What determines whether your property loan gets approved?

There are a lot of myths about what affects your property loan. If you go by rumour, everything in your life is a factor – from your job to your car to the pattern of facial hair you sprout on a bad week. We’re going to let you in on a secret: the process of loan approval is straightforward, and quite predictable:

The factors determining loan approval

There are some variations on this list, depending on the bank you go to. But these are the basic factors that almost every bank will look at.

 

Your Total Debt Servicing Ratio
 Your credit score
 Your age
Income and source of income
Valuation
Remaining lease

1. Your Total Debt Servicing Ratio

Also referred to as TDSR, The TDSR is one of the most significant cooling measures imposed by the government. It is meant to prevent overleveraging (too much borrowing), and to push home prices down. When you apply for a home loan, the bank will compare your debt obligations to your monthly income. Your total debt repayments each month, after getting the home loan, must not exceed 60 per cent of your monthly income. For example:

Say you are applying for a loan of 2 million, with a 30 year loan tenure. The monthly repayments are around 7,300.

In addition to this, you have:

§         A car loan, for which you pay 1,500 per month

§        Various personal instalment loans, for which you pay 1,200 per month

§        The remnants of your university education loan, for which you pay 400 per month

With the home loan, you would be obliged to make total monthly repayments of 10,400.

Your monthly income is 25,000. Your repayments come to around 41.6 per cent of your total monthly income – this is your TDSR, and you would qualify for the loan.

If your TDSR would exceed 60 per cent, the loan will either not be approved, or you will be asked to lower the amount you’re borrowing.

If you apply for a personal loan to cover the down payment, that loan is factored into your TDSR. So try to avoid that.

 

Do not mistake the TDSR for the Mortgage Servicing Ratio (MSR)

You may occasionally come across a condition called the MSR. For example, the bank may require that you have an MSR of 35 per cent. This means that the monthly repayments from your home loan only cannot exceed 35 per cent of your monthly income.

In the above example (earning 25,000 per month), this would mean home loan repayments, irrespective of other debts, cannot exceed 8,750 per month.

You must still adhere to the 60 per cent TDSR limit, even if you meet the MSR.

 

2. Your credit score

Every bank will check your credit score when you apply for a loan. This is a number between 1,000 and 2,000, for which you will be assigned a grade. You can obtain your credit score for about $6, from the Credit Bureau of Singapore (CBS.)

At 1,911 to 2,000 points, you will have a credit rating of AA. Assuming you meet the other conditions on this list, this often assures you will get the maximum allowable loan (80 per cent of the property value.)

Foreign buyers should note that Singapore banks do not negotiate interest rates for high risk borrowers. The interest rate on your home loan will not be adjusted to make up for your risk profile: your loan is either rejected, or you are asked to take a smaller loan.

If you have never taken a loan in your life, your credit rating will be Cx. This is not as good as AA, as it means the bank has no idea who they’re dealing with.

For this reason, a lot of borrowers take small loans or use credit cards (which they pay back religiously) two to three years before taking a home loan. The idea is to have the coveted AA score by the time of your application.

Foreigners often start with a credit rating of Cx. There is no inter-border data exchange for credit scores; banks here can’t check your credit score back home via the Credit Bureau of Singapore (although some might request you present a credit report from home.)

 

For former bankrupts or defaulters:

Bankruptcy is removed from your credit report five years after receiving the official letter of discharge. You should be able to apply for a loan normally at that point.

Records of default are removed after three years, assuming the debt was settled (e.g. paid through debt restructuring.) If the debt was written off with no attempt at repayment, it will remain on record indefinitely; this can result in rejection or a smaller loan.

3. Your age

The loan tenure has a maximum of 35 years. In addition, the sum of the Property loan tenure and your age must not go beyond the retirement age of 65. So if you are 40 years

Old at the time of application, you have maximum loan tenure of 25 years. Explaining to the banker that this wouldn’t have happened “in your day” is not helping.

 

4. Income and source of income

Income matters due to the TDSR (see point 1.) If you have a regular pay check this is straightforward. But if you are self-employed, your income may fluctuate.

