Loan on property Investment

The main topic for this article is property investment. As we know, banks have progressively tightened their lending criteria in the wake of the GFC, investors are getting frustrated because they can't source finance for their next purchase. In this article, I will discuss about ways to break through the credit ceiling and increase our serviceability limit.

The first step which is consolidates unsecured debts into your mortgage. Typically, unsecured debts such as credit cards and personal loan have short repayment period. This method is use to force us to reduce our debts with high cost monthly repayments. These high repayment levels will cause the bank's ability to repay calculation for our mortgage. The reason is because unsafe debt will limits the amount of uncommitted funds we have available to repay the proposed mortgage. Rolling our personal loan and other debts into our mortgage can help us because they won't show as other financial commitments. Anyway, it will stretch the debt over the life of your Loan on property term, creating more interest in the long run.

The second step is by reducing excess credit, especially Loan on property. It is believe to say that if we have any credit cards with limits that exceed our need for credit, action that will be received either cancel the limits or reduce the limits down to a manageable level. When there are lenders assess our ability to repay a mortgage, they might assume that our credit card will be fully drawn up to its limit.

For knowledge that most credit card supplier make a statement that three percent of the debt amount be repaid every month, the unused limits can be detrimental to your mortgage borrowing capacity Loan on property. Every $100 in credit card limits adds $3 per month to our monthly expenses and reduces our ability to borrow.

It may sound very good but all the lenders will look at the credit limit on our card or cards as a liability that we may have in the future, even if we don't owe a solitary cent currently.

Currently, if we have a card with an $800 limit and another with a $400 limit, a lender will write down $1200 as a debt under our name. Reducing our credit card limit by $1000 may increase your calculated monthly disposable income by $30, which has the effect of having a net pay rise of $360 per annum."

Article Source: http://EzineArticles.com/4432090

Loan on property- For Greater Flexibility and Freedom

Each one of us needs money at one or the other time in our life. You may wish to buy a new home. One can fulfil his or her personal desires by withdrawing money from the savings account. But, do you think it is right to withdraw the savings when an efficient alternative is available that is taking a loan from the loan market. You can use the savings in future when some emergency occur. Now, the question arise that which loan to choose from the infinite number of loans existing in the market. If you own a property or want to buy one, Property loan will be the perfect option for you.

Loan on property are secured against a property. Property put as collateral can be a residential or a commercial property. The loan providers grant more flexibility to the borrower and freedom to use the money as they wish. A borrower can use a property loan to buy a new car or to pay for much needed home improvements.

Loan on property offer borrowers the opportunity to enjoy the benefit of flexible repayment option, low interest rate and a longer repayment term. Property loans are available with the term facility of up to 10 years. The rate of interest on a property loan is low as it is a secured loan.It accounts for a low monthly instalment which is much cheaper than the personal loans.

Commercial property is the property which is used for business purposes. It is commonly known as business property such as office buildings, stores which are intended to operate with a profit. This loan is similar to secured business loans.

Property loans are generally allowed against a residential property. When a borrower puts his home as collateral against the loan, the property loans take the form of a mortgage. A property loan secured against a home is specifically designed to facilitate the UK residents to provide financial support to them so that they can purchase a home. This type of property loan is popularly known as residential property loan.

The amount you can borrow with a loan against property depends on the equity in your property. Equity is defined as the difference between the market value of the property and the claims held against it.

There is one drawback of a property loan. It involves the risk of repossession for a borrower. The lender will repossess the property kept against the loan if the borrower defaults on the monthly installments or the loan amount.

A bad credit rating cannot stop you from borrowing a Loan on property. You just need to put your property as collateral to borrow money from the loan market. So people who have faced county court judgments or bankruptcy can also apply for this loan.

There are number of lenders who provide loan against property. With the technology growing day by day, entry of the online lenders has widened the growth scope of the finance market. Banks and financial institutions are now identified as traditional lenders. Online lenders give the convenience of applying for an online loan and try to keep you away from all the hassles. You can apply for an online Loan on property from your home or office's computer which is equipped with internet.

