SDB Club Benchmark Real Estate

many banks and financial institutions are ready to offer mortgage loans to people with good credit history. Moreover, they are ready to offer different types of mortgage loans that suit different people with different needs. The following points present some of the different varieties of such loans that banks and financial institutions offer :

1. Term Loans with Fixed-Term Repayment : These are normal term loan schemes where you get a loan for a fixed duration. The rate of interest can be fixed or can vary based on some benchmark rate.

2. Overdraft-Loan : These are loans in the form of current account overdraft where surplus funds can be parked and therefore interest burden can be minimized. Every month, the overdraft limit is reduced as per the Equated Monthly Installment (EMI) amount.

3. Flexible-Loans : These are loans with a fixed rate of interest for one part of the loan and a floating rate of interest for the other part. It can be designed as per the convenience of the applicant and up to what is allowed under the rules of the bank/financial institution

4. Fixed Interest Loan: These are loans with a fixed rate of interest for the entire duration of the loan. It is well protected against market rate fluctuations. Generally, these rates are somewhat higher than the market rate.

5. Floating Interest Loan: Floating rate of interest is the rate that is linked to the Central Bank‘s (Federal Reserve) prime lending rate. If the Central Bank increases (decreases) the prime lending rate, then the bank/financial institution also increases (decreases) its interest rate.

Generally, it is advisable to go for floating rate of interest as the rates will be lower when the economy.

Mortgage loans can be availed from a bank/Financial Institution (FI) without giving any specific reason.

Mortgage loan can be availed if the borrower
1. is between 18 and 60 years old.
2. has a regular, steady source of income.
3. owns and possesses a valued property with clear good marketable title (OR) has a spouse/parent/relative/friend, with a property with marketable legal title on it, who can come as a guarantor and pledge their property for the loan availed by the borrower.
4. is able to pay an Equated Monthly Instalment (EMI) that doesn’t exceed 50% of the borrower’s Net Monthly Income (inclusive of all liabilities to be serviced). In case of another person standing as a guarantor, their NMI will also be taken into consideration.
5. can repay the loan in about 7 to 10 years.

The bank/FI will satisfy itself as to the value of the property. The loan value may not usually exceed 50% to 75% of the market value of the property which is to be mortgaged.

The mortgage loan can be availed in two ways :

Firstly, it can be availed by demand/term loan method wherein the entire eligible loan will be sanctioned and released. It can be deposited in the checking account of the borrower to withdraw and use for any purpose. The interest commences immediately and the EMI is to be payable reckoning from the date of loan released.

Alternatively, the borrower can use the overdraft facility. This facility combines the loan and checking account. So the borrower can issue checks up to their Drawing Power (DP). Drawing Power is the maximum amount that can be drawn from an account including the mortgage loan. On the monthly due date of EMI payable, the DP will be reduced by an amount equal to the EMI. The advantage of using the overdraft facility is it reduces the interest incidence. The monthly deduction of EMI ensures closure of the loan on the due date. In case the borrower overdraws, it has to be regularized. Otherwise the bank/FI will recall the loan. This facility will especially be useful to people who do business.