For these variable income types, a 30 per cent haircut is imposed. So if you earn 10,000 per month, you will be treated as if you earn 7,000 per month for the purposes of meeting the TDSR.

Your loan application is rejected due to lack of proper documentation. If your income is not revealed in your CPF statements or IRAS tax forms, you will need to produce some other form of proof, such as client pay slips.

5. Valuation

When determining the loan amount, the bank will use the official valuation of the property. Not the seller’s asking price, but the official valuation. If the seller asks for 2.3 million, and then valuation says the house is worth 2.2 million, the bank is going to base the loan on 2.2 million.

You can go to different banks to get a different valuation.

Beyond dollars, banks will factor in conditions that may make the property difficult to sell. For example, almost no bank will give you a loan for properties in the red light district.

 

6. Remaining lease

If you are buying a property with limited time on the lease (e.g. less than 40 years), the bank might reject the loan. Most mortgage bankers will tell you outright if the remaining lease is too short.

Source: https://www.99.co/blog/singapore/what-determines-whether-your-property-loan-gets-approved/

What deposit do you need for a loan against Property?

There are many strategies for buying properties and investing, and the right one for you depends on your end goals.

Are you looking to get into the property market on the ground floor? Are you buying an investment now to move in to down the track? Or are you looking to build a diverse property portfolio to help you retire comfortably?

Ideally, you can have this discussion with your mortgage broker before you start buying, in order to set you down the right path: buying the right properties and using the right lenders/loan products to suit your future goals.

The first place to start is how you’re going to come up with the funds for the deposit, and there are a few different options.

Savings

Many first time purchasers are buying a property to live in, and a popular type of deposit in this instance is hard-earned savings. For an owner-occupied property, there is no tax benefit of the interest paid on your loan, so you will usually want to minimise the amount borrowed and pay the loan off as quickly as possible.

Equity

Some people buying their first investment property have already built up useable equity in their own homes. Borrowing against your owner-occupied home for the deposit for an investment property is a common way to start your investment portfolio, and can have positive tax implications over using savings as a deposit. Usually you would need to do an increase on your existing loan in order to access the funds.

Cash bonus

Sometimes, buyers are in the enviable position of receiving a gift from family to use as the deposit for an investment or owner-occupied purchase. This usually reduces the loan amount and borrowing costs for the purchasers who then have smaller repayments and can pay the loan against property  principal down faster, or build up equity to purchase again.

Guarantor

Another option available is a family guarantee. This is when family members, usually parents, have enough equity in their own homes that they can ‘lend’. This does not require borrowing against their house directly, but rather the loan on your purchase is secured by a limited value on their property as well as the new purchase. This is usually a temporary measure, and once the value of the purchased property goes up enough or the loan is paid down sufficiently, the parents’ house is released as security.

To find out which type of deposit will work best for you, give your broker a call and begin your investment journey today. If you don’t have a broker, contact Aussie and we will connect you with your local Mortgage Broker for a free appointment.

Source: https://loanagainstpropertyindia.quora.com/What-deposit-do-you-need-for-a-loan-against-Property

Loans against Property

Let your property be a shelter to your dreams. IDBI Bank Loans against Property is a multi-purpose loan that can be used for your business or personal needs.

Best Property Loan

Let your property be a shelter to your dreams. IDBI Bank Loan against Property is a multi-purpose loan that can be used for your business or personal needs. Property Loan

Loan against Property – Best Option of Financing

There are many option of getting loan. You may apply for personal loan, business loan, home loan etc. However Loan against property is the best option of financing. You may get low EMI, Low interest rate and long tenure loan if you opt for Loan against Property

What is Loan against Property (LAP)?

• Loan Against property is a secured commercial long term credit/loan facility provided by the Banks and NBFCs.

• Under this facility, property owned by the borrower is mortgaged as a security for the loan availed.

For what purposes, LAP can be availed?

• LAP can be availed for both business and individual requirement purposes

• Business Purpose – business expansion, long term corporate loan, machine purchase, property purchase where loan is not possible, etc.

