Professional Documents
Culture Documents
A mortgage is a long-term loan taken out to buy property or land. You repay the loan
plus interest over a period of anything up to 35 years.
A mortgage is the biggest, most expensive financial product most people ever take
out, so its important to understand the terms and pick the right mortgage for you.
Also, since a mortgage is secured against the property, if you dont keep up with
your mortgage repayments your lender can repossess your home.
Get the wrong one and even if you dont lose your property you could end up paying
tens of thousands of pounds more than you need to in interest and fees
A mortgage is a loan in which property or real estate is used as collateral. The
borrower enters into an agreement with the lender (usually a bank) wherein the
borrower receives cash upfront then makes payments over a set time span until he
pays back the lender in full.
You may think mortgages have been around for hundreds of years -- after all, how
could anyone ever afford to pay for a house outright? It was only in the 1930s,
however, that mortgages actually got their start. It may surprise you to learn that
banks didn't forge ahead with this new idea; insurance companies did. These daring
insurance companies did this not in the interest of making money through fees and
interest charges, but in the hopes of gaining ownership of properties if borrowers
failed to keep up with the payments.
It wasn't until 1934 that modern mortgages came into being. The Federal Housing
Administration (FHA) played a critical role. In order to help pull the country out of the
Great Depression, the FHA initiated a new type of mortgage aimed at the folks who
couldn't get mortgages under the existing programs. At that time, only four in 10
households owned homes. Mortgage loan terms were limited to 50 percent of the
property's market value, and the repayment schedule was spread over three to five
years and ended with a balloon payment. An 80 percent loan at that time meant your
down payment was 80 percent -- not the amount you financed! With loan terms like
that, it's no wonder that most Americans were renters.
ABOUT THE REPORT
TITLE OF THE STUDY
The present study is titled as A PROJECT REPORT ON ICICIHOME LOANS. The study is
made with special reference tobankbranch
WHAT YOU NEED TO GET A MORTGAGE
A DEPOSIT
You need to save a deposit to get a mortgage, and the bigger the better. If you save
a 10% deposit, your mortgage will be 90% of the propertys value. This is known as
the loan-to-value (LTV).
In general the lower the LTV, the better the interest rate youll be eligible for.
A lender will check your credit history when you apply for a mortgage. They will want
to see how youve handled borrowing money in the past and if you pay bills on time.
The better your credit history the lower the interest rate you will be offered on your
mortgage.
PROOF OF AFFORDABILITY
Mortgage lenders will check if you can afford your mortgage. To do this they look at
your income and outgoings. If youre employed they will want to see your payslips,
and if youre self-employed theyll want to see your accounts for several years. Then
they will look at your other financial commitments and decide how much they will
lend to you.
A POTENTIAL HOME
Your mortgage lender may well give you a mortgage in principle before you have
chosen your dream home. But they wont release the funds until theyve carried out a
valuation of the property you want to buy. This is so they can make sure it is worth
what you intend to pay for it, so they can be sure theyd get their money back if they
had to end up repossessing your home.
OBJECTIVE OF THE STUDY:
The following are the objective of the present study:
1. The main objective of doing this project is to study the corporate culture
1. Simple Mortgage
In a simple mortgage, the mortgager does not deliver the possession of the
mortgaged property. He binds himself personally to pay the mortgage money and
agrees either expressly or impliedly, that in case of his failure to repay, the
mortgagee shall have the right to cause the mortgaged property to be sold and
apply the sale proceeds in payment of mortgage money.
The essential feature of the simple mortgage is that the mortgagee has no power
to sell the property without the intervention of the court. The mortgagee can:
apply to the court for permission to sell the mortgaged property, or
file a suit for recovery of the whole amount without selling the property
2. Mortgage by Conditional Sale
In this form of mortgage, the mortgager ostensibly sells the property to the
mortgagee on the following conditions:
the sale shall become void on payment of the mortgage money.
the mortgagee will retransfer the property on payment of the mortgage money.
the sale shall become absolute if the mortgager fails to repay the amount on a
certain date.
the mortgagee has no right of sale but he can sue for foreclosure.
Foreclosure means the loss of right possessed by the mortgager to redeem the
mortgaged property. The mortgagee has the right to institute a suit for a decree
so that the mortgager will be absolutely debarred from his right to redeem the
property. The right to foreclosure arises when the time fixed for repayment
expires and the mortgager fails to repay the mortgage money. Without the fore
closure order the mortgagee will not become the owner of the property.
