FINANCE TIP OF THE DAY
Can you afford your loan?!
Know the quantity of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offer. As a thumb rule, remember not to let your credit exceed 40% of your income!
The advantages of a pre-approved property
Buying a property is hardly an easy decision to make. It is the single largest asset investment which will have a financial impact for the next whole decade and perhaps for much more time. So it is best to be cent percent sure of your investment from a legal perspective so that you shield yourself from negative surprises later. Look for pre-approved properties. Builders disclose the list of pre-approved properties.
Have you heard of the construction of a building being stalled because the builder hasn’t received requisite approvals and does not have all the documentation in place? It can be rather annoying, because one doesn’t know when the construction will re-start – that will have a financial and emotional effect on those already invested in the property.
This means that before buying any property, you need to make sure that the builder possesses the requisite approvals. How many of us are aware of all the documents the builder should have for the construction to be legally authorised? If you want to free yourself from worrying about the builders’ documentation and the legality of the construction, it’s best to look for a pre-approved property.
What does pre-approved property mean?
It means that the titles and the documents of the property have been examined by a bank/financial institution (FI) on the request of a builder. Banks/FI’s have the technical know-how, so their assessment will be a comprehensive one- it also takes into consideration things like the track record of the builder among several other things.
If the property is pre-approved by a bank/ FI, as a buyer it would be safe to assume that the builders’ documents are in place and the construction is legally authorised. The reason being, banks/FIs have a vested interest. They would have provided loans to quite a few buyers of that property. Any delay in construction, would affect the bank/FI financially as EMIs for several customers would start on the possession of the property. Also many a times, banks provide loans to the builder of the property that they have pre-approved. So their due diligence can be relied as it is in their interest also that construction goes on uninterrupted.
However, this does not imply that the bank/FI will in any way be responsible for the delay in construction by the builder for whatever reason. Also, you cannot expect the bank/FI to take any legal action against the builder or waive off any charges for you. All pre-approved means is that the property is legally authorised and the builder is a trustworthy one.
What is the benefit to a home buyer?
- The home buyer frees himself from worrying whether the property complies to all the requisite legal and technical aspects or not- here he need not worry about delay in construction due to improper documentation
- Loan sanction to buyers of pre-approved projects is quicker- the bank/FI has already done the due diligence of the property, the records of which they maintain time taken for processing the loan application is reduced
- Pre-approved property is a good indicator of project quality as banks /FIs take into consideration all parameters including the track record of the builder before putting the pre-approved stamp.
Buying a property is hardly an easy decision to make. It is the single largest asset investment which will have a financial impact for the next whole decade and perhaps for much more time. So it is best to be cent percent sure of your investment from a legal perspective so that you shield yourself from negative surprises later. Look for pre-approved properties. Builders disclose the list of pre-approved properties. Also institutions such as ICICI Bank and LIC Housing Finance among others disclose the list of properties pre-approved by them.