Your search results

Faq

Select one of the frequently asked questions below to learn more about buying, selling, and renting real estate. Also, begin to think about important things to consider when diving into your real estate search.

Can a home depreciate in value?

Generally, real property never depreciates in value, or more so, it is not very common for property to depreciate.  This is why it’s a great investment. Make sure you carefully consider location and community when choosing a home, it can effect the homes future value greatly.

If you are in a newly developed area, do some research on the construction of the surrounding areas being developed to determine if they may effect your homes value.

Is an older home as good a value as a new home?

This is really just a matter of preference, but both newer and older homes offer distinct advantages, depending upon your unique taste and lifestyle.

Older homes can generally cost less than new homes, however, there are many cases where new homes can also cost less then older homes. Most new homes will not have any backyard landscaping and some don”t include any front landscaping either. With an older home, the landscaping is normally already completed and could have 10”s of thousands of dollars in landscaping done, which is included in the purchase price.

Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they”re concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve. A good Home Warranty plan protects you against unexpected repairs on many home systems and appliances for a full year or more after you move in.

In a new house, you can pick your own color schemes, flooring, kitchen cabinets, appliances, custom wiring for TV”s, electrical, computers, phones and speakers, etc., as well as have more upgrade options. Modern features like media rooms, extra-large closets and extra-large bathrooms and tubs are also more attainable in ground-up construction. In a used home, you rely largely on the previous resident”s tastes and technological whims, unless you plan to farm thousands into a remodeling and rewiring.

New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.

Builders have to follow very strict guidelines in new-homes and additions, especially in the West and Northwest, where earthquake safety standards must be observed. In general, new homes are usually more fire-safe and better accommodating of new security and garage-door systems.

Older homes can be better judged for their quality and timeless beauty. New homes that now possess a smooth veneer might reveal the use of substandard building materials or shoddy workmanship over time.

As you can see there are advantages and dis-advantages to each, but it really comes down to what fits you and what you are looking for in a home.

What is a broker?

An agent who is authorized to open and run his/her own agency. All real estate offices have one principal broker.

What is the difference between being prequalified and preapproved for a loan?

If you’re prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a preapproval.

If you’re preapproved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment – and the lender is willing to give you a loan, basically meaning you’re approved!

You will usually be provided an accurate figure which shows the maximum amount that you are approved for.  Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.

What is title insurance?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.

Can I pay my own taxes and insurance?

When a loan is originated, the mortgage documents specify the escrow conditions. This has become a standard practice for all mortgages, including FHA, VA and conventional mortgages.  Occasionally on conventional loans, FRFCU waives the collection of escrow requirement at closing if the member has a minimum 20% equity position in the property.

How can I avoid private mortgage insurance?

The easiest way to avoid PMI is by putting 20% down payment; however, PMI can also be avoided if you only have 5% or 10% for the down payment. The way to accomplish this is via a first and second mortgage combination commonly referred to as 80/10/10^s or 80/15/5^s.

These two methods combine a first mortgage lien for 80% of the home price with a second mortgage lien for either 10% or 15% of the home price leaving the remaining 5% or 10% as the down payment. Because the first lien is at the magical 80% loan=to-value, there is no PMI required, even though a second mortgage is being |piggybacked| onto the financing thus allowing for the lessor down payment.

While the second lien terms are not as attractive as first lien rates, the second mortgage is still home mortgage interest and thus deductible as such on your federal tax return where PMI is insurance and offers no deduction.

How is interest calculated on a mortgage loan?

Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.

Is there a minimum credit score?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.

What benefits do I receive from private mortgage insurance?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.

What do I do if I receive a tax statement?

Many tax authorities will mail an informational copy of the real estate tax statement to the homeowner in addition to the Credit Union.  However, there are some statements tax authorities do not forward to the credit union, and in special cases we will need your assistance in obtaining the bill. If you receive a statement for any of the following, please forward it to our office by mail or fax.

  • delinquent real estate taxes
  • supplemental or additional real estate taxes
  • special assessments
  • if the tax authority will not honor a bill request from another party.

How long does the loan process take?

Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.

How long does the loan process take?

Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.

How can I avoid private mortgage insurance?

