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  • Re : Home Loans & Related News

    Home loan: Don’t rush into a loan overdraft facility

    While it will cut interest charges, prepayment may come at a cost

    January 9, 2023 12:05:00 am
    The home loan interest costs for the borrower is calculated after deducting the amount deposited in the savings/current account from the outstanding home loan amount.

    At a time when interest rates on home loans are rising, new borrowers should look at a home loan interest saver account which can help them to reduce the interest cost without compromising the liquidity. Under this facility, the lender opens an overdraft account in the form of savings or current account wherein the home loan borrower can park his excess savings and withdraw from it based on his cash flow requirements.

    How does it benefit borrowers

    Many banks and housing finance companies offer home loan overdraft facilities, branded as Home Loan Advantage, Maxgain, Home Loan Interest Saver, etc., to their home loan applicants. When the interest component is calculated, the bank will deduct the balance in the super saver account from the outstanding principal. The average monthly balance in this account is considered for the calculation of the interest.

    Adhil Shetty, CEO, BankBazaar.com, says the best thing is that an individual can use this money whenever he faces an emergency, or in need of the money for anything important. “It helps in bringing down the interest of your home loan to the extent of funds parked in your current account. You can withdraw or deposit funds whenever required,” he says.

    The home loan interest costs for the borrower is calculated after deducting the amount deposited in the savings/current account from the outstanding home loan amount. Ratan Chaudhary, head, Home Loans, Paisabazaar, says this allows home loan borrowers to derive the benefit of making prepayments without sacrificing their liquidity. “Home loan borrowers opting for the home loan overdraft facility can even park their emergency fund in the linked overdraft accounts. This would help in saving their interest cost without compromising on their liquidity,” he says.

    What to consider

    The eligibility criteria for this facility may vary from bank to bank. Some banks may require higher salaries and more work experience to allow the super saver account facility. A borrower must remember that the deposit in the current account will not generate any interest. Secondly, home saver loans are expensive as compared to regular home loans. Shetty says one must avoid hasty decisions as calculations of interest might be confusing. “Understand the calculation for a home saver loan and get clarity on additional charges you might have to pay. You must understand the terms and conditions clearly before rushing to opt for this product.” he says.

    As the home loan overdraft option offers higher liquidity and flexibility to the borrowers, lenders usually charge slightly higher interest rates for home loan overdraft products than their regular home loan schemes. “Thus, applicants should opt for the home loan overdraft option only if the potential of interest cost savings outweighs the higher interest cost incurred through the home loan overdraft facility,” says Chaudhary.

    Smart ways to prepay

    Existing borrowers have multiple prepayment options depending on their repayment capacity. For one, those who have seen improvement in their credit profile after availing home loans should compare the home loan interest rates offered through home loan balance transfer facility. Their improved credit profiles may make them eligible to transfer their existing home loans to other lenders at much lower interest rates.

    Secondly, one way is to pre-pay 5% of your outstanding principal each year. Typically, for a 20-year loan, doing this can bring down the tenor of your loan to 12 months, assuming a constant rate. You can choose to make lumpsum prepayments once a year or split and pay once every quarter. In this case, a borrower would prepay around a third of the loan as prepayment and the rest as EMIs. This allows you to get out of debt faster and leave you with more money for your investments.

    Borrowers should prefer the tenure reduction option as it leads to higher interest cost savings than the EMI reduction option. “The EMI in case of tenure reduction option would remain the same as earlier. Thus, only those borrowers who wish to reduce their EMI burden should opt for the EMI reduction option,” says Chaudhary.

    Another way is to prepay a certain amount over and above the EMI every month. “This accelerates your repayments, and you close your debts faster. You can also step up your EMI every year as your income increases. You can choose what prepayment plan works for you based on your current finances and the prepayment terms and conditions in your loan agreement,” says Shetty.

    INTEREST COSTS

    * Opt for it only if the potential of interest cost savings outweighs the higher interest cost incurred through the overdraft facility

    * Home loan borrowers can even park their emergency fund in the linked overdraft accounts

    * Interest rates for home loan overdraft products are higher than that on regular home loans











    Home loan: Don’t rush into a loan overdraft facility | The Financial Express

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    • Re : Home Loans & Related News

      Who can jointly take a home loan?




      Read more at:
      https://economictimes.indiatimes.com...campaign=cppst


      Synopsis Since the home loan quantum and rate of interest are key parameters for taking a home loan, having a joint applicant can increase the chance of a larger limit as the co-applicant’s income can also be taken into consideration.