3. Usufructuary Mortgage
Under this form of mortgage, the mortgager delivers possession of the property
or binds himself to deliver possession of the property to the mortgagee. The
mortgagee is authorized to retain the possession until the debt is repaid. The
mortgager reserves the right to recover the property when the money is repaid.
The essential feature of this form of mortgage is that the mortgagee is entitled to
receive rents and profits relating to the mortgaged property till the loan is repaid
and appropriate the same in lieu of interest or in repayment of the loan or both.
The mortgager is not personally liable to repay the mortgage money. So the
mortgagee cannot sue the mortgager for repayment. He can neither sue
foreclosure nor sue for sale of the mortgaged property; the only remedy for the
mortgagee is to remain in possession of the property and pay himself out of the
rents or profits of the mortgaged property. Since there is no time limit he has to
wait for a very long time to recover his dues.
4. English Mortgage
The English mortgage has the following characteristics:
The mortgager transfers the property absolutely to the mortgagee. The
mortgagee, therefore, is entitled to take immediate possession of the property.
The transfer is subject to the condition that the property shall be transferred
on repayment of the loan.
The mortgager also binds himself to pay the mortgage money on a certain date.
In case of non-repayment, the mortgagee has the right to sell the mortgaged
property without seeking permission of the court in circumstances mentioned
in section 69 of the Transfer of Property Act.
6. Anomalous Mortgage
In terms of this definition an anomalous mortgage is one which does not fall
under anyone of the above five terms of mortgages. Such a mortgage can be
effected according to the terms and conditions of the mortgager and the
mortgagee. Usually it arises by a combination of two or more of the above said
mortgages. It may' take various forms depending upon custom, usage or
contract.
Legal Mortgage Vs Equitable Mortgage
On the basis of transfer of title to the mortgaged property, mortgages are divided into
two types, namely:
1. Legal Mortgage.
2. Equitable Mortgage
Legal Mortgage
In a legal mortgage, the legal title to the property is transferred in favour of
mortgagee by a deed. The deed is to be registered when the principal money is Rs.
100/- or more. On repayment of the loan, the legal title is retransferred to the
mortgagor. This method of creating charge is expensive as it involves registration
charges and stamp duty.
Equitable Mortgage
An equitable mortgage is effected by mere delivery of documents of title to property
to the mortgagee. The mortgagor through Memorandum of deposit undertakes to
grant a legal mortgage if he fails to pay the mortgage money.
FIXED RATE
With a fixed rate mortgage, your interest rate is set for a period of time, usually two,
three, five or ten years. This means that your monthly payments will always be the
same during that period, even if the Bank of England base rate goes up or down.
These mortgages are best suited to people who are prepared to pay slightly more for
the security of knowing exactly what theyll pay each month.
VARIABLE RATE
With a variable rate mortgage, your interest rate can go up or down each month,
depending on external factors. There are two main types:
Tracker
These have an interest rate that tracks either the Bank of England base rate or your
lenders own standard interest rate.
If you choose a mortgage that tracks the base rate, your interest rate, and the
amount you repay each month, will change if the Bank of England changes the base
rate. For example, a tracker mortgage might be 1% above base rate. If the base rate
is 0.5%, youll pay 1.5%. So, if the base rate rises to 2%, youll pay 2.5%.
If your mortgage tracks your lenders standard rate known as the standard variable
rate or SVR what you pay is based purely on your lenders whim. In
general, SVRs go up and down in line with the base rate and the lender is allowed
to change the rate whenever it sees fit.
DISCOUNT
This is a variable rate mortgage that tracks the lenders SVR, but several percentage
points lower. For example, the discount might be 1% off the SVR. So if the lenders
SVR is 3%, youll pay 2%.
A variable rate mortgage may suit you if you want to pay less now and are prepared
to risk the chance of your monthly repayments rising if the interest rate you are
tracking moves upwards. Read more in our dedicated guides to tracker and discount
mortgages.
OFFSET
An offset mortgage lets you link your savings account, and sometimes your current
account as well, to your mortgage so you only pay interest on the difference. For
instance, if you have a mortgage of 100,000 and savings of 20,000 and 1,000 in
your current account, you would only pay interest on 79,000 of your mortgage if you
linked it to these accounts.
Offset mortgages are ideal for anyone with a large amount of savings
The good thing about offset mortgages is that while you benefit from lower interest
charges (as you would if you paid off large chunks of your mortgage), you can also
access your savings whenever you like, giving you the best of both worlds .
Offset mortgages can be an ideal option for anyone with a large amount of savings,
or self-employed workers who build up money to pay their tax bill each year. If thats
you, then an offset mortgage will probably save you more money in unpaid interest
on your mortgage than you could earn with a traditional savings account.
