly impacts the loan amount that can be availed. Some lenders may offer higher or lower valuations than others, so it is essential to do thorough research and choose a lender that offers a fair and competitive valuation.

2. Interest rates

Another crucial factor to keep in mind is the interest rates charged by the lender. Although the interest rates for Loan Against Property are generally lower than those for Personal Loans, there can be significant differences in interest rates charged by different lenders. Therefore, it is advisable to do a market study of interest rates comparison being charged by different lending institutions and choose a lender that offers a competitive interest rate. In the long term, even a very little change in interest rates may lead to considerable cost savings.

3. Tenure of the loan

The loan tenure offered by lenders is one of the key features of Loan Against Property. It typically ranges from 5 – 15 years, depending on the lender. As a borrower, it is important to choose the loan tenure that best suits your financial situation. While longer loan tenures may result in lower EMIs, they also result in higher interest payments over the entire loan tenure. Therefore, it is important to strike an appropriate balance between the loan’s duration and the EMIs to guarantee that the loan’s payback is not too burdensome.

4. Processing fees

Lenders charge loan processing fees as per their terms and conditions, which may vary significantly from lender to lender. The processing fees may start from 0.5% of the sanctioned loan amount or have a minimum/maximum fix-cap amount. While the processing fees may seem like a small component of the overall loan, they can significantly impact the overall cost of borrowing. Therefore, it is important to strike an appropriate balance between the loan’s tenure and the EMIs to guarantee that the loan’s payback is not too burdensome.

5. Property ownership

Finally, it is crucial to ensure that the property being pledged as collateral is clear of any disputes or discrepancies in documentation. For a smooth journey, it is essential to ensure that property documents are consistent, complete, the title deed is clear, and all joint owners are in favour of obtaining a loan. Therefore, it is important to ensure robust property documentation and consensus of all joint owners before applying for a Loan Against Property. This can help avoid longer loan disbursement time and ensure that the loan application is approved smoothly.

Conclusion

A Loan Against Property can be a viable option for homeowners looking for financial assistance for various purposes. However, before applying for a LAP, it’s essential to consider factors such as property valuation, interest rates, loan tenure, processing fees, and property ownership to make an informed decision. By doing your due diligence and working with a trusted lender, you can leverage your property’s value to get the funds you need while minimising the risks.

If you’re a home buyer looking for interest-free assistance for your property-related payments, HomeCapital can provide you with the support you need. Whether you need help with down payment, payments on possession, stamp duty payments, or other property payments to developers, HomeCapital has got you covered.

New law for registering your new property

Posted on March 6, 2023March 6, 2023 by HomeCapital Team

With more people wanting to register their property, the Indian government has made new rules to make sure the process goes smoothly and quickly for everyone. The goal of these new laws is to make it easier for people to know what their rights and responsibilities are when it comes to registering property.

This article will explore the new property law in India, providing valuable insights into the process and ensuring that you have all the information you need to get started.

Mandatory laws for property registration in India

India’s government has put into place two important laws that make it easier to buy and sell property in the country.

1. Registration Act, 1908

According to this property law, all Indian citizens who own property worth more than ₹ 100 must notify the government. This is a crucial step because it gives the government a complete inventory of all land and buildings in the nation, which may be used to settle legal issues down the road.

2. Indian Stamp Act, 1889

This property law mandates that every person must pay stamp duty on documents related to the property before it can be registered. The amount of stamp duty varies depending on the value of the property and is an important source of revenue for the government.

New Property Registration Rules in India

In 2020, the Indian government made a new set of rules for registering property. These rules were meant to make the process easier and more open. Here are some of the key changes that you should be aware of:

● Efficient document processing

Thanks to improvements in technology, it is now possible to get copies of all important documents on the same day as registration. This effectively eliminates the need for long wait times.

● No compensation for unregistered properties

Any property that is acquired by the government but is not registered cannot demand compensation under an Income Tax return. This highlights the importance of registering your property to protect your rights and interests.

● Legal validity of registered properties

It is important to know that properties that haven’t been registered have no legal value and can’t be used as proof in court. This shows how important it is to make sure your property is registered and that all the paperwork is in order.

