LTV ratio for Home Loan

Applying for a Home Loan? Here’s a Quick Explanation of the Loan to Value Ratio

If you’re in the process of deciding which Home Loan to apply for, it’s quite likely that you’ve come across the term ‘loan to value ratio’. To decide between the various types of Home Loans you can apply for, you need to understand this concept fully.

In this article, we help you understand what loan to value ratio for Home Loans actually means, how to calculate loan to value ratio, and what effect this is going to have on your quest for a Home Loan. You can also save yourself a lot of time and trouble by applying for an online Home Loan with Bajaj Finserv. You’ll incur a processing fee of only 0.8%!

Defining Loan to Value Ratio

Loan to value ratio (LTV ratio) is the comparison between the value of the loan you’re taking out and the value of the property that you intend to purchase with the loan.

How Does It Affect You?

It’s a simple calculation, but it can have a profound effect on your financial plans. It can affect the total amount that the bank lends you, and the monthly EMIs that you will have to pay. A high LTV ratio is considered to be a higher risk to the bank because the possibility of defaulting is higher. Banks usually have an LTV ratio can of 80%.

What this means for you is that you’ll have to produce the rest of the funds for the property out of your own pocket, which might prove to be a difficult task. If the value of the property in question is above 10 lakhs, the banks don’t consider stamp duty, registration, and other related documentation charges as part of the value of the property.

These overheads are usually a sizable chunk and make up around 15% of the property’s cost. However, there is good news for people who want to purchase property that has a value of up to 10 lakhs. The RBI recently passed a mandate because of which banks must now consider the overhead charges of stamp duty and other such documentation as part of the value of the property, as long as the value doesn’t exceed 10 lakhs.

The purpose of this move was mainly to empower economically weaker sections and reduce the financial burden on them.

How is It Calculated?

The calculation for LTV ratio is fairly simple. Here’s the loan to value formula used to arrive at the figure:

Loan to Value Ratio = Value of Loan/Value of Property

To make this simpler to understand, let’s take a look at a loan to value calculation example:

Suppose you want to buy a property that is valued at Rs 60,00,000, when you approach the bank for a loan of Rs 54,00,000, they will take the two values and apply the formula to them.

LTV Ratio = 5400000/6000000

This gives them a LTV Ratio of 90%. Because their cap is set at 80%, they will only approve a loan of Rs 48,00,000 on this particular property. Note that the value of the property (Rs 60,00,000) doesn’t include all the overhead registration and documentation costs. This means that you’ll have to procure the remaining funds (Rs 12,00,000) by yourself.

If you’re thinking about taking out a Home Loan, be sure to check out the ones offered by Bajaj Finserv.

Now that you know what loan to value ratio is, you’ll be able to make a better decision on the Home Loan you’re planning on taking out!

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A few important things to know about Mutual Funds

A Mutual Fund (MF) is a relatively safe way to invest in the stock market. It provides the investor with the services of investment experts and also provides a flexibility that might not be possible while creating an individual portfolio.

What is a Mutual Fund?

A mutual fund is set up like a trust and is managed by an Asset Management Company (AMC). After collecting funds from various investors and pooling them, the AMC makes various investments using this cash pool. Gains and losses from the investment are shared by the investors on the basis of the amount they’ve invested.

Understanding the Game

You buy units issued by the MF. A unit represents the extent of ownership an investor has in the mutual fund. The number of units you own determines how you share in the earnings and liabilities of the fund.

The Net Asset Value (NAV) of the fund determines the value of a unit. The NAV is calculated using a few simple steps,

  1. The current market value of all the investments made by the AMC is added up.
  2. Then, the expenses incurred are calculated.
  3. The expense is deducted from the total market value.
  4. This result is divided by the total number of units in the MF, giving you the value of a single unit.

Remember that, the NAV is calculated daily by the AMC, so it can keep changing. When investing, you should know that mutual funds usually have their own eligibility criteria. For more info, check out the Bajaj Finserv website, particularly the section on Mutual Funds Eligibility Criteria.

