Home loan insurance is a good way for people to deal with the different problems encountered in paying for their home loans since they are able to get the necessary support and reinforcement with regards to the different problems encountered. Basically, the payments for home loans are very complicated since the financial status of a person could be changed in a moment's notice. Many unexpected situations such as the one found in the recession have resulted in many unpaid debts with banks and government based lending institutions. The flaws of the initial problems have been solved since the home loan insurance allows the most flexible payment terms even after the person involved is incapable of fulfilling all the requirements found in the contract. This is because the institution would readjust the extension to appoint that would fit the monthly income or payment capabilities of the people involved. Imagine paying as small as half of the original payment except that the payment terms would be longer. Considering the implications of the deal, it would save many home owners from being evicted from their own homes and houses. That is why many banks have started to imitate how the home loan insurance works and have allowed their clients and customers to continue payment at the best way they can achieve without repossession of their homes. This is the reason why home loan insurance has been hailed as the solution to the homelessness problems faced by millions of Americans in the country today. The simplicity of the application would allow easy processing and payments terms Article Source: http://EzineArticles.com/2849069
Sunday, February 24, 2013
Home Loan Insurance
Home loan insurance is a good way for people to deal with the different problems encountered in paying for their home loans since they are able to get the necessary support and reinforcement with regards to the different problems encountered. Basically, the payments for home loans are very complicated since the financial status of a person could be changed in a moment's notice. Many unexpected situations such as the one found in the recession have resulted in many unpaid debts with banks and government based lending institutions. The flaws of the initial problems have been solved since the home loan insurance allows the most flexible payment terms even after the person involved is incapable of fulfilling all the requirements found in the contract. This is because the institution would readjust the extension to appoint that would fit the monthly income or payment capabilities of the people involved. Imagine paying as small as half of the original payment except that the payment terms would be longer. Considering the implications of the deal, it would save many home owners from being evicted from their own homes and houses. That is why many banks have started to imitate how the home loan insurance works and have allowed their clients and customers to continue payment at the best way they can achieve without repossession of their homes. This is the reason why home loan insurance has been hailed as the solution to the homelessness problems faced by millions of Americans in the country today. The simplicity of the application would allow easy processing and payments terms Article Source: http://EzineArticles.com/2849069
Saturday, July 14, 2012
Some Pros and Cons of Securing a FHA Insured Home Loan
Friday, May 21, 2010
Home loan: Checklist for borrowers
A house is generally financed with a home loan, while a certain portion is financed out of one's own resources. It would be advisable for a borrower to consider some factors before taking a final decision on whom to borrow from and how much to borrow. As a preliminary step, you should prepare a checklist covering specific areas. While discussing with a prospective lender the checklist will come in handy to make a comparison and take a final decision .
Some points to be included in your checklist:
Purposes the loan amount is available for - purchase of plot, construction or for both How and when the disbursement will take place Documents required to sanction the loan Eligibility to be a co-applicant Time taken for sanction and disbursement of loan. Generally, a bank takes 7-10 working days Maximum loan the bank is ready to disburse When EMIs start Method of implementing interest rate change - reduction/increase in tenure or EMI Method of calculating interest rate Guarantor requirement Phases of the loan disbursement Legal and verification fees payable by the borrower Rate of interest and effective rate of interest.
The effective interest rate should be taken into account for comparison Commitment charges payable, if any Processing charges payable by the borrower Procedure for switching over from floating to fixed rate or vice versa. The conditions and corresponding charges payable In case of purchase of land and construction loan, will the bank sanction separate loans or a composite loan Monthly EMI amount Mode of payment of EMIs direct transfer from bank account, postdated cheques or debit from salary Offer of a free or concessional insurance policy for the loan, house or against personal accident Impact of part prepayment on EMI - reduction of EMI amount or reduced number of EMIs These factors constitute a preliminary checklist only and are by no means exhaustive. You may add any number of additional points. This will help in comparing and negotiating with banks for a good deal.
