The normal rule is that banks and housing finance companies easily provide NRI home loans up-to 85% of the cost of the residential property. However, the upper limit of the loan amount sanctioned and the down payment will depend on various factors and can also vary from lender to lender.

For example if you take a NRI housing loan for purchase, construction, extension or renovation of a new house or flat from ICICI Bank, it will happily finance 85% of the total cost of the property. However, if you take a NRI home loan for purchase of a plot of land for residential use, the maximum amount of home loan financed will be 75% of the total cost of the property.

Again there are special schemes offered by banks, which break all the rules, like the one from Citibank, which provides a NRI home loan up to 89% of the property value if the loan value is less than or equal to Rs. 50 lakhs.

Here is a roundup of the maximum and minimum loan amounts offered by various banks for their NRI home loans:

Minimum loan amount
SBI offers a NRI Home Loan for a minimum of Rs. 3 lakhs ICICI Bank gives a NRI home loan for a minimum of Rs 5 lakh. ICICI bank offers a minimum of Rs. 10 Lakh for loan against property Citibank offers a NRI home loan for a minimum of Rs. 2.1 lakhs

Maximum loan amount
SBI offers a NRI housing loan for a maximum of 60 times NMI ( Net Monthly Income) or 5 times NAI (Net Annual Income) for applicants below 45 years of age and 48 times NMI or 4 times NAI for applicants above 45 years of age SBI special maximum loan amount terms:
Maximum loan amount for repairs and renovation: Rs.10 lacs Maximum loan amount for purchase of plot for construction of house : Rs.20 lacs Aggregate repayment obligations should not exceed 50% of NMI or NAI
ICICI Bank gives a NRI home loan for a maximum amount of Rs. 1 crore. Citibank provides a NRI home loan for a maximum of Rs. 5 crore. This amount is available for a loan of 15 years tenure. The maximum amount for 20 year NRI home loan from Citibank is Rs. 1 crore.

As per a circular issued by the RBI on 31st January, 2007, if the loan is against the NRI’s NRE and FCNR accounts, the maximum loan amount cannot exceed Rs. 20 lakhs.

From July 1, the banking sector moved into this new interest rate regime. Prabhakar Sinha explains how it can benefit borrowers

Anew interest rate regime kicked off when the country moved to the Reserve Bank of India (RBI) mandated system of base rate, which is likely to be a more objective interest rate benchmark than the one currently followed – benchmark prime lending rate (BPLR) system. It is also believed that compared to the BPLR system, the base rate regime will bring in more transparency in fixing a rate in the banking system.

In the new regime, interest rates will be benchmarked to base rates with all the lending rates linked to the respective base rates of each bank. This is with effect from July 1. The interest rates on your loan have been fixed against the benchmark rate. Assuming that your present interest rate is nine percent and the bank has fixed the base rate at 7.5 percent, your interest rate will be termed as 1.5 percentage points higher than the base rate. Banks did not hike the mortgage rates, instead, they just pegged them as against their respective base rates. In fact, the new system is likely t
In fact, when the rates are rising, they cannot change it immediately but will have to wait for the new quarter to start. This system has already benefited existing customers. Most banks have announced the base rates on July 1 and 2.

Just after their announcements, the RBI increased the policy rates to make the funds costly. But, now banks cannot change the base rate for the next three months. So, the existing customers will continue to pay the present rate.
Suppose your home loan is at nine percent and the base rate of your bank is 7.5 percent. This means the bank has fixed your rate 1.5 percent higher than the base rate. Now, as the banks can’t change the base rate, you will continue to pay nine percent. But as the cost of fund has gone up, banks might decide to charge higher rates at 9.5 percent from new borrowers by raising the premium over the base rate from the existing level of 1.5 to two percent.

Commercial banks are concerned over the Reserve Bank’s new interest rate system under which lending rates are to be linked to a base rate. They are seeking clarifications in an attempt to de-link home loans from the plan. This is because the expected base rate of around 8.5 to 9.5 per cent could lead to home loans being offered at 10 per cent or more. At present, home loans are available at 8.5 per cent for start-up customers at “teaser” rates offered by some banks.

Bankers say home loan rates must be kept at affordable levels for consumers. “Though most concerns over the implementation of the new system have been addressed by the Reserve Bank of India, certain more clarifications are awaited,” the chairman of a public sector bank told Hindustan Times. Bankers say “teaser” rates to lure customers should be discontinued, but add that lending rates cannot be unreasonable either. “Affordable housing is an important issue and we are yet to get clarification from the central bank if home loans would also be linked to the base rate,” said M S Sundara Rajan, chairman and managing director, Indian Bank.

The base rate system, due to be implemented from July 1, would replace the current practice of benchmark prime lending rate (BPLR) system. Nearly 72 per cent of all loans are currently priced below the BPLR. The new rules, aiming for transparency, forbid loans priced below the base rate. According to the draft of RBI guidelines, the actual rate a borrower will pay would involve the base rate and additional charges linked to costs, tenure and the risk premium specific to a borrower. The current BPLR is between 11.5 per cent and 12.5 per cent.

Foreign investors returning to Denmark’s mortgage-bond market may bolster demand as banks sell a record $115 billion of the securities at annual auctions beginning today.

Investors based outside the Nordic nation likely will buy about 15 percent of the securities maturing in one to five years, up from 5 percent last year, the smallest amount in at least a decade, according to Nordea Bank AB, Scandinavia’s biggest lender. Prices in the $460 billion mortgage-bond market, the largest after the U.S. and Germany, have risen almost 9 percent since last year’s sale, the Danske Bank A/S Mortgage Bond-Market Index shows.