• Individual Purpose – child's education, child's marriage, property purchase where loan is not possible, renovation of existing house, etc.

What are the main features of LAP facility?

• Loan amount ranges from Rs.15 lacs to Rs.50 crores

• Maximum loan of up to 70% of the market value of the property offered, could be availed

• Higher tenure of 10 years to15years is available for easy repayment

• Lower annual interest rates (11%-14%) as compared to personal loans and unsecured business loans (16% - 22%)

• Lower EMI (Equated Monthly Installment) for better monthly funds management

• Faster process for sanction and disbursement of loan as compared to corporate loans

• Simple and easy documentation

• Both salaried and self employed individuals can avail the loan, apart from firms and corporate.

• Option for loan prepayment is also available

• In case, the loan is used for business purposes, whole of interest amount on the loan could be booked under business expenses

Who Can Apply for LAP?

• Any Individual or Company / Firm can apply for Loans against Property, having a good credit history, regular income and owns a property.

How to get / apply for LAP facility?

• Borrower may submit his requirement through online simple application form available on our website or may call us at 011-42427191.

• Our trained financial advisors will guide you for all your loan related queries and provide the door step services for availing the LAP facility from the bank of your choice.

• We are authorized channel partners of various private/public sector banks and major NBFCs.

Source: https://medium.com/@anilsurma333/loan-against-property-best-option-of-financing-1a8e70e66dc2#.4kxywi9og

Getting the Money you Need with a Loans against Property

The modern economy is not living up to expectations. Unemployment is high, and middle class wages have been stagnant. This has made it incredibly difficult to stay solvent. The truth is that many people are a few bad days away from bankruptcy.

If you're worried about your financial situation, you may want to look at a personal loan. By getting a loan, you can get the money that you need to live. Obviously, no two loans are ever alike. Before you apply for a Business Loan, you need to educate yourself on finances. If you know what you are looking for, it will be easier for you to make an informed decision. You should know how much money you need to borrow, and you should also know how long you will need it for.

If you're interested in applying for a personal home loan, you need to understand the concept of collateral. By offering collateral, you can usually secure a low interest rate. This will also allow you to increase the size of your loan. Collateral can take many forms. Anything valuable will work well here. To get the best results, you should consider using your home. Obviously, it's important to be as responsible as possible here. If you are careless, your home could be repossessed. Make it a priority to be on time with every payment. Keep in mind that every lender is unique. You should only work with a lender that is trustworthy and honest.

When it comes down to it, getting a personal home loan is all about defining your expectations. To get started, think about how much money you need to borrow. Avoid any lender that tries to persuade you to borrow more money than you need. Once you know how much money you are trying to borrow, you will be ready to start looking for Loans against Property.

Generally speaking, it makes sense to talk to as many lenders as you can. If you can, ask for a few quotes. Remember that it's to your advantage to learn as much as you can before applying for a loan. By shopping around, you should be able to secure more reasonable interest rates. It's important to be accurate and honest here. You should know your precise income before you talk to anyone. This will help you find a home loan that meets your demands.

Source: https://www.apsense.com/article/getting-the-money-you-need-with-a-loans-against-property.html

What you need to know about a Property Loan

A loan against property is a loan that is given against the mortgage of property. The loan is provided at a certain percentage of your property’s market value, usually somewhere between 40% and 60%.
The loan against property interest rates make them more attractive than personal loans. If you were to take a personal loan, the interest rate would be 16% – 21%. Taking a loan against property means you pay interest at the rate of 11% to 14.50%. This difference is because your property is guaranteed against the loan. If you avail the services of Finance, you can get up to 3 months off on your EMI payments.

How the Bank Goes About It

The mortgage loan process includes the following:
If the property you mortgage has more than one owner, all of you will have to apply together to get the loan.

You can take a loan for any freehold property – from a plot of land to your house. It doesn’t matter if you’ve rented out the house or if you’re living in it. For more types of loans against property, avail financial services, and you’ll get a wide range to choose from.