http://economictimes.indiatimes.com/features/financial-times/Home-loan-Checklist-for-borrowers/articleshow/5936076.cms
Some points to be included in your checklist:
Purposes the loan amount is available for - purchase of plot, construction or for both How and when the disbursement will take place Documents required to sanction the loan Eligibility to be a co-applicant Time taken for sanction and disbursement of loan. Generally, a bank takes 7-10 working days Maximum loan the bank is ready to disburse When EMIs start Method of implementing interest rate change - reduction/increase in tenure or EMI Method of calculating interest rate Guarantor requirement Phases of the loan disbursement Legal and verification fees payable by the borrower Rate of interest and effective rate of interest.
The effective interest rate should be taken into account for comparison Commitment charges payable, if any Processing charges payable by the borrower Procedure for switching over from floating to fixed rate or vice versa. The conditions and corresponding charges payable In case of purchase of land and construction loan, will the bank sanction separate loans or a composite loan Monthly EMI amount Mode of payment of EMIs direct transfer from bank account, postdated cheques or debit from salary Offer of a free or concessional insurance policy for the loan, house or against personal accident Impact of part prepayment on EMI - reduction of EMI amount or reduced number of EMIs These factors constitute a preliminary checklist only and are by no means exhaustive. You may add any number of additional points. This will help in comparing and negotiating with banks for a good deal.
http://economictimes.indiatimes.com/features/financial-times/Home-loan-Checklist-for-borrowers/articleshow/5936076.cms
Wednesday, March 3, 2010
Select home loan provider with care
Imagine a situation where you have identified a house you like to buy. You walk into a bank, provide some identification and the front-office executive offers you a special discounted rate based on your credit score thrown up by the bank’s computer. Not just that, the bank also feeds in details of the property that you wish to buy and tells you whether the seller has a loan outstanding against it or not.
A combination of events are taking place that will propel growth in retail loans to the level of developed markets by reducing bad loans and improved accuracy in pricing. At one end, a host of new credit information companies (CICs) are coming up to provide banks with a comprehensive database of borrowers’ track record.
At the other end, the government is promoting institutions like the Central Mortgage Registry, which will ensure that no two borrowers in the country will be able to raise institutional loans against the same asset. Helping link the borrowers to their credit histories will be the Unique Identification Authority of India (UIDAI) with its social security-like number, which has received a government support of Rs 1,900 crore in the recent Budget.
Last week, the Reserve Bank of India (RBI) gave operating licence to Experian Credit Information Company, which plans to roll out its products over the next few months. Experian is the first credit information company to receive operating licence after the Credit Information Companies (Regulation) Act was passed in May 2005.
Earlier in 2009 the central bank had given in-principle approvals to two companies — Equifax Credit Information Services and High Mark Credit Information Services. Both are expected to get full-fledged operational licences before the end of FY10.
The competition in this nascent sector is set to hot up as the new entrants enter the fray till now monopolised by Credit Information Bureau of India (Cibil), which came into existence bore the CIC Act was passed.
CICs maintain a centralised database on borrowers and rate their creditworthiness based on the information on their existing liabilities and past repayment record. The scoring is based on the analysis of the information provided by banks, which have already extended credit facilities to the borrowers. If a borrower goes to multiple lenders, then new lenders will benefit from these scores while making a lending decision and pricing the loan appropriately.
The success of the model is based on information sharing between members — NBFCs and banks. While Cibil enjoys a patronage of 200 credit grantors as members and has a database of about 1.5 million credit accounts, Experian has already obtained commitments from 39 lenders, even before starting full operations. Though the CIC Act has similar provisions for telecom and insurance companies, these are yet to take off commercially.
Each player has his own strategy to tackle competition. Cibil, which set shop in 2004, is aware of the challenges that it will face as more companies enter the market. “We welcome competition as it would eventually boost credit penetration in the country and bring financial discipline among individuals. We will continue to make investments in information technology infrastructure and offer innovative risk management products to the banking industry,” says Arun Thukral, managing director of Cibil.