      Getty Images


      Purchasing a home involves a great deal of financial planning as this is a big ticket investment. People usually avail home loans that offer repayment benefits as well as tax advantages. Financing through a home loan can be done up to 90% of the value of the property. Since the home loan quantum and rate of interest are key parameters for taking a home loan, having a joint applicant can increase the chance of a larger limit as the co-applicant’s income can also be taken into consideration.

      Who can jointly take a home loan?
      Co-applicants of a home loan need to be close relatives, such as a parent, spouse, sibling, son or unmarried daughter. The KYC documents and loan-related documents of all co-applicants have to be provided along with the income documents of all applicants taking the home loan.

      Benefits of joint home loan
      Apart from the higher limit that can be sanctioned for a joint home loan, many banks offer lower interest rate if the
      first applicant is a woman. There may also be an advantage of reduced stamp duty for home loan agreement or loan processing charges in case of women applicants. It is good to check such offers available at the time of availing the loan. A joint home loan also allows the coapplicants to share the burden of paying the hefty loan amount. One of the significant advantages of taking a joint home loan is that the co-applicants can individually avail tax benefits on the combined loan on principal as well as interest payment.

      Points to note
      • A co-applicant for a home loan need not be a coowner of the house.
      • A non-resident Indian (NRI) can also be a co-applicant for the loan.







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      • Re : Home Loans & Related News

        Planning To Buy A House In 2023? Take A Plunge


        By Sanjay Kumar Singh
        Get Rediff News in your Inbox:email
        End users should take the plunge despite higher home loan rates as these tend to be cyclical.





        Illustration: Uttam Ghosh/Rediff.com

        The housing market revived in 2022 after a long period of stagnation.

        As sales rose, prices moved up, albeit at a sedate pace.

        The positive momentum is expected to continue in 2023.

        Decisive revival


        Housing sales in the top seven cities scaled a new peak of 364,900 units in 2022, up 54 per cent year-on-year (Y-o-Y), according to ANAROCK Research.

        Sales surpassed the previous peak of 3.43 lakh units seen in 2014.

        Prices, too, moved up. The current average price across the country's top seven cities is Rs 5,991 per sq. ft, up 8 per cent over the past five years.

        "2022 saw the maximum yearly rise of 5 per cent in average property prices compared to the maximum 2 per cent Y-o-Y increase in the previous four years," says Prashant Thakur, senior director and head-research, ANAROCK group.

        The luxury segment revived in 2022.

        "Housing prices moved up in select markets, particularly in the luxury segment, owing to high demand post-Covid," says Shalin Raina, managing director, residential services, Cushman & Wakefield.

        Pent-up demand

        Demand shot up across cities.

        "The pent-up demand of the past two years and the need to own residential properties in the wake of the pandemic were two major drivers behind the strong revival," says Dhruv Agarwala, group CEO, Housing.com, ************** and ***********.

        The economy's resilience played a major part in demand.

        "The strong vaccination program coupled with job stability among a large section of corporate employees bolstered consumer confidence," says Raina.

        Affordability touched historically high levels in early 2022 due to the price stagnation of the preceding years and low home loan rates.

        And as the equity markets turned volatile, investors sought refuge in the stability of residential real estate.

        Non-resident Indians also entered the market in 2022.

        "They were driven by the desire to have a base in India they could move to in case they lost their jobs in overseas markets, as happened to many during the pandemic," says Pradeep Mishra, founder, Homents, a National Capital Region-based real estate consultancy.

        Rising input costs also contributed to the price rise.

        "Material costs rose due to curtailed production amid the pandemic and increased global shipping costs led by supply chain bottlenecks," says Anshuman Magazine, chairman and CEO-India, Southeast Asia, Middle East & Africa, CBRE.

        Steel, cement, labour, and fuel contributed to the rise in construction cost.

        "The overall greenfield construction cost increased 5-7 per cent in Q3 2022 y-o-y across all metro cities," adds Magazine.





        Momentum likely to continue

        Most experts expect prices to rise between 6 and 10 per cent in 2023.

        "Moderate price rise will keep demand buoyant," says Thakur.

        Inflationary pressures and the resolution of supply chain disruptions are likely to limit the increase in material prices in 2023.

        "However, the cascading effect of the current geopolitical situation and global inflationary pressures is expected to impact greenfield construction costs marginally in the future. We expect construction costs to rise 4-5 per cent in 2023 across cities," says Magazine.