Property registration fees in India

In India, each state has its own set of fees for property registration. Most of the time, the fees are between 1% and 3% of the property’s value, with a cap of ₹ 30,000. The fees are subject to change periodically, so it is important to stay informed of any updates. Here is a breakdown of the fees in some of the major cities in India:

● Delhi

The registration fee in Delhi is 1% of the property’s market value, plus Rs 100 for filing fees.

● Mumbai

For houses in Mumbai the registration fee is 1% of the agreement value and is capped at ₹30,000.

● Bangalore

The fee in Bangalore is 1% of the value of the property.

● Chennai

In Chennai, the fee is 1% of the market value of the property.

It is important to note that these fees are subject to change and may vary depending on the state and location.

Consequences of failing to register a property in India

Failing to register a property in India can have serious consequences and risks. First of all, a property that hasn’t been registered isn’t legal and can’t be used as proof in a court of law. This means that establishing ownership of a property may not be possible if the owner’s name is not listed in public records as the owner of the land.

In addition, there is a time limit for registration in India. The registration must be completed within four months of the completion of the transaction. If it isn’t registered in this amount of time, the buyer can ask the sub-registrar for more time. But if the buyer doesn’t get the extension, they may have to pay a fine equal to up to 10 times the initial registration fee.

Property registration process in India

Here is a comprehensive guide to the registration process in India:

1. Estimation of property value

The first step is to estimate the value based on the circle rate in the area where the it is located. This will help you determine the stamp duty and registration fee that you will need to pay.

2. Purchase of non-judicial stamp paper

The next step is to buy non-judicial stamp paper from a licensed stamp seller or online. This paper will be used to sign the deed based on the nature of the transaction.

3. Signing of deed

The deed must be signed on stamp paper by both the buyer and seller and two witnesses. You will also need to bring passport-size photographs and identity proof for both parties to the sub-registrar’s office.

4. Visit to sub- registrar’s office

The buyer and seller, along with the witnesses, must visit the sub registrar’s office and submit all the necessary documents, including a copy of the municipal tax bill, a property register card, a construction completion certificate, a No Objection Certificate, and payment receipts for stamp duty and the registration fee.

5. Payment of registration fee

Before the property can be registered, the buyer must pay the registration fee and turn in all the necessary paperwork. The fee may vary from state to state, so it is important to gather all the information from the registrar’s office.

6. Verification of documents

The registrar will check the documents you send in, and you will get a receipt after the deed is registered.

7. Collection of sale deed

You can get the sale deed from the registrar’s office two to seven days after the property is sold, depending on where it is. In metropolises, the registration of documents may take 2-3 days, while in rural areas, it may take up to 7 days.

Online property registration

With the growth of technology, the government in some states has made it possible to register property online. You may submit your stamp duty plus registration fee payment online and print out a receipt at the same time. The payment can be made using net banking, a debit card, or a credit card.

Only a few states in India are allowed to provide online services for property registration. Make sure there is an online property registration gateway for the state where the property is situated.

On an online portal, only the services listed below are available.

Check the cost of stamp duty.

Pay the registration cost and stamp duty.

Online payment receipt.

By doing these things, you can make sure that the process of registering your property goes smoothly and quickly.

Conclusion

In India, residents must know the steps and documents needed for property registration. To help make the process easier, it is recommended that you seek the assistance of a professional or a company that specialises in property registration. HomeCapital offers a unique solution for home buyers who are looking for financial assistance with their property purchases. With interest-free help for a down payment, payments on possession, stamp duty payments, and other property payments to developers, the HomeCapital program covers all of your property-buying needs.

What is a composite home loan?

Posted on March 2, 2023March 2, 2023 by HomeCapital Team

While the process of building a new home is exciting and rewarding, it may be a financial burden if you aren’t prepared. With the costs of building and buying land, it can be hard to get the money you need to make your dream come true. This is where composite home loans come in. Composite home loans are a unique form of home financing that covers both the cost of land and construction in a single loan.

In this blog, we’ll discuss composite home loans in depth.