"We have to differentiate our offering from that of Cibil. We understand the market and products better as we are twice the size of our nearest competitor globally,” says Phil Nolan, managing director of Experian Credit Information Company of India. Experian plans to outsource all its data processing work to its data centre in the UK, which it says is cost-effective. This UK-headquartered, $3.9-billion CIC has presence in 69 countries.
The US-headquartered Equifax, which too has a sizeable global presence, is expected to set up shop soon here. “Globally, Equifax has over 800 different products in its bouquet. Over the medium term, we plan to introduce some of the most relevant products in the Indian market,” says Equifax India head Samir Bhatia.
“Our foremost priority will be to offer our clients products such as credit information reports, scores and analytics services. We will also focus on identity and collection management areas. We are also investing to bring in high-end technology to enable our customers superior and easy access,” he adds.
The reason why none of the companies are particularly perturbed by competition is the size of the market. As of now, data is available only for 15 lakh borrowal accounts, that too mainly from large cities. But CICs are talking of covering Tier-I and Tier-II cities. Some, like Experian, are also in talks with micro-finance companies in order to enter the rural market.
As for banks, such reports will help them arrive at a more realistic lending decision which, in turn, will help them in reducing their non-performing assets (NPAs). However, this comfort comes with a cost. Every report obtained from a CIC attracts a fee. For lenders to refer to more than one credit information agency, it is incumbent upon the agencies to reduce their fees for such credit reports.
According to MD Mallya, chairman and managing director of Bank of Baroda, which holds stake in two credit information companies, “Competition will bring down the cost of accessing such reports. It will help us take quicker decisions based on qualitatively better data.”
Eventually, it will be the accuracy of the credit report, besides pricing, based on the information provided by banks that will hold the key. The competition may force CICs to ensure this. Cross-checking the customer’s data from two different bureaus may put more confidence in the minds of the appraising officials about the true state of affairs of the applicants’ current borrowing record.
http://economictimes.indiatimes.com/personal-finance/loan-centre/home-loans/analysis/Select-home-loan-provider-with-care/articleshow/5635276.cms
A combination of events are taking place that will propel growth in retail loans to the level of developed markets by reducing bad loans and improved accuracy in pricing. At one end, a host of new credit information companies (CICs) are coming up to provide banks with a comprehensive database of borrowers’ track record.
At the other end, the government is promoting institutions like the Central Mortgage Registry, which will ensure that no two borrowers in the country will be able to raise institutional loans against the same asset. Helping link the borrowers to their credit histories will be the Unique Identification Authority of India (UIDAI) with its social security-like number, which has received a government support of Rs 1,900 crore in the recent Budget.
Last week, the Reserve Bank of India (RBI) gave operating licence to Experian Credit Information Company, which plans to roll out its products over the next few months. Experian is the first credit information company to receive operating licence after the Credit Information Companies (Regulation) Act was passed in May 2005.
Earlier in 2009 the central bank had given in-principle approvals to two companies — Equifax Credit Information Services and High Mark Credit Information Services. Both are expected to get full-fledged operational licences before the end of FY10.
The competition in this nascent sector is set to hot up as the new entrants enter the fray till now monopolised by Credit Information Bureau of India (Cibil), which came into existence bore the CIC Act was passed.
CICs maintain a centralised database on borrowers and rate their creditworthiness based on the information on their existing liabilities and past repayment record. The scoring is based on the analysis of the information provided by banks, which have already extended credit facilities to the borrowers. If a borrower goes to multiple lenders, then new lenders will benefit from these scores while making a lending decision and pricing the loan appropriately.
The success of the model is based on information sharing between members — NBFCs and banks. While Cibil enjoys a patronage of 200 credit grantors as members and has a database of about 1.5 million credit accounts, Experian has already obtained commitments from 39 lenders, even before starting full operations. Though the CIC Act has similar provisions for telecom and insurance companies, these are yet to take off commercially.