The bank checks all the documents related to the title of your property, like electricity and telephone bills, for residence proof. They also need identity proof like your passport, PAN card, or voter ID card. If you’re employed, they need your bank statements for the past 6 months, and if you’re self-employed, they require your financial statements for the past 2 years.

The minimum age at which you can borrow a loan is usually 24 years, and the maximum age for an employed person is 60, and a self-employed individual is 65.

The bank also reviews your CIBIL or credit score and goes through your payment track record. Keeping a good CIBIL score will increase your chances of getting your loan application approved. Based on all of this information, your bank will ascertain your capacity for repayment and provide you with the loan if they are satisfied.

Here’s Why You Should Take One

Now that you’ve understood how loan against property works, opting for one is great choice if you’re ever in need of money. Here’s why:

The tenure of an LAP (Loan against Property) is longer than most other loans. You can get one for a maximum period of 10 years. Since their rate of interest is lower, and they have such a long repayment time, it’s a cheaper option than any other loan.

Just like any other loan, you can take a LAP without disclosing your motive for the loan. Like a home loan, partial prepayment as well as full prepayment is allowed with regard to LAPs. This prepayment is generally free from penalties. If you contact Bank, they can provide you with a loan of up to 21 crores on your property. Find out more on their loan against property FAQ.

The property continues to be under your ownership even after you receive the loan. In case you are unable to pay back the loan, you can sell your property and settle the debt. This will also help you procure additional funds.

If the value of your property increases, you can refinance it to increase the loan amount. So if you’re a businessman, it’s the an excellent option for you to expand your business.

The processing of an LAP is much faster than a house loan as the property already exists. You can also continue to live in your home while making use of the mortgage money.

Your asset does not lay idle, as its value is utilised by putting it to productive use.

As a general rule, be cautious while taking out a loan; it must be backed up by solid reasons and assurances that you can repay it. If you need money immediately, a Property Loan is a simple way to procure quick, liquid cash.

Source: http://blogs.rediff.com/loanagainstproperty/2016/03/25/what-you-need-to-know-about-a-property-loan/

Loan against Property Overview

Personal Loans are usually of two types i.e. secured personal loan which is secured against the mortgage of immovable property, insurance policies, gold jewelry, investments, etc and another is unsecured personal loan which does not require you to pledge anything.

Mortgage Loan commonly known as “Loan Against Property” in India is a secured loan that is sanctioned against fully constructed, freehold residential and commercial properties.

Some of the key factors are given below for your consideration before you apply for Loan Against Property.

Purpose

Loan against Property is normally taken for funding various personal or business needs of an individual e.g.

· Business Expansion

· Education Expenses of children

· Marriage expenses in the family

· Purchase of home

· Improvement or Extension of existing Property

· Medical Treatment

· or Any other personal Need.

Eligibility

The applicant for the loan should be:-

· Minimum 21 years of age

· Salaried Individual

· Self Employed professionals / non-professionals

Applicant should be the owner of the property and all co-owner has to compulsorily be co-applicant to the loan, however the co-borrowers need not be the co-owner to the loan.

Loan Amount

Typically you can get up to 50% – 60% of the value of the property or twice your annual income (whichever is lower) as a loan against property. The maximum loan amount is normally between Rs. 5 – 10 crores, but can be extended in some cases depending on the borrowers profile

The final loan amount is dependent on host of other factors like income and regular outgoings, existing loans, repayment track record, valuation of the property by the lender, etc.

Rate of Interest

Loan against Property is normally available on Floating as well as Fixed rate of interest. Most of the lenders will offer fixed rate of interest with a reset clause of 2-5 years which means that your fixed interest rate will be reviewed every 2-5 years and can be increased or decreased as per the terms and conditions mentioned in the agreement.

Repayment

Most lenders offers maximum tenure of 15 years but it is also restricted by the borrower’s age at the end of the tenure so as to ensure that the loan repayment ends on or before the retirement age of the borrower which is usually 60 years for salaried and 65 years for self-employed borrowers.

Fees and Charges

The processing fee for Loan against Property may vary from lender to lender but is usually up to 2% (excluding service tax) of loan amount.

