first home loan
Building a new home can be one of the most satisfying and exiting times in everyones life. Designing your dream house and watching it to take shape is an intensely gratifying process. The process of construction of house is a complicated one involving time, money and inputs from various sources. You might have a vision of how your dream home should look like. Once you have selected your plot of land, the next step would be to find a house plan.
Basic Concepts of Housing:
Many families want reasonable privacy, comfort, health and safety, facilities for leisure-time activities, convenient and accessible stores, good schools, congenial neighbours and good play grounds. One should also to enquire about drinking water supply, telephone connection, cooking gas connection, cable and other basic utilities and services around the locality. Be aware of any regulations or restrictions in the area you are considering to build a house.
When you consider the various alternatives in family housing, use the following basic concepts as guidelines:
i). Area/extent of land and the choice of a home is related to your family needs.
ii). Master bed room with attached bath and large living room or family room & formal living room.
iii). Number of bedrooms, bathrooms; bath tubs, dressing rooms, built-in cub-boards, garden, lawn, landscaped area, large windows etc.
iv). Home ownership is a long term investment.
v). Housing requires large amounts of capital.
vi). Housing investments are sensitive to future trends.
vii). Housing may involve a do it yourself programme.
Process of Building a Home:
Home ownership strengthens the general and social prestige of the family. Building a home is a time consuming process and one should discuss with their family members; they will have certain desires and requirements.
Building a house includes selecting an architect. Final plan of the house. Selecting an interior designer. Any changes to plan. Construction permits. Selecting a contractor. Civil construction works, electrical wiring and switches, plumbing, flooring and painting of exteriors & interiors. Interiors which would include a basic built-in wood work for wardrobes, cabinets and kitchen.
Choosing the right architect is important for a successful project. Architects bring as much value to a small home as they do to luxurious mansions. Go for an architect who has better. You could select one who specialises in designing and building homes. You could also opt for one based on referrals. Talk to your friends, relatives and colleagues and find out whom they employed as their architect. Hire a licensed registered architect. This is someone who is licensed, by Governmental authorities because he or she has met strict educational requirements, has passed a licensing exam and maintains that license in good standing. If it is a firm, the size of the firm should not in itself be a deciding factor. The kind of work they do should be the criterion. Many firms only take on big projects. Some of them may take on small projects, but will not give them adequate attention. Check out how committed the firm is. Try and get as much information about the company from the people you contact. Cass as many references as possible. Set up interviews with several firms.
Choosing Home Loans:
Banks and Housing Finance Companies offer such a host of different features with varying interest rates that it gets difficult to distinguish between the various products. As there are many players in the home loan business, it is easy to get confused while choosing a loan.
Finance is the crucial component when you decide to have a roof of your own especially when you are taking a loan. Once you decided to buy a house, the issues were two-fold; how much you can spare towards the repayment of the loan i.e., Equated Monthly Installments (EMI) and how to raise the margin money.
Housing financing companies and banks generally lend upto 85% of the cost. Apart from the margin money, the buyers have to put in money towards registration and charges imposed by the Governmental authorities. Till sometime back, the loan was restricted to 85% of the property. The buyer/loan borrower had to fund the remaining 15%. However this ratio differs among housing finance companies.
The factors like age, qualification, occupation and work experience also tend to influence the value of a loan. The home loan amount depends on income levels, value of the property and your personal/professional profile. Housing finance companies usually have an upper limit on the amount they finance, but this could vary from bank to bank. Depending on the credit worthiness of the buyer and the stiff competition, some finance companies may relax the rule marginally. The loan amount also depends on the value of the property. Usually, the loan cannot go beyond a certain percentage of the value of the property, better know as the loan-to value ratio.
The rate of interest is the critical factor that determines the total amount of repayment to be made over the years. Individuals have the option of choosing between a floating interest rate and fixed rate interest. A floating rate interest is one where the interest charged keeps charging according to the movements of interest rates in the economy of the Nation. If the interest rate in the economy is falling, the interest rate charged on the housing loan also falls and the borrower benefits. In fixed rate loan, the interest rate remains fixed throughout the tenure of the loan.
A home loan is like any other product. Therefore, the cost and the loan term are always negotiable. The financial institutions tend to keep the rate higher than the effective price rate as the lower rates are only for those who bargain.
Types of Home Loans:
Housing finance is available for all types of property purchases, like from buying a house to purchasing land and constructing a house. The following are the various types of loans with different features and interest rate structures depending on your requirements.
1). Standard home loan: Under standard home loan to purchase a house, the housing finance companies lend up to 90% of the cost of the house, while the borrower has to contribute the rest.
2). Adjustable rate home loan: The rates on adjustable rate home loan is linked to a banks retail prime lending rate. The rate will be revised every three months from the date of the first disbursement.
3). Home improvement loan: This loan facilities internal and external repairs andother structural improvements like tilling, plumbing etc.
4). Construction loan: This loan is available for constructing a new house, for those who already have land.
5). Land purchase loan: This allows you to purchase land either for construction or investment purposes, anywhere you want as long as the title deeds can be verified.
6). Bridge loan: This is a temporary loan that helps to finance a new home, till a buyer is found for the old one. Interest rates are marginally higher, and repayments can be made either as a lump sum or in installments.
7). Transfer loan: This comes in handy when shifting from an existing small house to a bigger house. Here the borrower can convert an existing loan into a new one in which the housing financier provides the additional funds required to more into the new house.
8). Non-residential premises loan: This is exclusively for professionals for construction, purchase, extension or renovation of their office or chambers.
Other Articles