What is a composite home loan scheme?

A composite home loan scheme is a type of housing loan that covers all aspects of building a home, including the purchase of land and construction charges. This loan is different from regular home loans because it lets you buy land and build a house within a certain amount of time.

The loan amount is paid out in stages. The housing finance company releases the money at different stages of construction. This facilitates the borrower’s ability to meet their loan repayment obligations.

Most composite home loans have reasonable interest rates, and the bank keeps an eye on the building to make sure everything is going as planned. With a composite home loan, borrowers can keep their finances simple and focus on building their dream homes.

Key features of composite home loan

This type of loan is more cost-effective than getting separate loans for land and construction because it covers both costs. However, there are a few essential details and factors to bear in mind while applying for a composite home loan:

● Different from land loans

A composite home loan differs from a land loan in that it covers both building and land expenditures. If you plan to start construction immediately, you should opt for a composite loan, but if you plan to construct later, a land loan might be a better option.

● Higher interest rates

Composite home loans typically have higher interest rates compared to standard home loans. This is something to keep in mind when deciding whether a composite loan is the right choice for you.

● Immediate construction requirement

To avail of a composite home loan, immediate construction is a mandatory requirement. Lenders usually want borrowers to start building within one to two years of getting a loan. If they don’t, they may have to pay higher interest rates or pay off the loan and close it.

● Loan limit

The composite loan limit is based on your loan repayment capacity, which can go up to ₹ 15 crores.

● Disbursement in stages

Financial institutions pay out a loan for building a house in stages based on how far along the building is. Lenders disburse a predetermined sum even before construction begins.

● Tax benefits

To avail the tax benefits of a composite home loan, the home construction must be completed within three years of loan sanction, and a completion certificate from an architect must be obtained. This can result in tax benefits of ₹ 1.5 lakh on repaying the principal amount and ₹ 2 lakhs on interest repayment each year.

● Up to 80% funding

With a composite home loan, a bank will give you up to 80% of the money after you show proof of the cost of the land and the building. However, the funding depends on your credit history and repayment capacity.

● Prepayment charges

It’s possible that you’ll have to pay prepayment fees if you go with a fixed interest rate, but you may not have to do so if you go with a fluctuating interest rate on your composite loan. Prepayment fees may differ from one lender to the next.

Documentation for a composite home loan

When applying for a composite loan, it’s important to have the right documents so that the loan can be approved. Here’s a rundown of the documents you’ll need to submit:

● KYC (Know Your Customer) Documents

To prove your identity and address, you will need to show proof like a passport, PAN card, voter ID card, driving licence, or ration card for ID and a utility bill, ration card, or letter from your employer for address.

● Proof of income documents

You’ll need to bring in Form 16 and bank statements or pay stubs to prove that you have the funds to pay back the loan.

● Property related documents

You will also need to show proof that you put money into the property, as well as the property’s approved plan and an allotment letter.

It’s important to remember that different lenders may have different requirements for a composite loan.

Eligibility criteria for composite housing loan

A person must meet certain criteria set by the lending institutions in order to get a composite housing loan. The following are the key eligibility criteria:

● Age

To be eligible for a loan, the applicant has to be between the ages of 18 and 65 at the time of application.

● Residency

The applicant must be an Indian resident or a non-resident Indian.

● Occupation

The applicant must be either a self-employed professional or a self-employed non-professional.

● Residence

The applicant must have resided at their current address for more than a year.

● Credit Score

A good credit score, typically over 750, is necessary for loan approval.

Bank guidelines for a composite home loan

For a composite loan application to be accepted, borrowers must stick to a few guidelines. The following steps must be taken to meet these guidelines:

● Cost estimate for construction

A cost estimate for building the house is one of the most important things that needs to be done to get a loan. You have to give the bank a detailed estimate of how much the building will cost, including the cost of materials, labour, and other costs.

● Validation of the cost estimate

After you give the estimate, it needs to be checked by a licensed professional. This can be either an architect or a chartered accountant. They will check the estimate to make sure it is correct and meets industry standards.