BUY-TO-LET
Buy-to-Let (BTL) mortgages are specifically designed for landlords who want to buy
a property to rent out to tenants. They are more expensive than ordinary residential
mortgages because banks see rental property as higher risk, but if you are going to
rent out a property using a mortgage you have to have a BTL mortgage.
BTL mortgages are virtually identical to normal mortgages, for example you can
choose between a variable or a fixed-rate interest rate. But, how much you can
borrow will depend on the potential rental income of the property rather than your
personal income. Also, BTL mortgages generally require a larger deposit than other
types of mortgage Where to get a Mortgage
Banks, building societies and specialised mortgage lenders all sell mortgages. But
dont just wander into your local bank and start filling out application forms. To get
the best deal you should use a comparison website. Our mortgage tool searches
over 5,000 mortgages in seconds.
HOME LOAN
Housing is a primary human need next in importance only to food and clothing. A
first priority for a youngster who begins life is therefore to plan for a house. This
takes precedence over other household expenditure and creature needs. Housing,
however, is a major expenditure and cannot be funded out of a family's normal
monthly income or savings. The prospective homeowner must look for a loan
substantial in size and so structured that he can repay it over a longer period of time,
in many cases almost one's entire working life. Loan is offered to a borrower to
purchase or build a new house on the basis of his/her eligibility and the bank's
lending rules. One of the important basic human needs is shelter. House is the
ultimate dream of every middle class family. Government gaveen couragement for
house finance subsidiaries by offering number of tax concessions to individuals. With
the overall encouragement given to this sector, a number of players entered in
housing finance. One of the most important benefits of taking a home loan is the
interest rate that is allowed on the home loan. Fixed and variable interest rate
options are also available for home loans. Many financiers also offer home
improvement loans at the same interest rate as they offer the home loans.
A THEORETICAL VIEW-HOME LOAN
The section 5 (b) of the Banking Regulation Act 1949 defines Banking as," Accepting for the
purpose of lending or investment of deposits of money from the public, repayable on
demand or otherwise and withdrawable by cheque, draft or otherwise."A "home loan" is a
credit to a consumer for the purchase or transformation of the private immovable property
he owns or aims to acquire secured either by a mortgage on immovable property or by a
surety commonly used in a Member State for that purpose."A home loan requires you to
pledge your home as the lender's security for repayment of your loan. The lender agrees to
hold the title or deed to your property until you have paid back your loan plus interest. In
simple words a home loan is a fund or the loan which the buyer has taken from any financial
institution or bank to purchase a new home at an agreed rate of interest specified during
the contract. Home loan is the finance borrowed from a bank or financial institution to buy
or modify a residential real estate property. Any Resident or Non-resident individual who is
planning to buy a house in India can apply for a Home loan. If you have decided to buy a
property in the near future you can even apply for a loan before you select your property.
STEPS INVOLVED IN GETTING HOME LOAN:
STEP 1:
Submit an Application form along with relevant documents:
The finance company will process customers application to check the loan eligibility
based on the persons income and personal profile. Usually an up front (non
refundable fee) of about 0.5-1% of the loan amount must be paid before processing
begins.
STEP 2:
Verification of the property and supporting documents:(Usually takes 5-7 working
days after Step1)A company representative may visit the property as well as the
residence to vary information submitted in the persons application form. Further, a
property valuation maybe carried out by the company to determine the maximum
amount they are willing to lend you. Any references submitted by the person in the
Application Form may also be contacted. The person maybe personally interviewed
and any further clarifications in the documents submitted maybe sought.
STEP 3:
Sanction of the loan: Usually on the 7th working days after Step 1A sanction letter is
issued which the customer will have to sign. This letter will contain the amount and
the terms of the loan. Some companies specify the period for which the loan
sanction is valid. The person will have to pay a Commitment fee
Normally 1% of the unutilized loan amount) if you do not draw on the entire
sanctioned amount before that period.
STEP 4:
Submission of the original Property documents and signing the loan
Agreement(Usually on the 8-10th working days after Step 1)The customer will be
required to leave the title deed of the property with the company as a security for the
loan. He will be required to go to the companys office to execute the legal loan
papers.
STEP 5:
Disbursal of the Loan Cheque (Usually on the 10 15 working days after Step 1)The
person can draw the loan in parts depending on the stage of construction of the
building. Until such time that the entire sanctioned amount is NOT drawn, you will
pay a simple interest on the Actual Amount drawn (without any principal
repayments).The EMI payments will commence only after the entireSanctioned Loan
Amount is drawn
POINTS CONSIDERED BY BANK WHILE GRANTING HOME
LOAN:
The borrower's eligibility of getting a home loan depend upon his / her repayment
capacity &the banks establish this repayment capacity by considering various
factors such income, spouse's income, age, number of dependants qualifications
,assets, liabilities, stability and continuity of occupation and savings history.
