Showing posts with label home loans in Mumbai. Show all posts
Showing posts with label home loans in Mumbai. Show all posts

Friday, 11 May 2018

Looking For A Home Loan? These 6 Terminologies May Come In Handy



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.