Investing in a residential property is
a milestone in life and the mammoth task comes with a lot of work to
be done. Earlier in the day purchasing a home was quite difficult
taking into consideration the enormous capital required. However, the
easy and hassle-free availability of home loans by banks and
financial institutions has made it all the more convenient to have
your own home in the city. This is essential favourable for those
residing in metropolitan cities like Mumbai where the standard of
living is comparatively on the higher side. All the expenditures of
day-to-day life, different costs that a citizen has to make way for
and other liabilities leave little room to be able to save the sum
required to invest in a house at one go. This is where home loans in Mumbai come into play and save the day for the majority. All
said and done, the process of taking a home loan is a task in itself,
what with all the lengthy paperwork and cumbersome financial and
legal formalities that come with it. This can be a little
overwhelming for all the big technical terms and jargon that can be
difficult to interpret. While we may be familiar with some of the
terms, there is also a high possibility of not knowing its relativity
to the context of home loans. It is always better to be well-equipped
with the explanation of the terms and terminologies associated with
home loans to be able to comprehend the information. Read on to
enhance your knowledge about the most common terms affiliated to home
loans.
1. Disbursement: The usage of
this term is not limited to home loans alone but spans across almost
all loans. The word is used to refer to the release of the sanctioned
loan amount by the money lending institute to the customer. Once all
the paperwork is in place and the required formalities are completed,
the sanctioned loan amount is disbursed to the borrower via a cheque
which can then be deposited by the borrower in their loan account. As
per the arrangements between the bank or financial institution and
the customer, the loan can be disbursed in one out of three ways, viz
full disbursement, partial disbursement, and advance disbursement.
Usually, advance disbursement comes into play in cases of new
construction projects that are underway and the entire loan amount is
disbursed by the bank well in advance, before the completion of the
project. On the other hand, in partial disbursement, a certain
percentage of the loan amount is disbursed at various stages of
completion of an under-construction project.
2. Margin: There is a certain
percentage of the loan amount that can be taken against a property
set by the RBI. For any property, a borrower can take a maximum loan
of 80% of the property value and the remaining 20% has to be paid by
the borrower. This remainder 20% that is paid by the borrower is
known as the margin, more commonly referred to as the down payment
made by the borrower.
3. Credit appraisal: Before
approving a loan, a thorough financial background check of the
borrower is conducted so as to determine the applicant's eligibility
to acquire a home loan as well as to calculate and deduce the maximum
loan amount that can be sanctioned. This entire process is known as
credit appraisal of the applicant. Factors like age, qualification,
nature of work, income, savings, existing loans and previous payment
history among others are taken into account to judge the same.
4. Credit worthiness: Post the
credit appraisal, the repayment capacity of the recipient that is
established is termed at the credit worthiness of the recipient. The
credit worthiness assures the home loan repayment capacity of the
applicant.
5. Security: The bank lending
the loan keeps an asset of the borrower as a security. This security,
also termed as collateral, serves as a protection for the bank when
the borrower fails to repay the loan. In cases of home loan, the home
being purchased for which the loan is borrowed serves as the asset.
When the borrower defaults in repayment of the loan, the bank has the
right to sell the security to recover the loan amount.
6. Pre-approved property: Builders
usually get their properties pre-approved by money lending financial
institutions to establish the credibility of the builder as well as
that of the property. This implies that pre-approving financial
institution has done a check of the legal documentation of the
project and post the verification, it has given it a stamp of
approval. This also includes doing a background check on the
builder's previous projects and timely completion of the same.
However, this does not necessarily mean that a home loan on every
pre-approved property will be sanctioned. Also, the project will be
completely within the stipulated time duration is also not guaranteed
inspite it having received a pre-approval.
Now that you have enriched your
knowledge with the common terminologies associated with home loans,
it will become easier for you to decipher the information shared. If
you are looking for home loans Mumbai has a number of leading
players that you can get in touch with and realize your dream of
owning your dream house in the city.