Article Source: http://EzineArticles.com/124163

Investment Property Loan Types

An investment loan on property is a loan for non-owner occupied property. There are two main classifications of investment property mortgages. These classifications include: commercial and residential. A commercial property mortgage is for a dwelling that contains 5 or more units and/or is zoned as commercial. A residential investment mortgage is for a dwelling that is one to four units and is zoned residential. Commercial and residential mortgages are two completely different loan types and have significantly different qualification standards. The following is a basic description of each mortgage type.

Residential loan on property

Residential property investment mortgages have similar qualification guidelines as standard owner-occupied mortgages. Although, they do have higher down payment and credit score requirements. Below is a summary of the general guidelines for residential investment mortgages.

• Credit Score Requirement - The minimum credit score requirement is typically 680 or above for investment mortgages.

• Debt to Income Ratio - Typically, the debt ratio limit for an investment mortgage is 40% of the borrower's verifiable income. Besides W2 income, the borrower's last 2 years tax returns will be needed to calculate the income that can be used from other rental properties or other sources of income.

• Down Payment - Investment property mortgages require at least 15% down, but the down payment requirement increases with lower credit scores and the greater the number of units in the property.

• Income - Lenders typically will only use rental income if the borrower has a two-year history of owning rental properties. This is usually documented via the tax returns and schedules.

Commercial loan on property

Commercial loans typically have higher rates, greater fees, and shorter terms than residential mortgage. The two most important factors for lenders on this loan type include: a positive cash-flow for the property, and the borrower's past commercial property management experience. Below is a summary of the general guidelines for residential investment mortgages.

• Credit Scores Requirement - The minimum credit score requirement is typically 720 to 740 for a commercial loan.

• Down Payment - The minimum down payment for a commercial mortgage is typically 30% or greater. When refinancing, the maximum equity position is usually 70% of the appraised value of the property.

• Debt Service Coverage - This is a ratio used by lenders to calculate the property's ability to generate cash flow. It is a calculation comparing the net operating income minus the mortgage payment and the other debt payments.

Article Source: http://EzineArticles.com/9079856

Home Loan

Be Sure on Choosing Your Home Loan Lender

Investment strategies in the real estate sector are becoming popular in the recent times. However these deals require hard work as there are lots of hassles that are involved while dealing with the real estate agents, lawyers and potential buyers. Above there is a need for huge amount of funds before finalizing on a real estate deal. Thus it is always better to a have good market survey prior to your property purchase.

Going on the fund side, there are many banks and housing finance companies that offer home loans which are easily availed. But to do a bit of market research is beneficial as it will keep you well informed about the changes that will you help in getting flexible loan terms and low interest rates. A good online research on home loan comparison would prove useful on deciding the best lender for you.

Today the market is floated with a number of home loans that are offered both at fixed and floating interest rates. Fixed rate home loans are availed with a view of fixed interest rate over the loan tenure. If one opts for this category of home loan then he need not worry about fluctuations in market interest rate.

Fixed rate Property Loan is not dependent on the rise in interest rates. On the other hand, there are floating rate loans where the interest charged varies with the market interest rate. These loans are also known as variable or adjustable rate home loans which generally start with both low interest rate and low EMI. But with a rise in interest rate, your monthly payment-EMI- also rises.

Buying a home is what everybody aspires today and arranging funds for the same is not a difficult task but to get the best deal may be tough. The competition today is rising with an increase in the number of banks and financial companies. These institutions are offering loans that are convenient in repayment through various options of monthly installments. All of them make every effort to provide the borrower with the best service.

These organizations are also offering additional facility now-a-days. Even if you do not have a good credit history, you can opt for home loans. So you need not fear about a loan being sanctioned due to your late payments, bankruptcy, discharge, etc. However these loans are offered at higher interest rate to customer with bad credit history.

So one just needs to sit in front of a computer with internet and compare the rates and services provided by the different lenders in the market. You can just compare the various quotes and find out which one cost you less.

This method is appropriate for people who dream to own a home. Online research facilitates you with various loan options and thereby helps in choosing the right option for you. So with high-speed internet access available with ease, searching for a home loan is no more a difficult task.

A proper comparison between the rates and schemes offered by differ lenders will definitely prove beneficial at a time of your property purchase.