The easiest way to avoid PMI is by putting 20% down payment; however, PMI can also be avoided if you only have 5% or 10% for the down payment. The way to accomplish this is via a first and second mortgage combination commonly referred to as 80/10/10^s or 80/15/5^s.

These two methods combine a first mortgage lien for 80% of the home price with a second mortgage lien for either 10% or 15% of the home price leaving the remaining 5% or 10% as the down payment. Because the first lien is at the magical 80% loan=to-value, there is no PMI required, even though a second mortgage is being |piggybacked| onto the financing thus allowing for the lessor down payment.

While the second lien terms are not as attractive as first lien rates, the second mortgage is still home mortgage interest and thus deductible as such on your federal tax return where PMI is insurance and offers no deduction.

What do I do if I receive a tax statement?

Many tax authorities will mail an informational copy of the real estate tax statement to the homeowner in addition to the Credit Union.  However, there are some statements tax authorities do not forward to the credit union, and in special cases we will need your assistance in obtaining the bill. If you receive a statement for any of the following, please forward it to our office by mail or fax.

  • delinquent real estate taxes
  • supplemental or additional real estate taxes
  • special assessments
  • if the tax authority will not honor a bill request from another party.

What benefits do I receive from private mortgage insurance?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.

How is interest calculated on a mortgage loan?

Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.

Can a home depreciate in value?

Generally, real property never depreciates in value, or more so, it is not very common for property to depreciate.  This is why it’s a great investment. Make sure you carefully consider location and community when choosing a home, it can effect the homes future value greatly.

If you are in a newly developed area, do some research on the construction of the surrounding areas being developed to determine if they may effect your homes value.

Is an older home as good a value as a new home?

This is really just a matter of preference, but both newer and older homes offer distinct advantages, depending upon your unique taste and lifestyle.

Older homes can generally cost less than new homes, however, there are many cases where new homes can also cost less then older homes. Most new homes will not have any backyard landscaping and some don”t include any front landscaping either. With an older home, the landscaping is normally already completed and could have 10”s of thousands of dollars in landscaping done, which is included in the purchase price.

Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they”re concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve. A good Home Warranty plan protects you against unexpected repairs on many home systems and appliances for a full year or more after you move in.

In a new house, you can pick your own color schemes, flooring, kitchen cabinets, appliances, custom wiring for TV”s, electrical, computers, phones and speakers, etc., as well as have more upgrade options. Modern features like media rooms, extra-large closets and extra-large bathrooms and tubs are also more attainable in ground-up construction. In a used home, you rely largely on the previous resident”s tastes and technological whims, unless you plan to farm thousands into a remodeling and rewiring.

New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.

Builders have to follow very strict guidelines in new-homes and additions, especially in the West and Northwest, where earthquake safety standards must be observed. In general, new homes are usually more fire-safe and better accommodating of new security and garage-door systems.

Older homes can be better judged for their quality and timeless beauty. New homes that now possess a smooth veneer might reveal the use of substandard building materials or shoddy workmanship over time.

As you can see there are advantages and dis-advantages to each, but it really comes down to what fits you and what you are looking for in a home.

What is a broker?

An agent who is authorized to open and run his/her own agency. All real estate offices have one principal broker.

What is the difference between being prequalified and preapproved for a loan?

If you’re prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a preapproval.

If you’re preapproved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment – and the lender is willing to give you a loan, basically meaning you’re approved!

You will usually be provided an accurate figure which shows the maximum amount that you are approved for.  Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.

What is title insurance?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.

Can I pay my own taxes and insurance?

When a loan is originated, the mortgage documents specify the escrow conditions. This has become a standard practice for all mortgages, including FHA, VA and conventional mortgages.  Occasionally on conventional loans, FRFCU waives the collection of escrow requirement at closing if the member has a minimum 20% equity position in the property.

Is there a minimum credit score?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.

