There are 30 words that any home buyer should be aware of.
We decode 30 tips commonly heard words that a buyer would hear repeatedly during his home-buying experience and afterward in this post.
Many specific sector-related words are commonly heard by parties interested in real estate transactions. This can be perplexing, particularly for first-time buyers who are embarking on a complicated and stressful home-buying process. In this post, we’ll break down 30 widely heard words that you’ll hear during the home-buying process and even afterward.
If you took out a home loan to finance the transaction, the EMI is the amount you will pay to the bank per month. The bank will set a deadline for this money to be electronically withdrawn from your account every month after you and the bank agreed on it. To escape fines and a blow to your credit report, make sure you don’t miss any of the payments.
– Loan tenure
The loan tenure is the amount of time you have to repay your home loan for a set period of time. This could last anywhere from 10 to 30 years. To save money on interest, a creditor can still repay his loan quicker and shorten the term.
Co-applicants are people who apply for a home loan for two or three other people. Although co-applying increases the odds of receiving a larger loan, it also ensures that all borrowers are similarly responsible for this debt.
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– Interest rate
For a home loan, banks owe interest. It’s worth noting that the interest rates charged to women borrowers are often smaller than those offered to men. Bank lenders now charge interest rates on home loans that range from under 7% to over 9% a year.
– Floating-rate interest
If you choose this option, the bank can (or is supposed to) adjust the interest rate on your loan whenever the banking regulator raises or lowers the repo rate, which is a direction rate. As the Reserve Bank of India raises interest rates, the bank may follow suit. In the case of a reduction, the same is true.
– Fixed-rate interest
Changes in monetary policy have no impact on your payment schedule if you keep the interest rate constant for the whole term. However, it’s worth noting that set prices aren’t locked down for the whole term.
– Repo rate
The Reserve Bank of India (RBI), India’s banking regulator, loans money to scheduled banks at the repo rate. This rate serves as a benchmark for home loan interest rates. A decrease in the repo rate can result in lower home loan rates, whereas an increase would result in an increase in the EMI.
– Down payment
Since banks just lend you 80% of the money, a creditor would usually have to come up with 20% of the property value from his own wallet. A down payment of 20% is referred to as a down payment.
Prepayment is when you pay off your home loan before the end of the term. Although there are no fees associated with prepaying the home loan as it is a floating rate loan, banks do charge a prepayment fee to homeowners with fixed-rate loans.
The bank recalculates the decrease in the principal sum at a certain date based on the ‘rest’ (which may be regular, weekly, quarterly, or annual) specified in the loan agreement. This means that even though you pay an EMI on a monthly basis, the unpaid debt obligation will change after a year if the loan arrangement allows for an annual break.
The base rate is the rate at which banks are forbidden from lending, and they adjust their “spread” to keep the rate of interest stable, despite any adjustments in the base rate due to market volatility. As a result, the spread is the difference between the index rate and the bank’s rate. For instance, if the base rate is 8.25 percent and the spread is set at 25 basis points, the home loan offered would be at 8.50 percent. If the benchmark rate slips to 8% due to market volatility, the lender would sell the loan at 8.25 percent with the same spread (25 basis points).
– Loan default
If a home loan borrower does not pay his EMI after two months, he or she will be paid interest. In the event of wilful default, the bank will take legal action.
– Property appraisal
The banks will send a team of analysts to appraise the property that the buyer plans to purchase in order to determine its market worth. Regardless of your personal loan qualifications, they will give up to 80% of the property’s market value as a loan. This is also intended to protect the interests of the banks.
– Loan-to-value ratio
The loan-to-value ratio, or LTV, is the proportion of the mortgage total to the property’s appraised value. The professional agency of the bank determines the property’s valuation. Regardless of one’s high take-home income, the bank will just lend 80 percent of the asset value.
– Credit score
Credit bureaus award you a credit score that represents your credit profile. India’s classification is based on a scale of 300 to 900. The higher your credit score, the more likely you are to be approved for a loan.
– Circle rate
The government sets the circle prices at which a property cannot be licensed. Since land is a state subject in India, local governments are responsible for setting these prices and revising them on a regular basis.
– Stamp duty
Stamp duty, also known as stamp duty and registration fee, is a tax levied by state governments on property buyers. As a result, a part of the property’s worth must be charged to the government in order to register it. Depending on the state where you are purchasing, stamp duty prices will range from 3% to 10%. It’s also worth noting that stamp duty could be smaller for women than for men.
– Registration charge
This is a central responsibility, and a buyer is normally expected to pay 1% of the property’s valuation as a registration fee. Only after the registration process is completed do you become the legal owner of a domain.
The Goods and Services Tax is also a part of the home-buying process (GST). For the selling of units in under-construction projects, investors must pay this tax to the government. The customer is also charged with this fee.
In 2016, the Indian government passed the Real Estate (Regulation and Development) Act (RERA), a sector-specific law. Property-related issues concerning under-construction developments are still the responsibility of state real estate regulators.
– Maintenance charge
If you own a flat in a housing community, you would be required to pay a monthly maintenance fee to cover the use of the common areas. These payments vary based on the services and equipment offered by the project, as well as the scale of the housing project.
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– Sale agreement/agreement to sell
After a buyer and a seller negotiate a price, they must first sign an agreement to sell, which is a contract that lays down the terms and conditions under which the future sale will take place. The existence of a sale agreement indicates that the transaction’s terms have been set.
– Sale deed/conveyance deed
A sell deed/conveyance deed is a contract that is produced when a property is sold. The fulfillment of the sale process is signified by the signature of this deed. The buyer becomes the owner of the property after signing the selling deed.
– Token money / earnest money deposit
A buyer’s earnest money deposit is the sum paid to the seller to demonstrate that his interest in a property is legitimate. After a verbal approval of a bid, the earnest money deposit, also known as a binder, token money, or good-faith deposit, is often charged. Following the payment of the token money, which is usually a percentage of the overall value, both the buyer and the seller are obliged to carry out the verbal arrangement. If the buyer fails to fulfill his or her obligations, the seller will lose this money.
According to Indian law, the buyer must subtract tax at the source on behalf of the seller at the time of the sale and deposit the money with the government.
Only after a buyer’s ownership title is recorded in the official documents of the local municipal body does he become the legal owner of the land. Land mutation, also known as ‘Dakhil Kharij’ in Hindi, is the method of deleting the former owner’s name from the documents and replacing it with a new one.
– Common areas
The places in a building community that are accessible to all inhabitants are known as common areas. The money spent on improving these places in a building community is also included in the monthly maintenance costs.
– Carpet area
Carpet area refers to the net available floor area of an apartment, excluding the area protected by exterior walls, the area under service shafts, the exclusive balcony or veranda area, and the exclusive open terrace area, as specified by real estate law. The carpet field, on the other hand, includes the “area enclosed by the apartment’s internal partition walls.” Developers must sell apartments based on carpet location, according to the regulation.
A residents’ welfare association (RWA) is a group of housing society members established to ensure the smooth running and upkeep of the house.
– Land title
A land title is a legal document that certifies that a certain piece of immovable property belongs to a certain individual. The buyer must pay the authorities money in the form of stamp duty and registry charges in order to convert a land title to his or her name.
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