The loan can be foreclosed any time on the payment of applicable penalty, however if the loan is taken on floating rate from the BANK then the borrower need not have to pay any foreclosure charges as the RBI has issued notification banning penalty of prepayment of all floating rate loans.

Documentation

To start the loan process, the lender will require proof of:-

· Identity

· Age

· Residence

· Income

· Property Documents including Title Deeds, chain of documents (if resale) and no-encumbrance certificate

One thing that needs to be noted is that if you are planning to buy a residential property, then it is advisable to take a Home Loan as they are cheaper, available for a longer tenure up to 30 years and lenders finance up to 90% of agreement value of the property as home loan as compared to Loan Against Property..

In case you are unable to get home loan due to any reason then you can take the loan against property.

[Source: http://www.apnapaisa.com/loan-against-property-overview/]

Property Loan

Let your property be a shelter to your dreams. IDBI Bank Loan against Property is a multi-purpose loan that can be used for your business or personal needs. Property Loan

4 Credit Tips for Buying a Home

1. Pay Down Debt/Rapid Re-Scoring

Some mortgage lenders have a credit doctor service, known as rapid re-scoring, available through their credit reporting company. This service allows them to run statistical credit modeling: the lender plugs in a certain credit score needed, an algorithm analyzes your complete credit portfolio and outlines what can be done to get you to that aforementioned threshold.

Oftentimes, high credit utilization (the amount of debt you are carrying versus your total available credit) is the culprit for a low score. In those instances, paying down certain credit accounts could make you more creditworthy — and mortgage eligible — within short period of time.

2. Time

If buying a house is a longer-term goal, time can be your friend. Credit history is a large component of a healthy credit score. Make your payments on time, keep the amount of debt you are carrying low and avoid late payments of any kind. These smart spending habits show that you are responsible with your obligations and will bolster your credit score eventually.

3. Quit or Resolve Disputes

In order to get a Loan against Property, you generally cannot have any accounts in dispute on your credit reports. At the same time, simply removing a dispute from your credit report can make your credit score drop. The reason? Credit scoring models generally ignore information being disputed, like an account with a late payment, which would otherwise hurt your credit score.

In order to circumvent these problems, work to resolve any disputes. (You can find more about getting errors off of your credit reports here.) You can also consider handling any issue you may have with a lender directly in lieu of filing a formal dispute with the credit bureaus. Here are some tips for negotiating with creditors.

4. Put More Money Down

Putting more money down to buy a home could put you in an entirely different mortgage category and help you bypass certain credit scoring problems.

Remember, if you have been told “no” by a bank or lender, you owe it to yourself to get a second or third opinion. What’s more, your credit score could improve from month to month, depending on what’s holding you back, so keep an eye on it in the meantime.

[Source: http://blog.credit.com/2016/03/4-credit-tips-from-a-mortgage-pro-139033/]

Loans against property: a time bomb ticking away?

In the fiscal year that ended 31 March, credit growth of India’s banking industry dropped to an 18-month low. The microfinance industry, in contrast, saw its loan book grow at the fastest pace and for a few it more than doubled. The scenario has not changed for banks in the past few months; year-on-year credit growth is now 9.8%. There are hardly any takers for loans from the corporate sector; the saving grace has been mortgages and retail loans.

At around Rs.12 trillion, the mortgage market in India is a little less than 10% of the size of its economy even as the overall bank credit market is about 50% of the nation’s gross domestic product or GDP. Indeed, the mortgage market has been growing at a fairly robust pace over the past decade but it is still small compared with other nations. For instance, the Chinese mortgage market is about 20% of its GDP; for the UK and the US, it has been 88% and 81%, respectively, while in Denmark, it is more than the GDP.

Home loans are the safest bet for Indian bankers, as they are backed by securities and the amount of loan is always less than the value of the property. In case of a default, the property can always be seized and sold to recover the money. Also, most banks and non-banks finance the first home purchase of salaried individuals; income verification for such home buyers is not difficult and affordability can be judged transparently.