Conclusion

Composite home loans are a comprehensive financial solution for those who plan to construct their dream home. From covering both land and construction costs to providing tax benefits, it is a cost-effective way to build your own home.

To make the process of purchasing your dream home even easier, consider taking advantage of HomeCapital‘s Home Down Payment Assistance Program, which provides up to 50% of the amount needed for your home down payment, stamp duty, and registration in the form of interest-free credit.

All About Home Loan Disbursement Process

Posted on February 27, 2023March 1, 2023 by HomeCapital Team

Homeownership is a dream for many individuals, and a home loan can help make that dream a reality. But the loan disbursement process can be confusing and overwhelming, especially for people who are buying a home for the first time.

Whether you’re a first-time buyer or simply looking to refinance, this guide will walk you through the process and help you understand the ins and outs of home loan disbursement.

What is home loan disbursement?

The disbursement of a home loan refers to the transfer of funds from the lender to the borrower’s account. It is the final step in the home loan process after the loan application has been approved and the loan agreement has been signed by both parties.

During the disbursement process, the lender will check the submitted documents and make sure that all of the loan agreement’s terms and conditions have been met. Once the verification is complete, the loan amount will be transferred to the borrower’s account. The terms and conditions of the loan will be written in the disbursement letter, as well as the amount of the loan and when it will be paid out.

What are the various stages of home loan disbursement?

The process of getting a home loan in India involves several stages, starting from filling out the home loan application form to disbursal of the loan. The following are the various home loan disbursement stages in detail:

1. Completing the home loan application form

The first step in obtaining a home loan in India is to fill out the home loan application form. On this form, you will need to give information about yourself, such as your name, address, income, employment, existing debts, properties, and so on.

2. Submitting application and required documents

After filling out the home loan application form, you will need to upload the required home loan documents and send them to the lender. Some of the common home loan documents that are required include:

● Identity proof such as a PAN Card, Aadhar Card, Passport, or Driving License
● Address proof such as an Aadhar Card, Driving License, Passport, or Utility Bills
● Age proof such as an Aadhaar Card, Passport, Birth Certificate, 10th Certificate, or PAN Card
● Educational qualifications proof
● Income proof such as Bank Statements, Salary Slips, or Income Tax Returns
● Business proof such as Balance Sheet, Profit & Loss Statements
● Proof of Business Address, or Business License

You may also be asked to show documents about the property, like an approved copy of the building plan, an estimate of how much it will cost to buy or build a house, and a NOC from the society or builder. Note that the lender may ask for additional documents or fewer documents, depending on the specific case.

3. Paying the home loan processing fees

Once you’ve filled out the home loan application form and sent in the necessary documents, the lender may ask you to pay a processing fee. This is a one-time fee that the lender will charge you to set up and keep your housing loan account.

It typically ranges from 0.50% to 2% of the sanctioned loan amount, but this can vary from lender to lender.

4. Communication with the lender

After you send in the home loan application form, the lender will check your information and decide how much you can borrow based on your ability to pay it back. The lender may also contact you to gather more information about you and assess your repayment capacity. This process also involves checking your credit score and credit report from credit bureaus such as CIBIL, Experian, CRIF High Mark, and Equifax.

5. Loan approval

After the verification process goes well, the lender will give you a home loan approval letter or a sanction letter. This letter will have information like the amount of the loan that has been approved, the interest rate, the type of interest rate (fixed, variable, or hybrid), the length of time it will take to pay back the loan, how it will be paid back, any special programs that may apply, and the loan’s terms and conditions.

Once you receive the sanction letter, you will have to sign it and submit an acceptance copy of it to the lender if you agree with its contents. At this stage, you may also need to pay any administrative fees to the lender.

6. Property evaluation and legal review

Before giving money for a purchase or building project, lenders often do some kind of inspection of the place where the deal will happen. This means giving the lender original copies of the title deed, a no objection certificate (NOC), an encumbrance certificate, and any other documents they need.

The lender will then do a legal check on the property to make sure that the title is clear and undisputed. For properties that are still being built, the lender will also look at the location, quality, stage of construction, and progress of the building. When a property is ready to be sold or is being resold, the lender will look at its age, ownership, maintenance, location, legal clearances, and construction quality.