Real Estate Terminology India

  1. Carpet Area : It is the area of the house which does not include the inner walls’ area. Carpet area calculation also includes the terrace and balcony space, which is normally considered as half of the main or the actual area.
  2. Built-up Area: Built-up area includes everything right from the thickness of the outer walls, carpet area, balcony area until the inside walls.
  3. Super built-up Area : This generally comprises of the built-up area and also all the useable area including the lobby, stairs, corridors, lifts etc and are proportionately divided among the flats.
  4. Per Square Foot Rate : Generally developers decide the value of the property based on the per square foot rate of the super built-up area. This is the reason for the super built-up area being termed as “Saleable area”.
  5. Floor Space Index (FSI) : Floor Space Index calculation or FSI is the actual ratio between the total built-up area and the available plot area permitted by the Government for a specific locality. A higher FSI will have a higher built-up area.
  6. Residential & Commercial Property: Residential property refers to those buildings which are developed for personal use and living; Commercial properties are those which are developed solely for business purposes.
  7. What is Freehold property: A Freehold property is where the owner has the complete & unconditional ownership of the land and also the building which stands on it. In other words, it is the unrestricted ownership of the whole real estate property.
  8. Real Estate Broker: Real estate brokers are usually professionals who mediate between the owner and the buyer in the sale or purchase of a property.
  9. Conveyance: It is referred to the act of transferring or conveying the rights, title, ownership & interests of a property from one person to the other, who is purchasing the property. Any property whether immovable or movable should be transferred to the buyer using this agreement.
  10. Credit Score: It is a statistically derived score of a person’s credit worthiness, which is generally used by money lenders to know the likelihood of that person repaying his/her debts. It is usually based on the person’s past credit history.
  11. Lease Agreement: Lease agreement is one type of contractual agreement made between the lessee (user) and the lessor (owner) to lease out the property for a period of time. The terms cannot be changed until the lease term expires and it should be strictly followed by both the parties.
  12. License Agreement: License agreement is referred as the written agreement which is entered into by the owner of the property who gives permission to another person to use the property or involve any activity with regards to the property.
  13. Non-Disclosure Agreement: A non-disclosure agreement or NDA is a legal contract signed between two or more parties outlining confidential materials, knowledge or valuable information which the parties share among themselves for business purposes but wish to restrict the access to third parties.
  14. Inherited Property: Inheriting a property is the practice of passing on of a property, titles, debts and any other obligations upon the death of a person or under any other circumstances.
  15. Subletting: It is basically the practice of an existing tenant to lease out small fraction or the whole property to another person. And the subtenant pays the rent to the tenant instead of paying it to the owner. In India, the tenant is evicted if found guilty of subletting the property to another person without the knowledge of the owner of the property.

What are the documents you need to check before buying?

  •  Check for proper conveyance of Title in favour of the builder.
  • Check the license/development right/approvals of the builder.
  •  Check clear and marketable title of the project.
  •  Ensure execution of proper Allotment Letter/Sale Agreements on your payments.
  • Ensure whether reputed financial companies approve the project. This will help you in getting financial loans.
  • Check the tentative layout/building plan and verify the plinth area of the apartment. It is advisable to check the carpet area of the apartment and find out if the difference between plinth area and carpet area is reasonable.
  • Ask for Occupation/Completion Certificate.
  • Ensure the Conveyance Deed is registered after the entire payment has been made.
  • For buying a property you need to check Deed of Conveyance, Mutation Certificate (for complete property), Land Registration Status, Sanction Plan, Search Report and Payment Schedule (for under construction). It is a must that you go through all the documents relating to the origin of the property, chain of Title, Occupancy Certificate, sanctions from various authorities dealing with building plans, fire safety and Completion Certificate.
  • For re-sale property, check demand notice relating to renovation, tax dues and latest receipts of payments made towards various out-goings such as water, electricity and ground rent.

What is meant by Carpet Area, Built-Up Area & Super Built-Up Area?

Carpet area is defined as the precise area within the walls of your home. If you had to lay out a wall-to-wall carpet in your entire home, the area covered would be the carpet area.
Built-up area is inclusive of not just the carpet area but also the area being occupied by the walls of your home.
Super built-up area takes into account all the area under the common spaces which is the apartment’s proportionate share of the lobby, staircase, elevator and the corridor outside the apartment.

What constitutes conclusion of sale of a property?