        According to Raina, rising cost of land will also drive prices up in 2023.

        Home loan rates have risen by more than 200 basis points in 2022. So far, housing demand has remained resilient.

        "Mortgage rates could impact the market, especially mid-segment buyers, if they rise significantly over the next six months," says Raina.

        Magazine adds that the lagged impact of the ongoing monetary tightening could lead to moderation in both sales momentum and price rise.

        A global recession could affect jobs in sectors such as information technology and in turn impact housing sales.

        Take the plunge

        End users should take the plunge despite higher home loan rates as these tend to be cyclical (they will rise and fall a few times during a 15-20-year tenure).

        Moreover, we appear to be at the start of a price rise cycle in real estate.

        Continuing to sit on the fence means you may have to pay a higher price in the future.

        Investors may enter the residential real estate market but with at least a five-seven-year horizon.










        Planning To Buy A House In 2023? Take A Plunge - Rediff.com Get Ahead
        Last edited 2 weeks ago.
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        • Re : Home Loans & Related News

          Reducing liabilities: Using PF kitty to clear home loan?

          Explore other options to repay loan first. Your PF should be the last resort.


          January 11, 2023 1:45:00 am
          According to Section 68BB of the EPF Scheme, you can withdraw the EPF amount for repayment of your home loan.
          Reducing liabilities: Using PF kitty to clear home loan?

          Home loan interest rates have gone up after five repo rates hikes last year. This has led to discussions around what should borrowers do to reduce their interest payouts against their outstanding loan amount. One of the options borrowers can explore is to prepay their home loans either fully or partially using their Employees Provident Fund (EPF) corpus. Let’s find out whether EPFO funds can be used for prepayment.

          Is withdrawal allowed for repayment of home loan?


          According to Section 68BB of the EPF Scheme, you can withdraw the EPF amount for repayment of your home loan. However, the home must be registered individually or jointly in the name of the PF member. The applicant needs to have a minimum of ten years of PF contribution record. So, if you have taken a loan and want to use your PF fund to repay it, you can do it, but do consider all options and do the math before opting for this facility. The withdrawn PF amount is not taxed after the completion of continuous service of five years.


          Should you do it?


          Before using the PF corpus to repay the home loan, check all the aspects carefully. If you are in the early stage of your career, say in the mid-30s, you can use the PF corpus to repay the home loan because you have a long period at hand to replenish the fund in your EPF account. If the home loan interest is substantially higher than the EPF interest, you can use the EPF corpus to repay the home loan and save money towards interest outgo. On the other hand, if the interest on EPF is higher or equal to the home loan interest, you may avoid disturbing your EPF corpus.

          For example, if the current home loan interest is 8% per annum (p.a) but the EPF is offering an interest of 8.1% p.a., you may avoid withdrawing funds from your PF account to repay the home loan.

          When to use PF fund


          The PF corpus should be used as a last resort. If you are in a temporary financial crunch and expect to come out of it in the near future, you may use the PF corpus. However, if you are unsure when your financial problem will get over, you may first explore other options like increasing the loan tenure to lower the EMI or using FDs to manage repayment. The PF corpus is meant for your retirement planning, and you must keep it safe.

          If you have withdrawn PF due to a job change after five years or you are unable to transfer your funds from one company to another, then the money can be carefully used to either repay your home loan or reinvest where you are getting higher interest to compensate for the interest you are paying for your home loan.

          Pros and cons of using PF to clear home loan


          One of the benefits of repaying your home loan is that your property value will increase with time while your home loan liability will decrease. You can earn rental income or use your income for investing in higher returns generating instruments. Disadvantage of repayment using your PF money could be losing out on higher interest due to compounding. You can also miss out on accumulating a big corpus at retirement.

          Adhil Shetty, CEO, BankBazaar. com, says, “Using surplus funds to repay your home loan is often prudent, but EPF is not a surplus fund. It is a long-term investment meant specially for post-retirement expenses. However, if you have already withdrawn your PF corpus and cannot invest it elsewhere, you may use it towards loan repayment. That said, withdrawing your PF for anything other than a financial or medical emergency is not advised.”