Pacific Investment Management Co., manager of the world’s biggest bond fund, said the gains may continue as high relative interest rates, a slowdown in home price declines and a global economic recovery attract investment. Denmark’s mortgage bonds haven’t suffered a default since they were introduced after the great Copenhagen fire of 1795, according to Danske Bank.

“Given the history, structure and valuations of the Danish mortgage market, they are an attractive investment,” said Andrew Bosomworth, an executive vice president and head of portfolio management in Munich at Pimco, which is based in Newport Beach, California. “We intend to prolong our existing exposure to the market. There’s no other mortgage security quite like them in the euro area.”

Default Risk

Mortgage lenders can’t take customer deposits, so they raise money by selling bonds backed by every home loan in the nation of 5.5 million people. Lenders also must balance loans with bonds that carry similar terms. Unlike in the U.S. and Germany, they must also retain the risk that borrowers will default by continuing to provide such functions as collecting interest payments.

Denmark’s mortgage market has exceeded its gross domestic product, which was $325 billion last year, since 2006. It is almost four times as large as the government bond market, which totals about $117 billion, according to central bank figures.

Adjustable-rate loans are reset once a year when investors such as pension funds bid for mortgage securities. The prices they pay determine the rates lenders can charge. The auctions will help lower the yield on a one-year loan to 2.25 percent, from 5.2 percent, adding $2.8 billion to household and business income next year, said RealKredit Danmark, the nation’s second- biggest lender.

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Sameer Tiwari, a Pune-based mechanical engineer, thought he had made a “prudent decision” by opting for a fixed rate, home loan five years ago from a reputed national bank.

Three years after the date of disbursement, Sameer received a letter, which said it was time for renewal of his loan and that the interest on his fixed home loan had been increased by 0.5 per cent.

On checking with the bank, he learned that there was a clause in the agreement that said the fixed rate was only for a period of three years and not for the entire tenure!

This letter brought endless, sleepless nights to Sameer and his family??? now, they had to recalculate and replan all their income sources and planned expenses because the “fixed EMIs (Equated Monthly Instalments)” will increase!

What is a loan agreement?

A loan agreement is a ‘contract’ entered into between the borrower and the lender (banks and financial institutions) that regulates the terms of a loan. The loan agreement comes into picture immediately after the bank appraises your credit and the property that you have identified.

The agreement and the fine prints???

In the euphoria to acquire that dream house, various clauses in the loan agreement are often overlooked. However, these clauses have a significant bearing on areas ranging from interest rates to repayment schedules.

Reading home loan agreements is generally viewed as a sheer formality and one always tends to ignore points that the agreement mentions. Moreover, the legal language used in the document often seems more alien than human!

In any case, not reading a loan agreement thoroughly can land you in a soup. Here are some clauses, which should be searched for inside a loan agreement and be clarified with your HFC (Housing Finance Company):

Reset Clause on Fixed Rates: Banks have introduced the reset clause in their fixed rate, home loan agreements so that they can increase interest rates in case the market rates increase in future. This effectively makes fixed rate loans equivalent to floating rate ones.

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When a person decides to buy a house, he will usually not pay for the entire cost of the home with cash on hand. He or she will usually borrow the money necessary to purchase the home and make monthly payment to the lender throughout an agreed period of time to pay off the amount of money borrowed. This type of loan is called a mortgage, and it is usually a long-term loan lasting up to thirty years.

Where to apply for a mortgage

There are many places you can go to find financing options for your home purchase. Most people will usually go to a bank to borrow money. However, there are also private companies that are in the business of providing home loans.

Applying for a home loan can be a very expensive process. There are many fees charged by lenders that are usually unknown by borrowers. These extra costs are never hidden due to the fact that it is required by law to disclose all fees to the borrowers if they advertise a rate. This disclosure law is to protect all potential borrowers from lenders that try to hide fees and upfront costs behind low advertised interest rates.

The interest rates applied to all mortgage loans are not all the same, considering the fact that they are based on the current market rate combined with your credit score. The only difference between private lenders and banks will be the fees they will charge you. Certain upfront costs, such as the loan closing costs, as well as other fees will vary among different lenders. Some lenders even offer zero lending fees and a very low to zero closing costs. Looking around and researching the different possible lenders can potentially save you a lot of money in fees alone.

Mortgage Financing provides detailed information on Mortgage Financing, Bad Credit Mortgage Financing, Commercial Mortgage Financing, Alternative Mortage Financing and more. Mortgage Financing is affiliated with Mobile Home Financing.

Foreclosures are soaring in California with 473,652 foreclosed homes and thousands more nearing foreclosure. California continues to have the highest number of foreclosures regardless of the government intervention loan modification programs.

The Federal Government under Obama’s direction implemented a Making Homes Affordable Campaign, which is designed to help homeowners stay in their homes by lowering monthly payments either by a reduction in interest rates or an extension on the length of the loan. The overall goal of the program is to stabilize home prices which would in-turn enable the economy to recover. Unfortunately, the program has had minimal impact especially in the hardest hit states of California, Nevada, Arizona and Florida.

According to Irvine, California’s Realty Trac, Inc.’s CEO James J. Saccacio, “In spite of the industry wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels.” Riverside County with the highest foreclosures has 6% of all households in some stage of foreclosure.

There appears to be multiple issues impeding the plan. Included are :
- Consumers are confused and don’t fully understand the program. Many think that in order to qualify, they have to be behind in their payments.
- Lenders are overwhelmed with the number of requests and do not have the staff to adequately handle the volume.
- Declining home prices and equity make it impossible for homes to qualify for the loan modifications.
- Rising interest rates have hindered some of the loans.
- Unemployed homeowners with limited or no monthly income cannot qualify.

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