Here are some home loan terms it helps knowing

CREDIT APPRAISAL

This is a process by which a lender evaluates the creditworthiness of the loan applicant. It involves assessing the borrower's past repayment history, establishing the sustainability of his current income and evaluating his capacity to repay. The applicant will be sanctioned a loan only after taking into account his savings, income, age, qualifications, period of employment and other outstanding debts.


EMI

EMI (equated monthly installment) is an unequal combination of two components - principal and interest. This is the amount of money the borrower owes the lender every month, through the tenure of the loan.


MARGIN MONEY

Also called down payment, margin money is typically around 10-15 percent of your loan amount. The bank does not disburse the entire cost of the property when you seek a home loan. It lends only around 85-90 percent of the project cost. The borrower is expected to bring in the remaining money. This is referred to as down payment or margin money.


HOME IMPROVEMENT LOAN

Some people may need money to repair, renovate, remodel or extend their home. Banks offer home improvement loans that you can use for making structural improvements, external and internal repairs, flooring, painting, improving plumbing, electrical work etc.


JOINT LOAN

A loan applicant can apply jointly for a loan with his spouse or parents. This way he can club the incomes. This increases his loan eligibility.


HOUSEHOLDER’S INSURANCE

This policy offers insurance for household belongings against fire, malicious damage, burglary and natural disasters like flood and earthquake. The householder's insurance policy is a comprehensive package that protects the house and its various contents against a variety of risks. It is a single policy that takes care of a number of contingencies.

Some tips to help you cope with higher EMIs without the risk of defaulting

Many borrowers, especially those who took a home loan when the rates were very low, are feeling the pinch of the higher rates prevailing now.

To understand the impact of the increase in rates on your Equated Monthly Instalments (EMI) outflow, consider this example. Five years ago, interest rates were at an unbelievable low of around seven percent. Suppose a borrower, takes a loan of Rs 50 lakhs for a tenure of 20 years, his EMI outflow comes to around Rs 39,700 at seven percent. For the same loan amount and tenure, consider the current rate of 13 percent. The EMI outflow comes to around Rs 58,500. If a borrower's income level has not risen up by this amount, then managing loan repayments becomes a tough task.

Here are a few tips that will help you cope with increase in interest rates:

• If you have money in instruments like fixed deposits or some surplus cash, consider prepaying partially. This way the increase in EMI outflow due to rate increase can be nullified.

• Consider paying off high interest debts first. Credit card penalties are huge. If your finances are simply unmanageable avoid using the credit card and transact in cash only.

• Rework on your budget if your incomes have stagnated and interest rates are shooting upwards. Make lifestyle changes and avoid high expenses.

• Consider refinancing if another lender offers a much lower rate. Some lenders who offer lower rates only to new customers and not to the existing ones must be avoided.

• Increasing the loan tenure brings down the EMI due every month to affordable levels. However, you pay more to the lender in the form of interest on the loan.

• Keep a tab on your monthly expenses, long-term financial commitments and other debts. Continue setting aside a small portion of your income towards a contingency fund.

• Do not indulge in debts.

Borrowers hold high emotional bonding to their homes. Defaulting is their worst nightmare. If you feel making EMI repayments an arduous task, contact your lender. You can try to workout a suitable repayment option and avoid defaulting.

Ahost of projects and willing lenders have made the dream of owning a house a reality for many. Apartments are equipped with unimaginable amenities and luxuries. Banks vie with one another to entice more borrowers and meet targets. The much-awaited moment that both the borrower and builder look forward to is - disbursement. But did you know that disbursement comes in different variants? Let's explore.

A home loan process is a lengthy one that starts off with filling up an application form. After a credit appraisal, scrutiny of your papers, legal formalities, technical check, valuation and collecting fees and margin money, the lender finally disburses the loan. Disbursement is payment of the loan amount by the lender to the borrower to meet his expenses.

Consider the case where the lender decides to disburse the entire amount as in the case of a fully constructed house, with no major work pending. This is called full disbursement. A loan is fully disbursed by the lender only when the builder is a reputed and respected one. Only in rare situations, will a lender fully disburse the loan amount, for a project that is in its initial stages. Otherwise, only for a ready-to-occupy house, the bank disburses the entire loan amount.

Loan disbursement largely depends on the phase of completion of a project. Be it a small house or a large apartment complex, the stages of construction are similar. After planning, drawings and approval, work on the ground commences with laying foundation walls. Then walls are raised. Roofing, plastering, woodwork, painting, electrical and plumbing jobs ensue. When a bank chooses to release the loan in various stages, it is referred to as partial disbursement. Depending on the pace and the level of progress made in the construction, money is disbursed by the lender.

For instance, when the foundation work is complete, the bank may choose to disburse 15 percent of the loan amount. The next release of say 20 percent may happen when the walls are erected. Banks make a partial disbursement for most borrowers who want to buy a house that is yet to be constructed or is under construction.

Advance disbursement is when the lender agrees to release the full amount for a house that is still under construction. This happens if the builder is a reputed one or the lender is convinced that the developer will complete the project on time. The lender can also make an advance disbursement when the borrower requests for it.

How do these variants impact the borrower? Would partial, full or advance disbursement make a difference to the borrower?

There is a larger element of risk involved in case of advance disbursements. The borrower is tied down financially to an asset that does not exist. It is very important for the borrower to read the agreement word by word before signing the deal. Most clauses are heavily tilted towards the lender. This leaves the borrower exposed to consume all sorts of risks. Starting from interest rate hikes to almost every risk is passed on to the borrower. This calls for adequate caution on the part of the borrower now rather than repenting later.

In case of partial disbursement, pre-EMI is a lower burden since it is computed on the amount disbursed at each stage rather than the full loan amount. In case of advance disbursements the EMI clock starts ticking for the entire loan amount, even before the construction is complete.

DLF plans retail expansion, to open 600 stores in five years
DLF, india's largest real estate company, plans to become a major retail player by opening 600 stores in less than five years through its retail management subsidiary DLF Brands. Planning a major expansion, DLF Brands has unveiled the plan of opening these stores by 2012-13 with an investment of Rs 7,500 crore. It also plans to bring around 15 international labels in the country in five years. DLF Brands has formed a JV with Italian menswear brand Boggi and Italian luggage brand Piquadro. It has franchise agreement with Italian apparel and accessories brands Alcott, Sia Home Fashion of France and Sun Glass Hut.