          A Fine Balance
          • If you have contributed to EPF for 10 years, you can withdraw funds to clear home loan
          • You can go for it if the interest on loan is much more than the EPF interest
          • Remember you will lose out on building a big retirement corpus







          Reducing liabilities: Using PF kitty to clear home loan? | The Financial Express
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          • Re : Home Loans & Related News

            Good news for EMI payers? Jefferies expects home loan rates to peak soon

            4 min read . Updated: 13 Jan 2023, 10:54 PM IST Pooja Sitaram Jaiswar

            From April till December 2022 in fiscal FY23, RBI has hiked the repo rate by 225 basis points taking it to the highest level since August 2018 at 6.25%.
            • American investment banker and financial services provider, Jefferies highlighted that despite the rising interest rates scenario, domestic demand has shown positive momentum with an upside in the credit cycle and residential property market.
            The real estate sector has witnessed a treble factor in 2022 due to repo rate hikes. On one side, residential property prices have gone up along with home loan interest rates, and on the other side, sales momentum continued to stay strong. Going ahead, RBI is expected to continue hiking the repo rate however at a much smaller size which is likely to lead housing loan rates to its peak level. American investment banker and financial services provider, Jefferies highlighted that despite the rising interest rates scenario, domestic demand has shown positive momentum with an upside in the credit cycle and residential property market.

            From April till December 2022 in fiscal FY23, RBI has hiked the repo rate by 225 basis points taking it to the highest level since August 2018 at 6.25%. The reason behind the rate hike trends is to tame multi-year high inflation. With the rise in repo rates, banks and other financial services providers too followed suit by raising interest rates on term loans including home loans.

            Jefferies Christopher Wood said, "if the current focus in Asia is, naturally, on China and the reopening story, the Indian domestic demand story remains rock solid to GREED & fear. The latest data shows positive momentum in terms of both the credit cycle and the continuing upturn in the residential property market despite rising interest rates."

            In his latest edition of widely followed Greed and Fears, Jefferies' Wood pointed out that bank credit rose to 17.4% YoY in mid-December.

            As per the edition, in November, at home, both primary and secondary market property transactions remained strong. Also, primary residential sales in the top seven cities which are monitored by consultant PropEquity --- surged by 13% YoY in the three months to November, and were also up by 30% YoY in the first 11 months of the year 2022.

            Also, the second market property registrations in Mumbai and Delhi increased by a whopping 15% YoY and 101% YoY respectively in November.

            There has also been an upward tick in residential prices. As per Jefferies' report, the average selling price increased by an estimated 10% YoY in the top seven cities in 4QCY22.

            Furthermore, it mentioned that inventory in the top seven cities is at 10-year lows running at 19 months of sales.

            Going ahead, Jefferies expects another 25-50 bps rate hike from RBI. This could take mortgage rates to their peak in the current year 2023.

            In December 2022, India's retail inflation eased to 5.72% from 5.88% in November and 6.77% in October 2022. The December month print is the lowest reading since December 2021, also the second consecutive month where inflation has stayed below RBI's upper tolerance limit of 6%. This better-than-expected CPI in December escalates hope for further smaller size hike rates to a sooner-than-expected pause in repo rate going forward from RBI.

            Jefferies cited that RBI at its December meeting signalled growing confidence that inflation has peaked. Inflation was projected by the RBI to decline from an estimated 6.6% YoY in 3QFY23 ended 31 December to 5.0% YoY in 1QFY24.

            With RBI's policy repo rate at 6.25%, Jefferies’ head of India research Mahesh Nandurkar believes that there will be only another 25-50bp of tightening at most.

            That being said, Jefferies also expects the mortgage rates to peak out at around 9% this year, up from 8.4% at present. In Jefferies' view, this should keep affordability at not too-demanding levels even though residential property price rises have been faster than income growth since FY21 ended 31 March 2021.

            The housing affordability ratio, measured as the home loan payment-to-income ratio, is estimated by Jefferies’ India office to rise from the low of 27% in FY21 to 34% in FY23 and 36% in FY24. This remains below the average of 40% between FY01 and FY22, the edition said.

            Further, Jefferies’ India property analyst Abhinav Sinha expects residential sales volume in the top 7 cities to increase by 10% in 2023, following an estimated 25% increase in 2022, while house prices are expected to appreciate by another 8-10% this year.














            Good news for EMI payers? Jefferies expects home loan rates to peak soon | Mint (livemint.com)



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            • Re : Home Loans & Related News

              Your 20-year home loan is now 45 years long. Here is how

              The impact of the rate hike is much more significant if you compare the tenure of your loan


              Teena Jain Kaushal

              The impact of the rate hike is much more significant if you compare the tenure of your loan

              Following the rise in the repo rate, your home loan interest rate has risen by 2.25 percentage points since May 2022. The jump might not have pinched you if you continued paying the same amount of EMI without checking the revised tenure of your loan. But the impact of the rate hike is much more significant if you compare the tenure of your loan.