7. Loan disbursement

Once all of the above is completed, the lender will issue a formal agreement and disburse the home loan proceeds per the agreed-upon conditions. The money is put into the borrower’s account or sent to the builder’s or seller’s account.

Conclusion

The process of disbursing a home loan may be a perplexing procedure, but with the appropriate assistance, it is possible to make the process simpler.

If you’re in need of assistance for making any payments to developers, HomeCapital provides interest-free financial support to home buyers for down payments, payments on possession, stamp duty payments, and all other property payments to developers. With the help of HomeCapital, you can be sure that when you buy your dream home, you are making a smart financial choice.

What are preferential location charges in real estate?

Posted on February 20, 2023February 20, 2023 by HomeCapital Team

Apartments in multi-storeyed buildings are often allotted randomly. For example, if there are 600 flats in a housing society, you can get any one of those 600 flats. But what if you want a preferential location? Yes, you can do that. By paying extra charges, you can get a flat or an apartment at a preferential location in your building or the housing society. These are called preferential location charges, also known as “preferential site price”.

Location can often have a big impact on the market value of a property. Who would not want a beautiful view when they sit on the balcony? Who would not want to bask in the sun during winter? Even if one has to spend extra money for the privilege.

Why must you pay preferential location charges?

When considering demand and supply, if more people want something and the supply is low, prices rise. For example, if many buyers want an apartment facing the park and are willing to pay more for the privilege, then the seller of the property is likely to charge extra.

The ability to pay preferential location charges is a win-win for both parties. You get an apartment at a location you prefer by paying extra, and the seller has a monetary incentive to offer that place to you instead of someone else. However, it is important to note that this is an additional cost – you’re essentially paying for preferential treatment.

Are the types of preferential location charges in real estate?

In India, real estate developers typically impose two types of preferential location charges: charges based on the height of the apartment and charges based on the view it offers.

However, these charges may vary depending on the region. For instance, in Delhi and the National Capital Region (NCR), ground-floor apartments tend to be more expensive. This means that if you are paying preferential location charges based on the floor your flat is on, you will pay a “floor price premium.” Additionally, if your apartment faces the park or is located in a privileged spot such as the corner of the building or near the entrance/exit of the main neighbourhood, you may have to pay an extra charge.

In contrast, Mumbai is a city prone to flooding during monsoon season. Therefore, having an apartment on the ground floor may not be desirable. In Mumbai, the charges may apply to units on higher floors, such as the 12th floor, to avoid flooding. Additionally, if your balcony door opens towards the seaside, you may have to pay an additional charge.

It’s worth noting that preferential location charges are subject to market conditions and may vary from developer to developer. It’s always a good idea to do your research and compare prices before making a decision.

How is it calculated?

In India, preferential location charges for apartments are typically calculated based on the super built-up area of the unit, which includes both the carpet area and common areas like the elevator, staircase, and common corridor.

The carpet area refers to the actual space within the apartment that you can use to put your furniture in, move around, and perform your daily activities.

For example, if your carpet area is 1500 square feet and the common area is 800 square feet, then your preferential location charges will be calculated based on the total super built-up area of 2300 square feet.

It’s important to note that every building may have different rules for calculating preferential location charges, and different privileges may incur different charges. Therefore, it’s important to clarify with the developer or seller how the charges are calculated and what privileges are available before making any decisions.

Hence, there may be four different preferred location charges clubbed together if your apartment occasion satisfies all the four conditions listed above.

Conclusion

Preferential location charges in real estate can vary based on several factors, such as the location and project. It is important to note that these charges may differ on each floor of a building and may not be included in the base price during the construction phase. Additionally, they may not be applicable when buying a property in the secondary market. Therefore, it’s crucial to be aware of the specific charges and policies for the property you are interested in and to clarify any questions with the developer or seller to ensure a transparent and informed buying decision.

How to check the approved financial project number (APF) before buying a property?