The housing society share certificate and the sale/purchase deed of the property are the main documents required to sell a residential property. If the property has been sold and bought multiple times, a copy of the previous deeds may be required to prove the authenticity of the deal. Other than these, copies of Stamp Duty and registered house documents will also be needed. In case of property being mortgaged, these papers will be held by the bank and you can use a photocopy of the required documents to initiate a deal. Depending on the kind of property and ownership, some more documents, such as a No-Objection Certificate from the housing society and a documented consent in case of jointly owned property, may be required.

What is a Sale Deed?

A Sale Deed is a document prepared on the basis of previous ownership document for the transfer of property from seller to buyer, providing the buyer the absolute and undisputed ownership of property. Source: CreditVidya, credit advisory firm helping borrowers on credit and debt management. Done.

How much is the Registration Fees on sale of immovable property?

During the transfer of property from one to another, the stamp paper and registration fee has to be paid which is equivalent to 7 to 8 per cent of the value of the property or those of circle rates. These rates are the notified rates of a particular area set by the government on which the registration charges on the value of the property are calculated. The circle rates can be seen on government registration and stamp department websites of each city. Source: MB Legal Expert (Atulay Nehra – Openhouse)

What are the things to actually look for when zeroing in on a house?

Budget, location, type of property, objective of buying and choice of property are the determining factors for purchase of property from an end user’s perspective. Real estate values are governed by demand and supply. This may vary on a project to project basis. The projects which see good demand normally do not see a price correction. Source: E-book

While buying a house the top questions to keep in mind are:

– When to Buy?
– What to Buy?
– Where to Buy?
– How to Buy?
– How much to pay for it?
– Which locality to buy in?
– What type of property to buy?
– How to extract maximum return from your property investment?
Source: E-book

Should I take a home on rent or should I buy?

There is no harm in renting a property till you are ready with enough finances to buy. If you find a place where you want to stay and can manage to get enough formal finance, look at buying as your monthly outflow will lead to creating an asset. But make sure your EMI is not more than 35-40 per cent of your monthly salary. Source: E-book

What is the difference between a builder floor apartment and a multi-storey apartment?

A single floor apartment is one where the builder buys a piece of land, often old plots which are up for redevelopment, constructs flats on each floor according to the permissible Floor Area Ratio (FAR) and building byelaws and sells them as independent units within the same building. The land belongs proportionately to all the buyers of single floors. Since there are smaller numbers of units than in a multi-story apartment, these lack economies of scale and so have fewer common facilities such as maintenance and back-ups compared to larger multi-storey apartments. But these are newer apartment units in downtown or preferred areas and come at a price lower than multi-storey units.
A multi-storey remains the most preferred housing units in metros and large cities today. It is a cluster of apartments in a high-rise building developed in a plot with all amenities available within a gated community. These units can be aggregated and constructed by developers or in the cooperative mode as Cooperative Group Housing Societies (CGHS).These need good common facilities management to take care of aggregating services and providing them to individual units for a fee. This fee is levied as monthly maintenance charges. They cover water and power supply, including back-ups, lift and common area maintenance and landscaping. Many developments also provide plumbing and electrical services for a fee. Source: E-book

How do you choose the right type of property?

Depending on the chosen budget, one can decide the type of property. If you are an end-user, the size of your family, along with the budget can be a determining factor while choosing the type of house you need. There is a wide range to choose from today as the market abounds in various housing formats from 1, 2, 3 and 4BHK apartments, to studios, villas and row houses, to builder floors and independent houses. Multi-storey projects and township with all amenities in one project clubhouse, swimming pool, meditation center, health clubs, departmental stores, schools, cinemas, sports facilities and banquet/party halls are what most end-users are looking at today. Source: E-book.

What is your recourse in case of a delayed project?

Until the draft real estate regulation bill outlines the obligations of project delivery, buyers will have to rely on their rights laid out in their booking agreements. First and foremost, buyers should scrutinize the project and the background of the developer. If possible, they must hire a real estate consultancy firm who has market expertise and is known for unbiased consulting. In addition, an investor has the right to ask for the copies of approvals of the project, if not buying during a soft launch stage. You must ask for detailed construction schedules and negotiate for penalty clause in case of delay of project. Refunds can be claimed if a project is delayed beyond the period stipulated in the Builder Buyer Agreement by filing a case in the consumer court. Source: CreditVidya, credit advisory firm helping borrowers on credit and debt management. Done

What is Stamp Duty and who is liable to pay the Stamp Duty, the purchaser or the Developer?