              Consider this: Your 20-year loan of Rs 50 lakh at 7 per cent has now turned into a loan of 45 years and 9 months, a jump of 25 years and 9 months. The calculation is based on the assumption that the rate got revised to 9.25 per cent after 6 months of taking the loan.

              In such a scenario when home loan rates have crossed the mark of 9 per cent, the concerning point is the tenure of the home loan that has already crossed the working age of 60 years for many borrowers. Given the steep rise in the tenure of loans, which is the default option for banks when the lending rates rise, it is important that you are aware of its implications in the long run.
              What is better to increase tenure or EMI? If you are already living on a tight budget it is better to increase your tenure without hurting your spending and savings.


              SPOTLIGHT


              But if you have a surplus then you have three options: First to increase your EMI, second to pre-pay with the surplus amount and third to invest the surplus amount somewhere else where the return is higher considering a home loan is the cheapest loan and comes along with tax benefits. Having said that if you choose to increase the tenure make sure you invest the extra amount for generating higher returns.

              For example, If you have Rs 5 lakh, and on average, based on your past investment experience, you can get a 12 per cent return on the amount invested. It makes more sense to invest Rs 5 lakh for that return, and continue the home loan with revised tenure.

              “If a borrower chooses to increase the repayment tenure of the loan, they can save the extra amount and use it for repaying another loan or can invest the same for a higher return which will balance out the increased interest burden,” said V Swaminathan, Executive Chairman, Andromeda loans and Apnapaisa.












              Your 20-year home loan is now 45 years long. Here is how - BusinessToday
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              • Re : Home Loans & Related News

                SBI hikes MCLR by 10 bps; concessions on home loan rates to end 31 Jan

                3 min read . Updated: 15 Jan 2023, 08:57 AM IST Edited By Pooja Sitaram Jaiswar

                SBI currently offers a certain concession on home loans under its festive offer campaign which is scheduled to end on January 31, 2023. (MINT_PRINT)
                • As per SBI's website, from January 15, MCLR on 1-year tenure is hiked to 8.4% from the previous 8.30%. MCLR on other tenures has been kept unchanged.
                State Bank of India (SBI) has hiked the marginal cost of funds-based lending rate (MCLR) on 1-year tenure by 10 basis points for home loans and others. The new rates have come into effect from January 15. Notably, SBI currently offers a certain concession on home loans under its festive offer campaign which is scheduled to end on January 31, 2023.

                As per SBI's website, from January 15, MCLR on 1-year tenure is hiked to 8.4% from the previous 8.30%. MCLR on other tenures has been kept unchanged.

                Hence, 2 years and 3 years MCLR stays at 8.50% and 8.60%. While 8% MCLR each is unchanged on one-month and three-month tenures. Overnight MCLR is unchanged at 7.85%.

                Home loan rates:

                Notably, the bank had launched a festive campaign over from October 4th just ahead of the Diwali festival. The offer will continue till January 31, 2023.

                In this festive offer, the bank is currently offering a concession from 15 bps to 30 bps in various home loan categories. It needs to be noted that SBI's home loan rates depend upon a borrower's CIBIL score. The higher your credit score, the lower are interest rate on home loans.

                Regular home loans including Flexipay, NRI, Non-salaried, Privilege/ Shaurya, Apon Ghar:

                SBI is offering a concession of 15 bps to borrowers on home loans to borrowers with CIBIL score greater or equal to 800 - taking the rate to 8.75% from the normal rate of 8.90%. On credit scores from 750 - 799, home loans have a concession of 25 bps to 8.75% from their normal rate of 9%. Further, on credit scores of 700 -749, home loans have a concession of 20 bps to 8.90% from their normal rate of 9.10%.

                However, the home loan rates on credit scores lower than 700 are unchanged. Hence, SBI's rate is at 9.20% on credit scores from 650 - 699, at 9.40% on scores of 550 - 649, and at 9.10% on NTC/NO CIBIL/-1.

                In its revised offer, SBI said, "Floor Rate: 15 bps lower than EBR (i.e. 8.75 %), EBR at present- 8.90%." Also, it added that the rates are inclusive of a 5bps concession available to women borrowers and 5 bps concession. Further, these rates are available for salary account holders for Privilege, Shaurya & Apon Ghar as well.