Posted on February 16, 2023February 16, 2023 by HomeCapital Team

A project gets an approved financial project number from a bank or a recognized financial institution. The number is allocated when the bank or the housing finance company vests its interest in the project. It also indicates that all the paperwork is complete and the documents pertaining to the construction have been submitted, reviewed, and approved by the appropriate agencies. The APF number ensures that the project has been approved and you can confidently invest in it. Companies involved in construction often collaborate with selected housing finance companies and banks to enable their clients to obtain loans for buying houses, flats and apartments. Obtaining and clearing documentation can be a time-consuming process. But if a construction project already has an APF, most of the documentation regarding the financing of a particular project is already completed, at least on the construction side.

How to check the APF number before buying a property?

As a home buyer you must check the approved project finance number before you invest in a property. How do you find the APF number of the property you are planning to buy?

Every construction project these days has a dedicated website. All approved construction projects have their APF number listed on the website. If the construction agency has multiple projects going on, you can go to their website, choose a project you are interested in, and look for the APF number.

Many banks and housing finance companies also list the approved projects on their websites, along with the APF number, although, it may not always be the case.

Why is it important to check the it before buying a property?

When you apply for a home loan, there are only certain banks and housing finance companies that are ready to give you the loan for the property in question. These banks and institutions, if they are ready to give you the loan, have approved this particular property. When they have approved the property, they must have given the APF number to the property being built.

When they have given the APF number, it means they have verified that the people responsible for building the property can be trusted with the project and it is safe to invest in it. Which further means, these banks and institutions trust this property enough to give you the loan that you can use to buy the apartment in the project.

There is a stringent procedure used before allocating the APF number. Thorough inspection of the project is carried out by the bank or the housing finance companies because they don’t want to jeopardise their reputation and money. Therefore, if a project has the APF number, in all probability, it is a safe project for you to invest your money in.

A construction project must gain the confidence of financiers to obtain the correct APF number. After obtaining the APF number, you can get it verified from the concerned bank. It also becomes much easier for you to obtain a housing loan once the upcoming construction property has a valid APF number.

How do banks and housing finance companies allocate it?

To begin with, the banks and the housing finance companies that are interested in granting loans for a particular construction project check whether the ongoing project is on the RBI’s negative list. If the project is on the RBI’s negative list, they don’t collaborate.

They also review the history of the people involved in the current construction project. How many projects have they successfully completed? What was the quality of the finished project? What is the feedback of the buyers? Were they able to stick to their schedule? Have they been engaged in some sort of dispute?

The banks and the housing finance companies use their own experts as well as gather information from different sources before deciding to allocate an APF number to the ongoing project.

What if a project does not have an APF number?

If a particular construction project does not have an APF number one of the reasons could be that the company responsible for the project is on the RBI’s negative list.

Another reason might be that the group responsible for the construction is still seeking the APF number – maybe in the process of getting it, but hasn’t gotten it yet.

Should it raise the red flag if a certain project does not have an APF number?

Certainly. After all, great stakes are involved when you are purchasing a property. Whether you are investing money from your own pocket or planning to get a loan from a bank or a housing finance company, you need to make sure that the property is legitimate and the people responsible for the construction can be relied on. A big reason why they don’t have it may be because they don’t have a good track record. They may not have obtained the required legal or technical approval or the license.

Conclusion

Is it important that you know the approved financial project number before you buy a property? Yes, it is.

An APF number tells you that it is a legitimate construction project, and you can put your stakes into it. You can rest assured that multiple agencies of repute have inspected the construction project and have approved it.

What is the home loan credit appraisal process?

Posted on February 14, 2023February 14, 2023 by HomeCapital Team

When someone applies for a home loan or a credit, the lender or the bank investigates to know whether it is safe to grant the applicant the loan or not. They want to know the applicant’s credit worthiness. They want to be sure that once the applicant takes the loan, they will be able to return the principal amount as well as the interest accrued upon the amount within the agreed-upon tenure. The entire process of this investigation is called the “home loan credit appraisal process”.

How does the lender assess your credit worthiness during the credit appraisal process?

Giving a loan is a commercial undertaking for the lender, whether it is a bank or home finance company. They will be taking a big risk by parting with a huge amount of money putting their trust in the applicant. But this trust needs to be gained through verifiable information. It is not a word-of-mouth affair. They want to make sure that giving the applicant a home loan is financially viable.