Each player has his own strategy to tackle competition. Cibil, which set shop in 2004, is aware of the challenges that it will face as more companies enter the market. “We welcome competition as it would eventually boost credit penetration in the country and bring financial discipline among individuals. We will continue to make investments in information technology infrastructure and offer innovative risk management products to the banking industry,” says Arun Thukral, managing director of Cibil.
"We have to differentiate our offering from that of Cibil. We understand the market and products better as we are twice the size of our nearest competitor globally,” says Phil Nolan, managing director of Experian Credit Information Company of India. Experian plans to outsource all its data processing work to its data centre in the UK, which it says is cost-effective. This UK-headquartered, $3.9-billion CIC has presence in 69 countries.
The US-headquartered Equifax, which too has a sizeable global presence, is expected to set up shop soon here. “Globally, Equifax has over 800 different products in its bouquet. Over the medium term, we plan to introduce some of the most relevant products in the Indian market,” says Equifax India head Samir Bhatia.
“Our foremost priority will be to offer our clients products such as credit information reports, scores and analytics services. We will also focus on identity and collection management areas. We are also investing to bring in high-end technology to enable our customers superior and easy access,” he adds.
The reason why none of the companies are particularly perturbed by competition is the size of the market. As of now, data is available only for 15 lakh borrowal accounts, that too mainly from large cities. But CICs are talking of covering Tier-I and Tier-II cities. Some, like Experian, are also in talks with micro-finance companies in order to enter the rural market.
As for banks, such reports will help them arrive at a more realistic lending decision which, in turn, will help them in reducing their non-performing assets (NPAs). However, this comfort comes with a cost. Every report obtained from a CIC attracts a fee. For lenders to refer to more than one credit information agency, it is incumbent upon the agencies to reduce their fees for such credit reports.
According to MD Mallya, chairman and managing director of Bank of Baroda, which holds stake in two credit information companies, “Competition will bring down the cost of accessing such reports. It will help us take quicker decisions based on qualitatively better data.”
Eventually, it will be the accuracy of the credit report, besides pricing, based on the information provided by banks that will hold the key. The competition may force CICs to ensure this. Cross-checking the customer’s data from two different bureaus may put more confidence in the minds of the appraising officials about the true state of affairs of the applicants’ current borrowing record.
http://economictimes.indiatimes.com/personal-finance/loan-centre/home-loans/analysis/Select-home-loan-provider-with-care/articleshow/5635276.cms
Friday, November 6, 2009
Demystifying insurance policies
MUMBAI: Rajesh Sinha, a 30-year-old marketing professional had five insurance policies where he was paying a premium of Rs 50,000 against each of the policies. With such a huge premium outgo, he was under the impression that he was more than adequately insured.
But little did he realise that his actual insurance need was 10 times his annual salary which was over a crore of rupees. Against this each of his unit-linked policies (Ulip) schemes offered protection for only Rs 2.5 lakh i.e. a total cover of Rs 12.5 lakh.
The proliferation of Ulips has taken away the focus from insurance. Buying insurance needs a staggered approach and one has to review/expand the cover as s/he assumes more responsibilities such as marriage, having children or dependent parents.
HOW TO REVIEW YOUR COVER
Today single-income families are making way for more double-income families. But that doesn’t reduce the financial responsibility for either of the spouses.
“The need for insurance emanates from the various obligations that the breadwinner is expected to fulfil such as children’s education, retirement, health and savings. These change with the changing life stages and are driven by the individual’s specific needs. Thus, each individual should put a rupee value to each need and thereafter conduct a self-risk assessment,” Leena Dhankher Joshi, AV-P, life, accident & health profit centre, Tata AIG Life Insurance.
This may sound very complex, but is quite easy. Assume a complete discontinuation of your income and evaluate the implications of that on your family.
This self-assessment coupled with the current life stage and the responsibilities towards the family. For example, children’s education, marriage, retirement plans and various liabilities such as home loans will help you asses your insurance needs. A ball-park figure is 10-15 times your salary, which should be the size of your insurance cover.