Typically, around 40% of monthly income is used to service the loan in the form of equated monthly installments. However, within the home loan market, the increasing popularity of loans against property or LAP is causing some discomfort. A few analysts say that LAP is a ticking time bomb.

To be sure, Loan against Property is a secured loan. It takes a residential or a commercial property as collateral; self-employed individuals and professionals are LAP customers. Such loans are typically taken to support business in the form of expansion, diversification, consolidation or even meeting working capital needs. It is also taken for personal use like weddings, education, medical exigencies, repayment of previous loans and debt consolidation. According to rating agency Crisil Ltd, about 75% LAP customers are self-employed individuals doing business, 15% are salaried and the rest self-employed professionals.

The average LAP ticket size is higher than a home loan; its tenure is also shorter than the home loan, with the average being four to five years against 10-11 years for home loans. Typically, the interest rate for LAP is always 4-5 percentage points higher than the home loan rate. Similarly, the loan-instalment-to-income ratio is also higher for LAP—at least 50% against 40% for home loans. Finally, the loan-to-value ratio for LAP is lower—around 60% against 80% for home loans. In other words, a home buyer can get a Rs.80 lakh loan to buy a Rs.1 crore property but for LAP, a Rs.1 crore worth of property will fetch a loan of Rs.60 lakh.

[Source: http://www.livemint.com/Opinion/VbRw1lmZwZFfeZP43yCjLJ/LAP-A-TIME-BOMB-TICKING-AWAY.html]

Loan against Pr

Let your property be a shelter to your dreams. IDBI Bank Loan against Property is a multi-purpose loan that can be used for your business or personal needs. 

Investment Property Loan Types

An investment property mortgage is a loan for non-owner occupied property. There are two main classifications of investment property mortgages. These classifications include: commercial and residential. A commercial property mortgage is for a dwelling that contains 5 or more units and/or is zoned as commercial. A residential investment mortgage is for a dwelling that is one to four units and is zoned residential. Commercial and residential mortgages are two completely different loan types and have significantly different qualification standards. The following is a basic description of each mortgage type.

Residential Property Investment Loans

Residential property investment mortgages have similar qualification guidelines as standard owner-occupied mortgages. Although, they do have higher down payment and credit score requirements. Below is a summary of the general guidelines for residential investment mortgages.

• Credit Score Requirement – The minimum credit score requirement is typically 680 or above for investment mortgages.

• Debt to Income Ratio – Typically, the debt ratio limit for an investment mortgage is 40% of the borrower’s verifiable income. Besides W2 income, the borrower’s last 2 years tax returns will be needed to calculate the income that can be used from other rental properties or other sources of income.

• Down Payment – Investment property mortgages require at least 15% down, but the down payment requirement increases with lower credit scores and the greater the number of units in the property.

• Income – Lenders typically will only use rental income if the borrower has a two-year history of owning rental properties. This is usually documented via the tax returns and schedules.

Commercial Property Investment Loans

Commercial loans typically have higher rates, greater fees, and shorter terms than residential mortgage. The two most important factors for lenders on this loan type include: a positive cash-flow for the property, and the borrower’s past commercial property management experience. Below is a summary of the general guidelines for residential investment mortgages.

• Credit Scores Requirement – The minimum credit score requirement is typically 720 to 740 for a commercial loan.

• Down Payment – The minimum down payment for a commercial mortgage is typically 30% or greater. When refinancing, the maximum equity position is usually 70% of the appraised value of the property.

• Debt Service Coverage – This is a ratio used by lenders to calculate the property’s ability to generate cash flow. It is a calculation comparing the net operating income minus the mortgage payment and the other debt payments.

Other funding sources include: hard money lenders and private loans. Hard money loans are short-term loans from private investors. Private lenders typically use the equity position in the property as the determining factor whether they will approve and fund the loan. There are usually excessive closing costs and fees (points) charged on this type of loan. Property loan are loans that a person would receive from their family or friends. The terms may or may not be similar to hard money loans. Both hard money and private lenders typically only put a lien on the property and do not report payments on the borrower’s credit report.

Source: https://memphisbuyandhold.wordpress.com/2015/06/29/investment-property-loan-types/