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Bring home the loan

In the web of house loan schemes, choosing the best one is a tricky business. With nothing much to differentiate between interest rates, it's value addition and hassle-free service that matter in the end.



GO GREEN WITH ENVY: Speed of disbursement of loan impresses prospective house buyers. - Photo: K.K. MUSTAFAH

Owning a home, one's own sweet home has never been so easy. It's not a goal set for distant future any longer. With banks, financial institutions eager to extend home loans on a platter, all one has to do is prove their regular and sustainable income and take home the loan or delivered at your doorstep.

But then there is a small catch. In a competitive market how to choose the best deal. How to go through the maze of loan schemes, features offered by different financial institutions and select the most satisfying one lest one ended up with that nagging feeling — they could have opted for the home loan of a bank preferred by his colleague or relative and brought down their equated monthly instalment (EMI).

The sensible way

Well the rational way to pin down the choice is by doing some home work on loan schemes of different banks, both private and public sector, institutions like HDFC, and choose the one that best meets one's requirement and affordability.

Rate of interest, terms of repayment, value additions like insurance linked home loans, personal accident insurance, customer service are what influence the customer.

With not much of a difference between the interest rates, it is value addition, hassle-free service and prompt response of an institution and its personnel that clinch the deal.

With rate of interest hovering between 8 and 9 per cent, after the recent hike, the difference may not be more than 0.5 per cent on different bank loans. So it is the convenience, speed of disbursement that impress the prospective applicants.

It is better to check out with public sector banks too as some of them are offering really attractive interest rates. For instance Oriental Bank of Commerce (OBC) is offering 7.25 to 8 per cent floating rate of interest depending on the loan tenure while the fixed rate is 9 per cent.

The loan eligibility is 40 times one's gross salary. There are banks offering 50 to 60 times of one's gross salary. The maximum repayment period too varies as OBC's maximum repayment period is 15 years.

Once the rate of interest is decided upon, it is the service that counts. For instance ICICI Home Loans offers doorstep service right from enquiry stage to disbursement, attractive interest rates and simple documentation, free personal accident insurance, and loan shield, where in case of unfortunate death of the borrower, the bank itself pays the rest of instalments without burden to the family.

Who are eligible?

Any person with a minimum age of 21 years, salaried or self-employed with regular income is eligible.

Some banks offer loans, joint loans, facilitating husband and wife, if both are employed, to pool up their monthly income to get higher amount of loan. Similarly the cumulative incomes of father and son, provided he is the only son would be considered for increasing the loan amount. But 90 per cent of loan sanctions are individual loans, says a bank officer.

But many banks insist on involvement of co-applicant like ICICI does. Even if the loan is sanctioned in the name of husband, spouse should be the co-applicant.

The loan amount starts from Rs.3 lakhs to Rs.3 crores, based on the income and repayment capacity of the borrower. For a new property 85 per cent of the registered value of the property is given as loan and it is 75 per cent for the plot.

The loan eligibility is determined based on 45 per cent to 55 per cent of the gross salary and the equated monthly instalments are calculated based on the loan repayment period opted by the borrower.

With floating and fixed rate options, balance transfer facility entertained by almost all banks, part payment options of principal and reduction in loan tenure at the same EMI, a customer has flexible options to juggle his financial burden. The loan tenure varies from one year to a maximum of 20 years depending on the applicant's age.

And what more. Some banks actually help you scout for a suitable property. For instance ICICI offers the free `Home Search' service to earn goodwill of customers.

The bank legally and technically evaluates the properties of builders registered with it, suggests suitable property to the prospective clients based on their preference and budget, ranging from apartments, independent and row houses.

For a thorough study of various options, all one has to do is call the bank or log on to their website.

M.L. MELLY MAITREYI

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