INSURE YOUR HOME LOAN
If you have a large home loan, it’s a wise option to cover the liability. A borrower wouldn’t want to pass on the financial burden to his spouse or dependent parents in case of an unexpected demise or even a disability and hence a job loss. Life insurance companies have designed home loan insurance covers in alliance with banks to cover this risk. However, a simple term plan could be a better back up than these home loan insurance cover, financial advisors say.
“Let us assume a borrower has opted for a home loan of Rs 30 lakh. Now, in case of a term cover, an individual of 35 years can opt for a term cover of Rs 30 lakh and pay an annual premium of around Rs 8,000. If an individual would have opted for home loan insurance, he would have had to pay an upfront amount of Rs 1.52 lakh as an insurance cover on the Rs 30 lakh home loan.
Now, this could prove to be loss to a customer if he prepays the loan within 10 years. Secondly, the insurance amount is calculated on a reducing balance basis. So the value of the cover falls with every passing year,” Suresh Sadagopan a certified financial planner, Ladder 7 Financial Services.
http://economictimes.indiatimes.com/personal-finance/insurance/analysis/Demystifying-insurance-policies/articleshow/5197966.cms
But little did he realise that his actual insurance need was 10 times his annual salary which was over a crore of rupees. Against this each of his unit-linked policies (Ulip) schemes offered protection for only Rs 2.5 lakh i.e. a total cover of Rs 12.5 lakh.
The proliferation of Ulips has taken away the focus from insurance. Buying insurance needs a staggered approach and one has to review/expand the cover as s/he assumes more responsibilities such as marriage, having children or dependent parents.
HOW TO REVIEW YOUR COVER
Today single-income families are making way for more double-income families. But that doesn’t reduce the financial responsibility for either of the spouses.
“The need for insurance emanates from the various obligations that the breadwinner is expected to fulfil such as children’s education, retirement, health and savings. These change with the changing life stages and are driven by the individual’s specific needs. Thus, each individual should put a rupee value to each need and thereafter conduct a self-risk assessment,” Leena Dhankher Joshi, AV-P, life, accident & health profit centre, Tata AIG Life Insurance.
This may sound very complex, but is quite easy. Assume a complete discontinuation of your income and evaluate the implications of that on your family.
This self-assessment coupled with the current life stage and the responsibilities towards the family. For example, children’s education, marriage, retirement plans and various liabilities such as home loans will help you asses your insurance needs. A ball-park figure is 10-15 times your salary, which should be the size of your insurance cover.
INSURE YOUR HOME LOAN
If you have a large home loan, it’s a wise option to cover the liability. A borrower wouldn’t want to pass on the financial burden to his spouse or dependent parents in case of an unexpected demise or even a disability and hence a job loss. Life insurance companies have designed home loan insurance covers in alliance with banks to cover this risk. However, a simple term plan could be a better back up than these home loan insurance cover, financial advisors say.
“Let us assume a borrower has opted for a home loan of Rs 30 lakh. Now, in case of a term cover, an individual of 35 years can opt for a term cover of Rs 30 lakh and pay an annual premium of around Rs 8,000. If an individual would have opted for home loan insurance, he would have had to pay an upfront amount of Rs 1.52 lakh as an insurance cover on the Rs 30 lakh home loan.
Now, this could prove to be loss to a customer if he prepays the loan within 10 years. Secondly, the insurance amount is calculated on a reducing balance basis. So the value of the cover falls with every passing year,” Suresh Sadagopan a certified financial planner, Ladder 7 Financial Services.
http://economictimes.indiatimes.com/personal-finance/insurance/analysis/Demystifying-insurance-policies/articleshow/5197966.cms
Thursday, September 3, 2009
Cut your home loan rate
Stick with one institution for all financial services and you can vault your savings into the fast lane.
Home-loan packages that bundle together a mortgage, credit card and transaction account are a good deal, according to the banking industry researcher Canstar Cannex.
Financial institutions use measurements such as "cross-sell" (how many of the institution's products each customer uses) and "share of wallet" (how much of the customer's banking business goes to the institution) to determine the effectiveness of their retail banking operations.