Stamp Duty is supposed to be paid every time there is a transfer of ownership. It is calculated on the basis of the total value of your property. The amount to be paid varies from city to city. Source: E-book

Which documents must be compulsory registered? When and where should a document be registered?

The Registration Act, 1908 came in the year 1908 and made compulsory registration of the deed. You have a property of the year 1978. Therefore, it should be registered. Since the agreement is unregistered, it is not valid and does not transfer the ownership to you. Before you make a gift deed, you need to register the sale deed in your favor as you are not the legal owner yet. Source: S Jalan (Openhouse)

What is meant by valuation of property?

Valuation of property simply means arriving at the actual prevailing cost of the property. It could depend upon number of parameters, location of property being the most important one. One needs to consider other parameters such as age of property, projects available, facilities offered and the sizes available in that project. The latest transaction price of a similar property needs to be considered to arrive at the closest value of the given property. Source: Openhouse (MB Expert)

Who is the appropriate authority for knowing the market value of the property?

It is ideal to get the valuation done by a certified valuer for the house as per the ongoing rates. The property valuation reports can be obtained from the architects or a certified valuation expert. Source: MB Legal Expert (OpenHouse- Atulay)

What is home loan?

Home loan is a way of finance for purchase of residential property, usually with specified payment periods and interest rates. The borrower gives the lender a lien on the property as collateral for the loan. The mortgagor’s lien on the property expires when the mortgage is paid off in full.

What are the types of Home loans available?

There are a variety of home loans available. They are:- – Home Purchase Loan:
This is the common loan for buying a house either a new one or on resale.

– Home Improvement Loan:
This loan is given for undertaking repairs, renovations and/or up-gradation to your house.

– Home Construction Loan:
This loan is available for the construction of a new home.

– Home Extension Loan:
Home extension loans are given for expanding or extending an existing home. For example, addition of an extra room or FSI allotted to the owner of the property

– Home conversion loan:
Home conversion loan is available for those who have financed the present home with a Home Loan and wish to purchase and move to another home for which some additional funds are required. Through a Home Conversion Loan, the existing loan is transferred to the new home, including the additional amount required, eliminating the need for pre-payment of the previous loan.

– Plot Loan:
This type of loan is sanctioned for purchase of land for home construction.

– Bridge loan:
The Bridge Loan is designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home

What is an EMI

EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of both interest and principal component.

What are the eligibility conditions for a home loan?

For Home loan lenders in general look at your ability, stability and creditworthiness before they lend. Loan is provided to the below category:
a) An Indian resident or NRI
b) Above 21 years of age at the commencement of the loan
c) Below 65 when the loan matures
d) Either salaried or self -employed
e)worthy of credit facility as per information on Credit Bureau

What are the interest rates offered for home loans? What are: Daily Reducing, Monthly Reducing and Yearly

The interest on home loans in India is usually calculated on monthly reducing balance. Some banks/ lending institutions also provide Home loans which are on daily reducing basis.
Annual reducing:-
Under this program, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender through EMIs paid during the year.
Monthly reducing:-
In this system, the principal, for which you pay interest, reduces every month as you pay your EMI and interest is calculated on the principle outstanding thereafter.
Daily Reducing:-
In this system, the principal, for which you pay interest, reduces from the day you pay your EMI.

What is a fixed rate of interest?

Fixed rate of interest means that the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, if rates of interest drop in the market. Similarly you do not lose if rates of interest increase. Under fixed home loan rates also, banks/HFCs may retain the right to increase the rate of interest know as reset clause after the prescribed interval which will be mentioned in the loan agreement.

What is a floating rate?

This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up. Floating rate is linked to BPLR or the base rate of the lender as the case may be.

What are the other costs that usually accompany a home loan?