[Source: http://ezinearticles.com/?Be-Sure-on-Choosing-Your-Home-Loan-Lender&id=1701160]

Terms and Conditions While Adding Co-applicants in a Home Loan

While applying for the home loan, you always have the option of adding another borrower or a co-applicant or a joint applicant. A co-applicant is a person who applies for a loan along with the main borrower.

Below are some of the points to take care while adding a co-applicant:-

1. Spouses (husband and wife)

It is very common to have spouses as co-applicants in a home loan calculator and this helps in many ways. In case both are earning, their combined income can be used for calculating eligibility. Secondly, both can claim tax benefits in proportion of the EMI they pay and increase their combined tax benefit.

2. Siblings:

Two brothers can be joint applicants in a loan for the same property if they stay together. However, typically a brother and a married sister cannot be co-applicants in a home loan in most banks.

3. Father and Son:

Father and son can be co-applicants in a Loan against Home with each other even if the property is owned by only one of them.  Incomes of both father and son can be considered for determining eligibility. However, in this case, loan tenure may have to be restricted based upon the father’s age.

4. Business Partners:

Two or more people unrelated by blood but partners in the same business entity (or controlling shareholders and directors in the same company) can act as co-applicants with each other for a loan. 

The income of the partnership or company they jointly own can be added to their individual incomes to arrive at eligibility. This is however subject to the condition that they co-own the property.

Note that distant relatives, friends and unrelated persons or entities cannot be added as co-applicants. 

Documentation for co-applicant:

A joint applicant or a co applicant is equally liable for the loan as the main applicant. Accordingly, same set of documents (KYC, income) are required for a co-applicant as for an applicant.

Impact on CIBIL:

Note that the co-applicants’ CIBIL Score and CIBIL Record will reflect all loans in which he/ she is an applicant or a co-applicant irrespective of who pays the EMI.

[Source: http://myloancare.blogspot.in/2014/12/what-are-terms-and-conditions-while.html]

            

How the Stock Market impacts Mortgage Rates

Although inflation expectations are the primary factor that influence the direction of mortgage rates on a day-to-day basis the stock market can also have an impact.

To understand how this relationship works its first important to understand how mortgage rates are determined. Mortgage rates are entirely determined by the price of mortgage-backed bonds (MBS's). MBS's are bonds that are issued by Fannie Mae & Freddie Mac that are backed by the interest paid by mortgage holders. Like the stock market there is an exchange where MBS's are traded.

There is an inverse relationship between the price of MBS's and mortgage rates. When the prices of MBS’s increase mortgage rates drop and vice versa.

So, to understand how the stock market can influence Mortgage Loan Interest Rates we have to understand how they impact the price of bonds. Stocks and bonds compete for the same investment dollar. In other words, an investor with money to invest has to make a decision to invest their money in either the stock market or in the bond market (it should be noted that there are other investment options but these two classes are the primary vehicles for investment capital).

For an investor stocks are generally thought to provide higher returns over time but also come with greater volatility. Conversely, bonds tend to have lower returns over time but have less volatility. Because bonds tend to provide low volatility with modest returns the bond market can often act as a "safe-haven" for investors who sell their stock positions.

Therefore, in general, when the stock market goes down it is a sign that investors are selling stocks and shifting their capital into bonds. This boosts bond prices and drives mortgage rates down. Conversely, when the stock market rallies it is a sign that investors are selling bond positions in order to shift capital into the stock market. The greater supply of bonds on the market drives prices lower and pushes mortgage rates higher.

It's important to understand that there are a myriad of factors that impact mortgage rates on a day-to-day basis. Inflation expectations & technical trading patterns are two of the primary factors that we monitor. However, in the absence of new information on these two topics it's not uncommon for mortgage rates to be impacted by the stock market in the aforementioned manner.

[Source: http://mortgagerateupdate.blogspot.in/2008/05/how-stock-market-impacts-mortgage-rates.html]

Loan against Property in India: Must-Know Advantages

In times of financial trouble, a loan can act as a life savior. One loan that can be a solution to numerous financial problems is loan against property (LAP). Loan Against Property is a secured loan which is provided against the mortgage of a property.