Customers with lots of products generate more revenue for the bank and they are less likely to go through the bother of moving their banking business. Financial institutions are prepared to offer a discount on the standard home loan if the borrower will take the extra products with it.
Canstar Cannex says this is a good deal. The package discount on a variable home-loan rate is usually between 0.5 of a percentage point and 0.7 of a point (50 basis points to 70 basis points).
It is less common to find a discount on a fixed-rate loan and those that are available are smaller than discounts on variable-rate loans. Canstar found that of the 37 home-loan packages it reviewed, eight offered a fixed-rate discount and the range was between 10 basis points and 45 basis points.
The big trade-off is that package loans come with a large annual fee. The fee can be as much as $395 a year (charged by St George, National Australia Bank, Westpac and BankSA) and as little as $25 (charged by Suncorp on its My Home Package).
Taking the example of a $350,000 loan, a consumer with a typical variable-rate loan at 5.78 per cent (the average of the big four) would pay $20,230 of interest each year, a standard $100 mortgage servicing fee, a $50 credit card fee and $60 in transaction account fees. The total cost is $20,440.
A consumer who chooses the package at a discount rate of 5.08 per cent pays $17,780 of interest each year plus a $350 average package fee. The total cost is $18,130 and the saving over the stand-alone option is $2310.
Even borrowers who might be considering a cheaper basic home loan would save some money using a package, according to Canstar's calculations.
Other benefits cannot be measured in dollar savings, such as the convenience of managing your banking through one financial institution.
Canstar says there is quite a bit of competition in the package banking market. Some institutions waive the annual fee on credit card reward programs. Some discount premiums on home and contents and other general insurance products. Others discount financial-planning fees.
http://www.smh.com.au/news/business/money/property/cut-your-home-loan-rate/2009/09/02/1251570744215.html
Friday, July 31, 2009
Home Loan Rate - How Do Closing Costs Affect Home Mortgage Rates?
First time home buyers or borrowers are often rather unpleasantly surprised at the time of closing or just prior when the good faith estimate of closing costs is received. These closing costs can sometime add a significant cost to the dollar amount that the borrower is expected to provide to clear the escrow account at the time of closing or shortly thereafter. The home loan rate is not directly tied to each of the closing costs, but indirectly, you will pay the closing costs. You should make sure you realize and understand each of these costs and how they impact your total cost of the loan.
Definitions
'Closing costs' is just one of the definitions that you should understand when considering obtaining a home loan. The 'home loan rate' is another. Closing costs are expenses related to the obtaining of the loan, such as document preparation, title search, appraisals, and various other expenses. These costs are typically listed as part of the closing process on the loan. The closing of the mortgage at the title company or with the loan officer will spell out each of these costs and who is responsible for payment of the cost at closing.
Title search
One of the responsibilities that must be met is a search by a title company of court records to insure that the ownership or title to the home in question is clear. They will be looking at sales and deed records to determine that the sellers actually have the legal authority to sell the property. There is a fee charged by the title company to conduct this search. The clear title means that the title company can guarantee the title is correct and that you will have a clear title to the property in question after closing. The title company actually provides a type of insurance, known as title insurance. The cost of the title insurance is one of the closing costs built into the home mortgage rates.
Origination fees
Another factor in the home loan rate is that of origination fees. These are costs associated with the work the lender or broker does in opening an application file and working to collect and pass on all the necessary documentation required to complete the loan according to the contract. These fees can be sizable or modest, depending upon the broker, but in most cases are negotiable also that fact is not commonly known.
Points
The borrower may be required to pay 'points' as part of the loan fees. There are two types of points that you may be asked to cover. Origination points are the fees you pay your broker or lender to secure the loan while discount points are essentially interest that you prepay in order to manage the best interest rates on your loan. Both types of points are usually paid at the home of closing. Payment of the discount points can significantly lower your home mortgage rates meaning thousands of dollars less in cost over the life of the loan.
http://ezinearticles.com/?Home-Loan-Rate---How-Do-Closing-Costs-Affect-Home-Mortgage-Rates?&id=1389414
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