Home loans usually attract following extra costs:-
1. Processing Charge: It’s a fee payable to the lender on applying for a loan. It is either a fixed amount or may be a percentage of the loan amount applied.
2. Pre-payment Penalties: You will be charged a Pre-payment penalty when you fore-closure your loan under fixed interest rate before the stipulated period. As per RBI guidelines there is no pre-payment penalty under floating rate of interest.
3. Miscellaneous Costs: Other Miscellaneous costs such as Lenders may charge CERSAI charges, as per Central Registry of Securitization Asset Reconstruction and Security Interest of India for creation of charges, conversion charges for switching of interest rates, document retrieval and handling charges etc.
4. Stamp duty for loan: Registration of mortgage deed by deposit of titled deed or registered mortgage.

How do HFCs decide on the loan amount?

The loan to value on Home loan will range from 75% -85% a maximum of 85% of the cost of the house basis the loan amount. The balance is called ‘margin money’, has to be provided by the loan applicant upfront. The amount, for which the applicant is eligible, is determined by the age, income, number of dependents, monthly outgoing and repayment capacity and credit score. This varies from case to case.

Are securities required for home loans?

Property is the prime security for Home loan and is mortgaged to the lending institution till the entire loan is repaid. Lender can ask for additional security in case to case basis which could be LIC policy, FD, NSC certificate if there are not comfortable with primary security provided.

What is the time required for loan disbursement?

Lenders need to complete the legal and technical clearance before the disbursement. On an average, loans are disbursed within 5-15 days after satisfactory and complete documentation and completion of all relevant procedures, including margin money has been paid upfront to the seller of the property.

What are the tax benefits of home loans?

– Resident Indians are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. Interest repayment of Rs. 1,50,000 p.a.
– You can get added tax benefits under Sec 80 C on repayment of principal amount upto Rs. 1,00,000 p.a.
– Budget 2013 also offers an additional Rs 1 lakh interest tax deduction on a home loan under Rs 25 lakh for first time first time home buyers under section 24 of Income Tax Act, 1961

List of documents required

1. Completed loan application
2. 1 passport size photographs (including those affixed in loan application)
3. Proof of identification: Electoral ID Card / Passport / Driving License / PAN card.
4. Proof of residence: Electoral ID Card / Passport / Electricity Bill / Telephone Bill.
5. Proof business address, in case of non- salaried borrowers
6. Statement of bank account for the last six months

Who is an NRI?

NRI is defined separately under income tax laws and under foreign exchange laws. The definition of NRI under the tax laws is relevant for all income tax related matters. The definition of NRI under the foreign exchange regulations is relevant for purposes such as banking, repatriation, investments, etc.
NRI under the tax laws: Under the income tax laws, an individual is considered as an NRI for a financial year if he is either a citizen of India or a person of Indian origin, and is a non-resident in India for that year.
An individual is considered as a non-resident in India for a financial year if:
i) He was present in India for less than 60 days in the financial year, OR
ii) He was present in India for a period of 60 days or more but for less than 182 days in the financial year AND he was in India for a period less than 365 days during the preceding 4 financial years, OR
iii) He was present in India for a period of 60 days or more but for less than 182 days in the financial year AND he, being an Indian citizen, either left India during the year for the purposes of employment outside of India or he, being a person of Indian origin or an Indian citizen, came to visit India during the year.
NRI under the foreign exchange regulations:
An individual is considered as an NRI if he is a non-resident of India for that year and is either a citizen of India or a person of Indian Origin.
An Individual is considered as a non-resident if he has left India for the purposes of taking up employment outside of India or carrying out a business/profession outside of India or for any other reason with an intention to stay outside of India for an indefinite period of time.

Can an NRI buy property in India?

Yes, an NRI can purchase immovable property in India other than an agricultural land.

Do an NRI need RBI permission for buying property in India?

No, an NRI does not need to obtain permission from RBI for buying immovable property (other than agricultural land) in India.

What are the documents required for obtaining Home Loans for NRIs & POIs?

Posted by SUPER ADMIN on October 23, 2016
|
| 0

1. NRIs are required to submit additional documents than is normally required for a resident Indian.
2. A copy of the passport
3. A copy of the works contract (also sometimes referred to as the contract card/labor card)
4. The power of attorney (POA). The POA is required because the borrower is not based in India and in such a scenario, the HFC would need a representative ‘in lieu of’ the NRI to deal with as required. Although not compulsory, the POA is usually drawn on the NRI’s parents, wife or children

What are the Tax Benefits applicable to Non-Resident Indians?