                The bank also added, "Premium of 10 bps for loans up to 30 lacs for LTV >80% & < =90% shall continue to be charged hitherto."

                Top-up home loans:

                There is a concession of 15 bps each on credit scores from 700 to equal to or greater than 800 on top-up loans.

                Under top loans have an interest rate of 9.15% on credit scores of greater or equal to 800 from the normal rate of 9.30%, while the rate is 9.25% on scores of 750 - 799 from the normal rate of 9.40%, and the rate is at 9.35% on scores of 700 -749 from the normal rate of 9.50%.

                On credit scores below 700, the rates are kept unchanged. Hence, the bank continues to levy 9.60% on credit scores of 650 - 699; 9.90% on scores of 550 - 649; and 9.50% on NTC/NO CIBIL/-1 scores.

                Loan Against Property:

                SBI gives a concession of 30 bps on credit scores from 700 to equal to or greater than 800. Accordingly, the rate is at 10.35% versus the normal rate of 10.65% on CIBIL greater or equal to 800, while the rate is at 10.45% versus the normal rate of 10.75% on scores from 750 - 799 score; and the rate is at 10.55% versus the normal rate of 10.85% on scores of 700 -749.

                Other rates are unchanged. The bank continues to impose 10.95% on credit scores of 650 - 699; 11.05% on 550 - 649 scores; and 10.85% on NTC/NO CIBIL/-1 scores.










                SBI hikes MCLR by 10 bps; concessions on home loan rates to end 31 Jan | Mint (livemint.com)
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                • Re : Home Loans & Related News

                  Should you increase SIP or Home Loan EMI: Which is a smart financial decision?

                  3 min read . Updated: 17 Jan 2023, 05:44 PM IST Vipul Das

                  By increasing your SIP, you'll gain the advantages of higher inflation protection, faster goal achievement, and assistance in growing your corpus to a bigger size.
                  • Both taking a home loan and starting a mutual fund SIP fall under the category of personal financial decisions that are based on individual requirements.
                  Both taking a home loan and starting a mutual fund SIP fall under the category of personal financial decisions that are based on individual requirements. By going the SIP path, you may invest monthly starting at a smaller amount at regular intervals, which will automatically result in accumulation that could lead to long-term fortune. In contrast, the advantages of taking out a home loan include helping to pay for your dream home while also saving money on taxes, enhancing credit limits, enjoying capital appreciation, and avoiding paying rent. Financial advisors advise that you should, generally increase your SIPs annually, by at least 10%. By increasing your SIP, you'll gain the advantages of higher inflation protection, faster goal achievement, and assistance in growing your corpus to a bigger size. However, let's use the scenario where you have a home loan and a mutual fund SIP. In this situation, which should you increase: the EMI on your home loan or the SIP amount?

                  Based on an exclusive interview with CA Manish P Hingar, Founder at Fintoo, the spokesperson said “A systematic investment plan (SIP) is a way to invest a fixed amount of money regularly in a mutual fund scheme while increasing the home loan EMI means increasing the amount you pay towards repaying your home loan each month. Deciding between the given options as to which is better, depends on your personal financial situation and goals. It is a good idea to consider your current financial situation and whether you are able to afford the additional expense of increasing your EMI. Additionally, you should also consider the rate of interest on your home loan, as well as the expected returns on your SIP investment."


                  Situation 1: Increasing Home Loan EMI


                  CA Manish P Hingar said suppose, you have taken a home loan of ₹50 Lakhs for a 20 years tenor at 8.5% interest p.a., your monthly EMI will be ₹43,391, and you will be paying a total interest of ₹54,13,897.

                  With your annual increment in your income, consider increasing your EMI monthly by 5% every year this will help you to save up to ₹19.5 Lakhs on interest costs and reduce your loan tenure by approximately 7.5 years.

                  Also, as per income tax rules, you can claim a tax deduction of up to ₹1.5 lakhs under Section 80C for the principal amount paid in a financial year and can claim up to ₹2 lakhs on the interest amount under Section 24(b) every year.


                  Situation 2: Increasing SIP


                  CA Manish P Hingar said suppose you have started a SIP of ₹40,000 per month in an equity mutual fund for 20 years, assuming a CAGR of 12% and with an annual increment in your income, you decided to step up your SIP by 5% every year then you will be able to create a corpus of ₹5,49,50,493 which is ₹3,90,78,835 as potential capital gains on your investment of ₹1,58,71,658 versus a potential gain of Rs 3,03,65,917 if you don’t step up your SIP every year and that is a difference of ₹87,12,918 in the gains.