CREDIT HISTORY:
Your chances of getting a home loan are increased if you have a good credit history
which is known by banks by checking the borrowers Cibil score. Now it is very hard
to get a loan from another bank when you already have a bad debt with one bank.
CLUBBING OF INCOME:
Your eligibility to take a home loan will augment when you club your income with
your spouses income, bank in this case will calculate your eligibility on the basis of
the clubbed income of both the applicants. You can club incomes of spouse,
children& parents staying with you and having regular income.
STEP-UP LOAN:
In this type of loan EMI's remain low in the beginning &increase gradually as and
when the borrowers spending power increases. Therefore lower EMI's in the initial
years enhances the borrowers ability to pay & further increases the loan eligibility
PRE-QUALIFICATION
"Pre-qualification" occurs before the loan process actually begins, and is usually the
first step after initial contact is made. In a pre-qualification, your Everett Co-operative
Bank Mortgage Lender gathers information about the income and debts of the
borrower and makes a financial determination about how much house you may be
able to afford. Different loan programs may lead to different values, depending on
whether you are qualified for them, so be sure to get a pre-qualification for each type
of program you are suited for.
APPLICATION
At this time, as your lender, we would order a property appraisal, property survey
and credit reports, mail out requests for verifications, if necessary, for employment
(VOE) and bank deposits (VOD) and any other documents needed for processing of
the loan. All information supplied by you (the borrower) is private, secure and
reviewed at this time. Then a list of items not yet received is compiled.
PROCESSING
The "processor" reviews the credit reports and verifies your (borrower's) debts and
payment histories as the VODs and VOEs are returned. If there are unacceptable
late payments, collections for judgment, etc., a written explanation is required. The
processor also reviews the appraisal and survey and checks for property issues that
may require further discernment. The processor's job is to put together an entire
package that may be underwritten by your Everett Co-operative Bank lending officer.
UNDERWRITING
"Mortgage insurance underwriting" occurs when the borrower has less than 20% of
the loan amount to put towards a down payment. At this time, the loan is submitted
to a private mortgage guaranty insurer, who provides extra insurance to the lender in
case of default. As above, if more information is needed the loan goes into
suspense. Otherwise it is usually returned back to us your mortgage company
within 48 hours.
Pre-Closing
During this time the title insurance is ordered, all approval contingencies, if any, are
met, and we would schedule a closing time for your loan.
CLOSING
At the closing, we "fund" your loan for you with a cashier's check, draft or wire to the
selling party in exchange for the title to the property. This is the point at which you,
the borrower, finishes the loan process and actually buys the house
CHARGES IN HOME LOAN:
Acquiring a Home Loan doesnt only involve the cost of home loan interest rates but
it also includes other charges & fee accompanying at various stages of taking the
Home loan. You must consider all these charges while comparing the cost structure
across banks. Following is the detailed fee structure incurred by banks at different
loan stages:
PROCESSING CHARGE:
It is a fee payable at the time of submitting the loan application to the bank which is
normally non-refundable. The fee ranges between 0.5 per cent and 1 per cent of the
loan amount.
ADMINISTRATIVE FEE:
It is a fee incurred by banks at the time of loan sanction; there are few banks who
have removed this fee so you must check it with all the banks.
PREPAYMENT PENALTIES:
When the borrower pre-pays the loan before the loan tenure ,banks charge a
penalty which usually varies between 1 per cent and 2 per cent of the pre-paid
amount.
LEGAL CHARGES:
Banks also incur some charges from the customer for legal and technical verification
of the property.
Past record:
The home loan borrower enjoys Tax Benefits on both Interestpaid & the Principal re-
paid. Under Section 24(d) of IncomeTax, the deduction of interest payable on the
home loan is up toa maximum of Rs. 1, 50,000.Under Section 80(c) of Income Tax,
Principal amount for the
repayment of loan along with other savings & investments iseligible for tax deduction
up to aMaximum limit of Rs. 1, 00,000.
Recent changes:
According to the new policy changes of the direct tax code billintroduced in the
parliament in the month of august 2010 onlyupto Rs 1.5 lakh deduction is allowed on
the interest paid onthe housing loan and there is no deduction available on
theprincipal amount. So if your equated monthly installment is Rs1.50 lakh,
comprising interest and principal outgo of RS 75000each, you can avail deduction of
only the interest