Home Loans & Mortgage Loans Better Understood (Part-2)

In our last post we discussed different terminologies and definitions that are used in Home Loans / Mortgage loans. In this post we shall discuss in details the different type of interest rates available with various financiers while they provide Home loans. Primarily there are two types of interest rates, one is the “floating rate” and the other is the “fixed rate”Floating Interest Rate

Floating interest rate, also known as “Variable Interest Rate” or “Adjustable Interest Rate” refers to any type of interest rate that is not fixed and keeps varying over its tenure typically using a base rate. In India the base rate is fixed by RBI and the general nomenclature for this is Prime Lending Rate or simply PLR. The actual floating rate of interest paid by borrowers is generally a margin rate added on to the PLR. Very rarely we come across situations where the floating rate is lesser than the base rate.

It is to be noted that Home loans / Mortgage loans in most countries are floating rate loans. In India very unfortunately borrowers predominantly do not understand the concept of floating rate and often mistake that the tenure of the loan is sacrosanct and that it does not change. This can be attributed to the fact that very few borrowers essentially understand the terms and conditions before they sigh the mortgage documents.

Typically, floating rate loans will cost less than fixed rate loans, depending in part on the yield curve. In return for paying a lower loan rate, the borrower takes the interest rate risk: the risk that rates will go up in future. In cases where the yield curve is inverted yield curve, the cost of borrowing at floating rates may actually be higher; in most cases, however, lenders require higher rates for longer-term fixed-rate loans, because they are bearing the interest rate risk.

Fixed Interest Rate

Fixed interest loans are interest rates that typically do not fluctuate at all over their tenure. The borrower in this case can know for sure what is their future payments as it is largely not changed. Generally fixed rates are higher than the floating rates and people generally do not prefer either due to ignorance about floating rate or due to the fact the floating rates are typically lower and can offer lesser EMI in the immediate time frame.

A fixed interest rate is based on the lender’s assumptions about the average discount rate over the fixed rate period. For example, when the discount rate is historically low, fixed rates are normally higher than variable rates because interest rates are more likely to rise during the fixed rate period. Conversely, when interest rates are historically high, lenders normally offer a discount to borrowers to fix their interest rate over time, as rates are more likely to fallduring the fixed rate period.

Further Details : Apartments for Sale in Chennai

 

Home Loans & Mortgage Loans Better Understood (Part-1)

In our first post on the above series, we shall be looking at Home Loans and Mortgage loans more from the Indian perspective, understand a bit of different interests rates available in the market and how banks service

Mortgage Loan – Definition

Mortgage loan generally refers to the loan secured by pledging an already existing home for financial needs. This definition is purely in Indian context. In India Home loans are for purchasing a new home where the disbursement of the loan amount is made in full by the financier / banks or for constructing new home where the disbursement is released in stages by the financier / banks vis-à-vis the progress made in the construction.

Typically in western countries Mortgage loan generally refers to all types of Home loans. According to Anglo-American property law, a mortgage occurs when an owner pledges his or her rights to the property, as a collateral to the loan.

As like any other loans, mortgage loans and / or home loans comes with interest rate and the payment is by generally EMI as per the amortization schedule spread over a repayment period ranging from 20 years to 30 years depending on the policies of the financier / bank that provides with the loan.

Now let us see some popular terminologies used in the financial circle when dealing with mortgage or home loans;

Property: The physical residence being financed in question here refers the property.

Borrower: The person borrowing the loan in exchange to mortgaging his / her interest on the property who in other words is either having or is creating an ownership interest in the property is called a Borrower.

Lender: Usually a bank or other financial institution qualifies to be called a Lender. Typically In India, lenders can also be individuals who lend money. In America, lenders may also be investors who own an interest in the mortgage through a mortgage-backed security. In such a situation, the initial lender is known as the mortgage originator, which then packages and sells the loan to investors. The payments from the borrower are thereafter collected by a loan servicer.

Principal: The original size of the loan, which may or may not include certain other cost refers to the Principal Amount. As and when principal amount is repaid in parts, the principal will go down in size and the loan interest is calculated for the remaining Principal amount only.

Interest: A financial charge for use of the lender’s money is referred as Interest. There are many different varieties of Interests employed by bankers. We shall discuss them elaborately in our next post.

Foreclosure or Repossession: The possibility that the lender has to foreclose, repossess or seize the property after paying the principal along with the applicable interest and other charges if any is essential to any mortgage loan.

Land Marvel Construct Jupiter

Land Marvel  Construct Jupiter

 

The project is located at 3^rd Cross Street, Shastri Nagar, Adyar in South Chennai having basement Ground + Two floors and completed in 1999.

 

Apartments for sale in chennai

In this post let us have a look at some of the ways in which the drainage is disposed in a more environmentally sound method. In this method, all a Chennai builder has to do is to construct septic tanks or leech pits in which the drainage system is drained. The excess water in the drainage is absorbed by the soil around. The water seeps through the soil slowly by which time the fine soil materials acts as a filter before the water percolates the ground water table. The solid waste is left behind to compost and in this process good garden manure is also left as a by-product.

A slight innovation in the above said method is the use of Eco-san toilets. In rural India, eco-san toilets are increasingly promoted by many NGO. But this system has not been introduced to the urban areas. Chennai builders can cash in on this lovely environmentally sustainable model of sewage disposal as this system does not require extensive pipes, drains or even water.

The common goal of any environmentally sound sewage disposal that needs to be taken note by any Chennai builder who wish to employ this method in their apartment complex and innovate are the systems needs to prevent infection thereby health conscious, it needs to protect the environment by not polluting and wasting water, the system needs to recycle back to the soil what has been taken. One another system is collection of grey-water which is the water collected from kitchen sinks, wash basins, bath tub etc. This grey-water collected is used for flushing toilets. In this ingenious but simple method more than 65% water can be saved. Builders in Chennai need to take note of the fact and can include this method as a USP in their upcoming projects. Raindrops Promoters, a renowned Chennai builder has taken a note of this point and may be employing this method in their upcoming projects.

Chennai builders can also contribute to creating a green future by constructing Flats in Chennai which lets out the collected grey-water in a small man made pond like structure near which a garden can be grown. This can enhance the greenery in the project area. Plants like Canna Indica (Kalvaazhai in Tamil), having the ability to absorb hard polluting elements in the waste, can be grown in the immediate vicinity of the grey-water mini-pond.