Please refer to answers to questions 11 and 13.
Also the first time individual homebuyers get tax deduction on interest of home loan (for self-occupied house), under newly inserted section 80EE of the Income Tax Act, 1961 applicable for financial year 2013-14. This is in addition to interest deduction referred to in answer to question 14.
This rebate on home loan interest is applicable only for home loans satisfying the following conditions:
i. Loan is sanctioned by a financial institution or housing finance company between April 1, 2013 and March 31, 2014.
ii. Loan amount is Rs. 25 lakhs or less and cost of residential house is Rs. 40 lakhs or less
This should be the only house owned by the taxpayer at the time of sanction.
Deduction of an amount up to Rs. 1 lakh can be claimed towards interest payable on home loan in the financial year 2013-14. If interest payable in this year is less than Rs. 1 lakh then the balance can be claimed in the following year.

What is the mode of payment for NRI home loans?

The loan towards the home has to be paid upfront for the entire tenure of the loan by way of direct remittances from abroad through normal banking channels or from accounts that are allowed by RBI. Currently, payments are done through NRO, NRE, NRNR and FCNR accounts. These accounts change on the basis of RBI permissions to each HFC.

What is the repayment period for a NRI Home Loan?

The housing finance offered to NRIs normally do not exceed 5 years. However, some HFCs offer loans for a term of 7 years. The repayment for the loan is by way of EMIs. The EMIs begin only after the entire loan is disbursed. In case of a part disbursement, you pay simple interest at the rate applicable on the loan amount that is disbursed to you.

What is the eligibility for obtaining NRI Home Loans?

1. The eligibility for an NRI is calculated on the same lines as a resident Indian. Emphasis is placed on the following for an NRI:
1. Qualifications – the NRI applicant has to be graduate
2. Current job profile & past experience
3. Probability of staying abroad for the entire loan tenure
4. Probability of servicing the loan with an extended tenure in case you have to return to India.

What income taxes are applicable on house properties in India?

The income tax implications arise at the time of purchase of the property, during the period of ownership of the property and also at the time of sale of such property.
i) Income tax implications at the time of purchase of property:
At the time of purchase of the property the NRI buyer may have to deduct income tax while making payment towards the purchase of the property.
If the property is being purchased from another non-resident then the NRI buyer is required to deduct income tax at the rate of 20% or 30% of the sale consideration of the property. He is also required to obtain a TDS Account Number and file TDS return for the same. Law also provides for procedures to enable the buyer deduct income taxes at lower rates.
If the property is being purchased from a resident seller then the NRI buyer is required to deduct income tax @ 1% while making payments to the buyer if the value of the property is more than Rs. 50 lakhs.

ii) Income tax implications during the period of ownership of the property:
The property may be either let out, or kept vacant or occupied by the owner himself during the period of its ownership.
The tax implications on these are dealt with in answers to question 13, 14 and 15.
It is important to mention here that the non-resident should also check the tax implications in the country of his residence as many countries tax their residents on the worldwide income.

iii) Income tax implications at the time of sale of the property:
The NRI taxpayer would be required to pay income taxes on capital gains arising on sale of the property. The law provides for certain deductions on reinvestment in capital gains tax saving bonds or in another house. The law also provides for conditions to be met to be eligible to claim these exemptions.
NRI seller may also have to suffer TDS upon the sale of his house. Under section 195 of the Income Tax Act, 1961, any person buying a property from a non-resident is required to deduct income tax @ 20% or 30%. The law also provides for procedures to receive the sale consideration without deduction of tax at source or deduction of tax at lower rates.
The NRI taxpayer, if he suffers from high amount of TDS, can file his income tax return and claim a refund of his taxes.
It is important to mention here that the non-resident should also check the tax implications in the country of his residence as many countries tax their residents on the worldwide income.

Can an NRI give power of attorney for property purchase transactions?

Yes, an NRI can give a power of attorney for property purchase transactions

What tax benefits are available on home loans repayments?