LAP can be applied by people who are self-employed and are in need of a huge amount of money. By applying for LAP, they can secure funds without renting or selling out their property.

When once applied for LAP, the property of the borrower is kept as a mortgage. The loan amount varies around 40-70% of the market value of the property.

Advantages of Loan against Property in India

Can Be Obtained Easily

Obtaining Loan against Property is not much of a hassle. Once the borrower presents security (read – property) and gets an approval on it, loan sanction doesn’t take too much time.

Can Help in Fulfilling Various Purposes

Loan against Property can be used for a number of purposes, such as:

To meet the financial needs of a commercial activity, trade, or for expansion of business.

To suffice a family member’s educational expenses.

To make repairs, extend or renovate an already existing commercial or residential property.

For urgent and unavoidable medical treatments.

Interest Rates Are Low

Loan against Property can be one of the best options to opt for as the interest rates of this loan are comparatively lower. Usually the interest rate of Loan against Property ranges between 11.5% – 13.75% while for personal loan it hovers between 16% – 20%.

Longer Repayment Tenure

Nothing can be more beneficial for a borrower than getting longer repayment tenure. Loan against Property offers the borrower longer repayment tenure, generally between 10-15 years which eventually eases out the burden of EMI(s).

Optimum Use of Idle Property

Many people own a property that lies unused for a long span of time. To make optimum use of such property, you can secure a loan against it. This allows the borrower to retain ownership of the property, and at the same time have an opportunity of acquiring a loan at a low interest rate too.

Continuous Ownership

In case you acquire the loan, but are not able to repay the amount, you have the flexibility of selling off the property and settling the loan amount. This gives you a chance to continue the ownership of the loan secured, along with the benefit of having surplus cash as well.

Flexibility of Loan Amount

Another benefit of Loan against Property is the possibility of securing a larger amount of funding. The lenders allow flexibility of loan amount, depending on the type and value of the property.

[Source: http://www.biz2credit.in/blog/2015/07/28/loan-against-property-in-india-must-know-advantages/]

Personal loan or loan against property: Which one is better?

What is personal loan? Personal loan as the name suggests, is an unsecured loan that you can raise from bank for your personal use. 

There are no restrictions on the proceeds of the loan amount – you can use it to pay off your debt, construct a house, set up your business or even for your wedding etc. What is loan against property? A loan against property (LAP) is a secured loan disbursed against the mortgage of the borrower’s property. It can be residential property (either self-occupied or a rent), commercial property or even a piece of land.

Just like a personal loan, there is no restriction on using the proceeds of an LAP. You can use the LAP proceeds to finance your child’s education and wedding, to build a home for yourself, to meet medical expenses, to buy personal or commercial vehicles and even to finance your business. How to choose between the two?

Processing time: As a loan against property is obtained by mortgaging the borrower’s property, the lender has to verify related documents before disbursing the loan. The lender may also undertake technical study to confirm the ownership of the property and find out its market value. In addition to this, you will be asked to submit documents supporting your income to judge your loan repayment capacity.

This entire process can take anywhere between 15 to 30 days and hence, Loan against Property is not suitable for those seeking quick disbursal of loans. Personal loans on the other hand, do not require any collateral. Lenders usually judge your application on the basis of your monthly income and credit score and hence, your application may get approved within 7 days.

Interest rates: Being a secured loan, the interest rates of LAP is usually lower than that of personal loan. This can be anywhere between 11% and 16%. In comparison, interest rates of personal loan can be as high as 24%.

The main factor determining the interest rates in personal loans is the borrower’s credit score. LAP will suit those who are unable to get a good personal loan deal because of poor credit scores.

Tenure of loan: In case of LAP, the loan tenure can be as high as 15 years whereas the upper limit of personal loan is usually around 5 years. 

The longer tenure of loan repayment brings down EMI payouts, which increases the affordability of big-ticket loans. However, the flip side is that the longer tenure would also result in higher interest payout.

[Source: http://www.moneycontrol.com/news/loans/personal-loan-or-loan-against-property-which-one-is-better_6365581.html]