Acceptance Letter
The letter that a borrower fills up. Once the loan is issued by the way of a sanction
letter, the applicant communicates his willingness to accept the loan by way of
an acceptance letter. He has to send this within 1-3 months from the date of the
sanction letter.
Advance EMI
Number of equated installments in the form of post dated cheques, paid out in advance
at the time of disbursement of loan.
Administrative Fee
A one-time fee paid to the HFC (Housing Finance Company). It is generally non-refundable
and is payable before the loan is disbursed. Rates may vary from 1-2% of the loan
amount.
Amortization Schedule
Find out exactly how much principal and how much interest you are going to pay each
month through the tenure of your specific loan. The amortization schedule gives
you the detailed breakdown of principal, interest, loan balance for each month.
Close Relatives
As per the section 6 of the Company Act, a close relative is one who is acceptable
as a guarantor is any of the following : Father, Mother (including step mother),
son(including step son), son's wife, daughter (including step daughter),son's son,
son's wife, son's daughter, son's daughter's husband, daughter's husband, daughter's
son, daughter's son's wife, daughter's daughter, daughter's husband, brother(including
step brother), brother's wife, sister (including step sister), wife/husband and
sister's husband. However they should comply with the age and other norms of the
company to be considered as guarantors.
Commitment Fee
Much like other commitments, the commitment fee is an interest, which is charged
if you do not draw the sanctioned loan amount within a period of 6-7 months. The
interest rate is usually about 1-2%.
Credit Appraisal
Every Housing Finance Company (HFC) has its own panel of credit appraisal officers
who process applications. They take into account various factors like income of
the applicants, number of dependents, monthly expenditure, repayment capacity, employment
history, number of service years left and other factors, which affect the credit
rating of the borrower. Proof of income will also be verified for the purpose of
approval of loan. The time taken for receipt of such information is crucial since
it affects the length of time required for a loan approval.
Documentation
Documentation is the set of papers to be signed in connection with the loan at the
HFC, i.e. the loan papers.
Down Payment
Housing Finance companies normally give loans up to 80-85% of the value of the property.
The balance would have to be paid by the buyer, as a payment before he draws on
the loan amount.
Encumbrance
Document to ward of the nightmare of property litigation. It records details of
transfer of ownership of a property in succession right to the current owner. It
shows the date, the names of the parties involving the amount of consideration,
the extent and schedule of the property. This certificate can be obtained from the
sub registrars' office for a payment of fee. This certificate is also useful in
establishing the events as to how and when the present owner came into possession
of the property.
Equated Monthly Installment (EMI)
Loan repayments are usually in Equal Monthly Installments over the tenure of the
loan. Some banks also offer a Variable Installment Scheme in the beginning of the
loan period. This is beneficial for those individuals who are trying to maximize
their tax breaks in the initial years and expect future tax breaks to fall.
Exposure/Extent of loan
The loan amount as against the value of the asset/product.
Floating Rate
Floating Rate is the interest rate on the loan depending on the Prime Lending Rate
(PLR) fixed by the Reserve Bank. This change can happen as frequently as once in
six months. If the PLR falls, you benefit and if it rises, you have to shell out
more. However, in case of a fall your payments remain the same for every month.
The finance company will refund some of your EMI cheques and effectively compensate
you by reducing the tenure of the loan. The reverse happens if the PLR rises, much
to your disadvantage.
Flat Rate
Percentage representation of the amount of annual interest on the total loan amount.
Interest Tax
Percentage representation of the amount of annual interest on the total loan amount.
Interest Rate
Rate at which the lenders charge interest for the loan amount.
IRR
Internal Rate of Return is the rate at which the lender accounts for interest.
Legal Scrutiny Report
The documents which are pertaining to your property needs to be scrutinized by the
legal personnel of the HFC to ensure that you are buying a property that is clear
and marketable.
License for Construction
This is basically permission to construct or an authorization in writing issued
along with the loan application.
Margin Amount
Margin Amount is the difference between the total cost of the project and the loan
amount sanctioned. This money has to be invested by the borrower prior to the release
of the loan amount.
Marketable Title
A person is said to have a marketable title only when the title to the property
is clear and he/she has the right and capacity to transfer the same.
Market Value
This is the value of the property as per the prevailing market value.
Obligation
Most HFCs charge some fee for pre-payment of loan before the tenure is over. Your
earning capacity normally increases with your age and a pre-payment fee can be a
big cost. The fee is normally in the range of 1-2% of the pre-paid amount.
Prepayment Charges
Most HFCs charge some fee for pre-payment of loan before the tenure is over. Your
earning capacity normally increases with your age and a pre-payment fee can be a
big cost. The fee is normally in the range of 1-2% of the pre-paid amount.
Pre-Sanction Inspection of Property
After the receipt of the loan application, a loan officer from the HFC conducts
an inspection of the property to ascertain the location of the property, verify
the technical details of the house and the stage of construction.
Property Tax
This is the tax which is levied by the local authority such as Corporation, Municipality
etc. to the person in whose name the property stands.
Refinance Charge
Home Housing Finance companies do not charge you for prepayments from your own savings.
However, if you retire a loan using money borrowed from another Finance Company,
you will have to pay a refinance charge of 1-2% of the loan outstanding.
Registration Value
This is the value of the property at which the property is registered.
Role of Guarantor
The role of a guarantor is commitment by the way of agreeing to the terms and conditions
of the loan and liable to the extent of the loan/liability together with the interest
and other charges.
Rest
Interest rates are quoted on a daily rest, monthly rest or annual rest basis. The
annual rest quote implies that the company gives you the credit for the monthly
principal repayments only at the end of each year. Such loans are therefore more
expensive than a monthly/daily rest loan. The shorter the tenure of the loan, the
greater the effective interest rate difference will be.
Sale Agreement
Sale Agreement is an agreement which is entered in between the parties dealing with
the property and which creates a right to obtain a sale deed mentioning the property.
Generally it preceeds a sale deed and normally it fixes a time for completion, payment
of earnest money or part payment of purchase consideration.
Sale Deed
This is an instrument in writing which transfers the ownership of the property/properties
in exchange for a price paid or considered. This document is required to be registered
compulsorily.
Sanction Letter
This is the letter which communicates the sanctioned terms and conditions once the
loan is approved.
Sanctioned Plan
A drawing containing the plans, section of elevations of areas along with detailed
schedules, specifications and area statements on which the sanctioning authorities
grant permission to carry out work as regulated in the bye laws.
Statement of Account
It is the duty/fee payable on the different instruments / documents as per the prescribed
rate. The adequacy of stamp duty should be ensured to make a document valid and
enforceable.
Stamp Duty
It is the duty/fee payable on the different instruments / documents as per the prescribed
rate. The adequacy of stamp duty should be ensured to make a document valid and
enforceable.
Tenure of the Loan
It is the duty/fee payable on the different instruments / documents as per the prescribed
rate. The adequacy of stamp duty should be ensured to make a document valid and
enforceable.
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