Therefore, all banks, non-banking financial corporations and housing finance companies have their individual procedures that they carry out before approving a home loan application.

The creditworthiness of the applicant decides whether they’re going to get the loan or not.

The lender would want to know the following details from the applicant:

1. Fixed obligation to income ratio (FOIR)

This is used to assess the borrower’s ability to repay a home loan. The borrower may have some fixed monthly obligations such as existing EMIs, rent, or other debts. These need to be deducted from the monthly income before deciding whether the borrower will have enough money to pay the home loan EMIs.

For example, if the applicant’s total fixed monthly income is Rs. 1,00,000 and their fixed monthly obligations are Rs. 50,000, then the FOIR is 50%. If this ratio is lower than the benchmark set by the lender, the application may be approved.

2. Installment to income ratio (IIR)

In many instances this is also called debt-to-income ratio. This assessment considers your probable EMI (for the home loan you are currently applying) and your monthly income. How much money you can safely take away from your monthly income to pay your equated monthly installments can have a bearing on the approval of your home loan application.

3. Loan to cost ratio

This is to decide how much loan an applicant can take. This depends on the cost of the house. Based on the outcome of the credit appraisal process, the candidate can get anywhere between 70%-90% of the value of the property.

What individual factors are evaluated during a credit appraisal process?

The credit appraisal process deliberates upon multiple factors before it can be decided whether the home loan should be approved or not. A broad range of factors include

Age
Current and future income prospects
Work experience
Repayment ability
Existing and past loans
Fixed monthly expenses
Nature of employment
Probability of future liabilities
Credit record
Owned assets
Tax history
Spending patterns
Financial habits
Bank balance

Age can be a big factor, especially when income and current financial obligations don’t compensate for an older age. Depending on the individual evaluator, the applicant’s current and future income prospects can decide how much home loan the applicant gets from the lender.

Existing loan can help the credit appraisal processor decide the applicant’s present liabilities and how they’re going to affect the applicant’s ability to repay their loan. The past loans and how they paid them gives an insight into their track record. The loan paying pattern also goes into the applicant’s credit record.

Owned assets can be used as collateral.

Similarly, the positive nature of other factors in totality can help in getting the home loan faster.

What different documents are needed for the home loan credit appraisal process?

Although a significant amount of data for the home loan credit appraisal process is automatically available these days, to complete the process, the applicant may need to submit the following documents and proofs:

i. Proof of income

The agency providing the home loan will need certain documents to establish proof of income that must be sufficient to pay the loan back. These may include

Most recent salary slips
Bank statements for 3-6 months
Income tax returns for at least two years (for self-employed applicants)
Audited financials for the previous two years

ii. Proof of address

Leave and license agreement
Valid driving license
Passport that is not expired
Latest electricity bills or utility bills bearing the current residential address
Aadhaar card

iii. Proof of identity

Voter ID card
Driving license
Passport -sized photographs
PAN card
Aadhaar card

iv. Proof of employment

Letter from the applicant’s employer
Offer letter or appointment letter provided by the applicant’s employer
Office address proof
Employment certificate from the applicant’s current employer
Relieving letter or certificate of experience from the previous employer/employers of the applicant to show overall work experience

v. Proof of investments

In case the applicant has made some investments such as fixed deposits, mutual funds, fixed assets (another property), gold, or stocks, this proof too will be required. In fact, such proofs can add a pinch of validation to the home loan credit appraisal process.

Conclusion – What is the necessity of the credit appraisal process?

Successful credit appraisal process makes you credit worthy. Although in theory the process is carried out to ensure that the lender gets back their investment along with the interest, it also benefits the applicant.

If it is found out that your credit worthiness is impeccable, and in fact, quite good, you are in a better negotiating place. You can get a better rate. You can get the processing fee reduced. A greater number of creditors want to give you the home loan. It is an indicator that you are managing your finances well. You can get your loan amount increased. A successful credit appraisal process is a win-win for all the stakeholders.