                  Conclusion


                  CA Manish P Hingar said “The above two situations illustrate that, though stepping up your EMI helps you to save interest costs and reduces your loan tenure but investing in a mutual fund SIP and stepping it up gradually every year creates a significant corpus to meet your future financial goals. It is important to consider the rate of return at which you are planning to invest versus the rate of interest payable on the loan. Having said that, if your primary goal is to save for the long-term, such as retirement, then investing in a SIP may be a wise decision. However, if your priority is to pay off your home loan as quickly as possible, then increasing your EMI may be a better choice."










                  Should you increase SIP or Home Loan EMI: Which is a smart financial decision? | Mint (livemint.com)
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                  • Re : Home Loans & Related News

                    Budget 2023: Real estate sector seeks increased tax rebate on housing loan rates, LTCG rationalisation

                    Real estate sector seeks higher income tax rebate on housing loan interest rate. Raising the Rs 2 lakh tax rebate to at least Rs 5 lakh expected to generate healthier housing demand.

                    January 21, 2023 10:25:37 am
                    FM Nirmala Sitharaman to present Union budget on 1 February. Here is what the real estate sector expects from the budget
                    By Shrinivas Rao

                    The Union budget to be presented on February 1 holds much significance, especially this being a run-up to the electoral year in 2024. While the budget is expected to focus more on issues that are tuned towards assuaging voters, there are a host of industry matters that need timely attention from the government in order to accelerate the pace of growth post the pandemic. The wish list of the real estate sector has remained much the same in the past few years, with the long-standing demand of allocating infrastructure status to the industry, tax breaks, and provision for a single-window clearance being some of the key expectations.

                    Besides, with the cost of construction assuming significant proportions in the last few years, a reduction in GST of input materials is widely anticipated by the industry stakeholders as it would greatly benefit the supply side. Expectations also abound regarding higher tax deductions for homebuyers in order to provide continued impetus to the residential market. Raising the INR 2 lakh tax rebate on housing loan interest rates to at least INR 5 lakh would generate healthier housing demand, most notably in the affordable and mid-income housing segment.

                    Also, a further hike in repo rate should be reconsidered to avert dampening homebuyers’ sentiments while the provision of additional funds put under the stress fund SWAMIH would imply improved market traction, leading to more stuck projects seeing completion.

                    The industry also expects to see the rationalization of capital gains tax, the rate reduced from the existing 20%, as well as the removal of the INR 2 crore cap on capital gains for reinvesting in two properties. Finally, with India committing to net zero carbon emissions by 2070, we expect the budget to initiate structured plans for sustainable development in the industry.














                    Budget 2023: Real estate sector seeks increased tax rebate on housing loan rates, LTCG rationalisation | The Financial Express
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                    • Re : Home Loans & Related News

                      ‘Home loans will become expensive’

                      While the demand for homes is unlikely to taper in the near term, financing a purchase will become increasingly costly, Kotak Mahindra Bank joint managing director Dipak Gupta tells Ajay Ramanathan. Excerpts.

                      Written by Ajay Ramanathan
                      Updated: January 23, 2023 8:08:22 am
                      Dipak Gupta, Joint MD, Kotak Mahindra Bank



                      With interest rates inching up, there will come a point when home loans will become expensive for borrowers, says Kotak Mahindra Bank joint managing director Dipak Gupta. While the demand for homes is unlikely to taper in the near term, financing a purchase will become increasingly costly, he tells Ajay Ramanathan. Excerpts.

                      Retail microfinance loans have grown sharply in the December quarter. How will you approach this segment going ahead?

                      For us, it will be limited and cautious. There is opportunity there and it is a very small base for us; total base for us is about Rs 5,000 crore. It will grow, it is an attractive area. But in the overall context, it will still be small. We do microfinance through our subsidiary BSS Microfinance, which is our business correspondent. They do the sourcing and we do all our sourcing through them. We are largely in Karnataka, southern Maharashtra, some parts of Gujarat and Uttar Pradesh. We basically are in these areas and we do not intend going significantly outside these areas.

                      What will you be focusing on growing within the retail portfolio?