The amount of principal loan repaid is eligible for deduction under section 80C. However, the loan should have been taken from a bank or a housing finance company or a financial institution in India.
Note that under the tax laws, the aggregate of deductions under section 80C and 80CCC cannot exceed Rs. 100,000. Lastly, the deduction on principal repayments is revoked if the property is sold within 5 years from the end of the year I which the NRI taxpayer obtained its possession.

How would the rent received from the property be treated?

If the property is let out, annual the rental income from the property is included in the taxable income.

What are the deductions one can get against the property?

In case the house property is let out or is deemed as let out (refer answer to question 15 below), the NRI taxpayer is entitled to claim 3 deductions i) the amount of property taxes paid, ii) an allowance for the repairs and maintenance of the property (computed @ 30% of rent minus property taxes paid), and iii) the amount of interest payable on loan taken for purchase or repairs/reconstruction of the house. It is important to note here that if the loan is taken outside of India to purchase the property in India then deduction on such interest is rarely allowed. However, if the loan is taken within India the interest payable on the same is allowed as deduction. Note that there is no ceiling on the amount of deduction which can be claimed on interest payable on such loans if the property is let out or deemed as let out.
The net rental income from the property, calculated as above, is included in the taxable income of the non-resident. However, if the net income is negative then such negative income can be set-off against the positive income from other houses, if any, owned by the non-resident. Balance loss, if any, can be set-off against any other income of the non-resident.

How does one handle a vacant property?

If the property is vacant throughout the year, the same can be claimed as self-occupied. However, if taxpayers own multiple houses which are not let out for any part during the year then only one of such vacant houses can be claimed as self-occupied. The other vacant houses are deemed as let out.
For a house which is considered as self-occupied, the tax payer can claim a deduction on interest payable on purchase/repairs/reconstruction of the property only up to Rs. 150,000. Since there is no income associated with a self-occupied property, this deduction results into a tax loss from the property. This loss can be set-off against the positive net rental income, if any, from the other properties. Balance loss, if any, can be set-off against any other income of the NRI taxpayer. If the house is deemed as let out, the annual value of the house (often the amount of rent the NRI taxpayer can reasonably expect to receive from the property) is considered as notional rental income.
Deductions, as discussed in the answer to question 11 above are allowed as if the property was actually let out to arrive at the net rental income from the property.

How is wealth tax applicable for NRIs?

NRIs are liable to pay wealth tax in India @ 1% on the net taxable wealth in excess of Rs. 30 lakh. Taxable wealth includes assets situated in India such as house, plot of land, motor cars, gold, jewellery, etc.
The value of one house can be claimed exempt while computing the taxable wealth. Further, if a house is let out for more than 300 days in a financial year then its value is not included in the taxable wealth.
The amount of debt outstanding in respect of taxable assets is allowed as a deduction while computing net taxable wealth.
Financial assets such as balances in banks, fixed deposits, share and securities, etc. are not included in taxable wealth.

Are there any limits on the amount that can be repatriated?

The current regulations allow an individual to repatriate up to one million dollars from the NRO account. For most NRIs this amount would be comforting considering that for a family of 3, the total amount which can be repatriated annually would work out to USD 3 million (or Rs. 18 crore rupees assuming an exchange rate of Rs. 60).
Additionally, upon sale of a house, an NRI can repatriate the cost of up to 2 residential houses sold which were acquired by funds in NRE or FCNR accounts or through the remittances from abroad.

In whose name will you buy the property?

It has to be decided on a case to case basis but generally it is a good idea to co-own the property along with spouse.

Are Non-Resident Indians allowed deductions under 80C for investing in the Public Provident Fund, National Savings Certificates, etc? Is the initial Rs 100,000 tax-free in those schemes?

Yes, NRIs are eligible to claim deduction of an amount up to Rs. 100,000 under section 80C of the Income Tax Act, 1961.
However, due to RBI regulations, not all the investment avenues enlisted under section 80C are available to the non-residents.

Hey! I Did Not Find Answer To Your Question In FAQ ?

If you still need assistance, please contact us and a member of our customer support team will gladly assist you.

Compare Listings