                      Retail for us is basically home loans on the secured side. On the unsecured side, it is basically personal loans, microfinance, and credit cards. We expect both segments to be growing well. The home loan, and loan against property side as well as the unsecured side. The consumer side is growing at more than 20%. That is a healthy growth rate at this point of time.

                      How do you see home loans shaping up?

                      I think the demand on the home loan side is pretty robust. What we have to watch out for is interest rate. Interest rates have moved up quite a lot and at some point of time, the home loan itself will become expensive for customers. That is what we have to watch out for. We probably have not reached that stage yet. There is significant demand. People at the middle income level are very keen and anxious to get a home, and hence a home loan. I do not see that demand coming off in the near term. Finance will become increasingly expensive.

                      At what point of time will bankers get jittery on home loans?

                      It is a difficult question to answer. Let us say for example that overall interest rates move up by another 100 basis points. Today, a good AAA-rated customer will typically get a home loan at around 860-865 basis points. Another 100 basis points will make it 960-965 basis points. At that point, you take a 15-20 year loan at 965 basis points, it is an expensive proposition. It will start impacting demand at that point of time.

                      Do you have a target on net non-performing asset ratio?

                      Well, we want to keep the net non-performing asset (NPA) ratio as low as possible. You have to look at the net NPA in two parts. One is secured portfolio; even if the secured side is about 1%, it is okay. On the unsecured side, your net non-performing asset ratio has to be close to zero because ultimately, recoverability is very low. On the secured side, recoverability is still reasonable, which is why you can do with a 1% net NPA. But on the unsecured side, it has to practically be about sub-0.25%. If you average the two out, a net NPA of about 0.5-0.75% is okay. That will give you a provision coverage ratio of somewhere around 75-80%, which is okay.

                      How do you see the loan-deposit story playing out going ahead?

                      Loan-to-deposit is less of a worry. What you should really be watchful of is credit-to-deposit ratio. A credit-to-deposit ratio of somewhere between 85-90% is appropriate. It also depends on your capital adequacy. All of us are at capital adequacies of close to 20%. Our common equity tier 1 (CET1) ratio is practically 20%. That also gives you additional comfort. So at 20% CET1 ratio, a credit deposit ratio of 85-90% is okay.

                      Would it now be more conducive for banks to source funds from the debt market given that term deposit rates have inched higher?

                      Normally, funding from the market happens either in the form of certificate of deposits, which is for a tenor of one year, or it happens in the form of refinance instruments. Let us say from a Small Industries Development Bank of India or the National Bank for Agriculture and Rural Development, that type. This typically happens for a tenor of three to five years. Let us say it happens against infrastructure bonds. That funding is good because that gives you stability. If that cost is appropriate, you should always go in for that. Funding from the market in the form of bulk deposits is what you should be careful about. That is hot money and it is rarely available beyond one year. You should always be worried about bulk deposits. If interest rates move up, they will just take it out. It is chunky movement. That is why you need to be careful.

                      When do you see private capital expenditure picking up?

                      Every time someone has asked me this, I say at least 18 months away. So that still remains. I think it is still some distance away. Capacity utilisation levels are still very low.

                      How do you view startups from a lending point of view?

                      We normally are not in that segment. From a credit quality point of view, it is uncomfortable. You may fund the company against its deposits, that is possible. But pure unsecured funding to startups tends to be a risky proposition, credit wise. Our startup loan portfolio is negligible. Even if it is there, it will be against deposits from the startups.

                      Will we see lenders focusing more on the secured lending going ahead?

                      I think generally if you see, it will be unsecured for some time because at this point of time, the credit outlook is very benign and it is unlikely to change for the next six months or so. I would still expect unsecured to be high. What happens is most AAA customers will always borrow unsecured. You lend to a Tata or a Reliance, it is practically always unsecured. From a risk point of view, it is not risk-free. These are large exposures, mind you. I think for some time, the unsecured piece with remain. As long as the credit outlook looks benign, you will see more of unsecured than secured. Right now, we are talking of a risk-off scenario.

                      There is a saying in banking that ‘bad lending is usually done during good times and good lending is done during bad times’. How relevant is this today?

                      This is a very early stage. In the early stage, everyone is hungry for fresh assets. I think it looks okay for the next two to three quarters at least. It will start happening when growth is going to be high and demand is also going to be high. When the capital expenditure cycle starts for example, bankers want growth and asset availability is limited. That is when all these misdemeanours happen.










                      ‘Home loans will become expensive’ | The Financial Express
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