Types of Mutual Funds

Mutual funds vary on the basis of their stated objectives which have to be clearly defined in the offer document. Here’s a look at a few common MF objectives,

Growth Scheme: In a mutual fund whose defined goal is capital growth, funds are mostly invested in equities. This gives your investments the best chance to grow quickly, although you will be exposed to a fair degree of risk.

Income Funds: This kind of mutual fund is invested mostly in bonds, government securities, money markets and debentures. The main aim here is to generate a steady income for investors, and reduce risk. This is a good option for retired individuals who want to generate a steady income to meet their regular expenses.

Money Market Funds: The money is invested in money market securities to generate income. Money market securities are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower returns than most other securities. Although the risk is minimal, these investments are usually made over the short term, and sometimes offer high yields.

Balanced Funds: This is a combination of growth and income funds. The money is invested in bonds and other fixed income instruments. A portion of the funds is also invested in equities to increase opportunities for quick capital growth.

There is another classification of mutual funds made on the basis of flexibility.

Closed-End Funds: A closed-end fund has a defined period of maturity, and has a fixed number of units to offer investors. Units can be purchased only during a particular period known as the New Fund Offer period. However, these funds are listed on the stock exchange and can be bought like equity shares.

Open-End Funds: These funds do not have a definite maturity period and units can be bought or sold at any time, at the current NAV of the fund. Most mutual funds are open-end funds, which are not listed on the stock exchange. Bajaj Finserv has a fabulous selection of Mutual Funds for you to choose from, especially if you’d like to invest in the stock market without too much risk.

Why Invest in a Mutual Fund?

Pooling of Funds: A Mutual Fund enables investors to maximize the profits from their investment by pooling the units invested in by numerous individuals. This large pool enables the fund to be utilized to provide maximum benefits for the investors.

Managed by Professionals: The fund is managed by an Asset Management Company that employs professionals experienced in the stock market to make intelligent investments.

Diversification of Investment: A diversified investment portfolio reduces risk by spreading the investment over many different types of securities. This might be impossible to do for the average investor. By using the large pool of investments, a Mutual Fund is able to provide this benefit to investors.

Regulated: The Security and Exchange Board of India (SEBI) regulates the operations of Mutual Funds in India. Besides this, Mutual Funds are governed by a Board of Directors who ensure that the interests of the investors are protected.

How to Invest in Mutual Funds

There are many ways to invest in a Mutual Fund. You can fill in a common Mutual Fund Application Form with the company you’d like to invest with. Alternatively, you can invest in a Systematic Investment Plan (SIP). Bajaj Finserv provides a truckload of advice on choosing the right SIP.

When you have funds that you’d like to place in a safe, high-yield financial scheme, mutual funds are usually the best way to go. Apply for Mutual Funds now to make a smart investment.

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Mutual Funds – A Sound and Secure Investment

Every working professional realizes the importance of making investments and putting a part of their income into something that will generate high returns, thereby providing for the future. Investing through mutual funds is not only safe but also promises excellent returns. One of the benefits of investing in a mutual fund is that it allows you to diversify your investment portfolio. You get access to various assets and stock options, including equity, gold and debt. This reduces the risk of investing everything in just one place. Since they are regulated by SEBI, you can be assured that most MF distributors are well-qualified and trained.

Why is a Mutual Fund Useful?

Another reason to invest in a mutual fund, besides diversification, is that it allows you to beat inflation. In a mutual fund, there is scope to adjust for long term inflation and provide growth, as opposed to your money simply idling away in a bank. Bajaj Finserv offers you Mutual Funds to invest in that are managed by expert professionals. Apply for a mutual fund so that you can manage your assets at a lower cost. Getting a mutual fund is also easy, convenient and saves on time. Another advantage of a mutual fund investment is that it does not require huge amounts of capital. Even a small amount invested can go a long way toward good returns. A proper research team will analyse the markets, tracking the growth of different firms and only then will they invest your money in those firms’ stock options. This gives you the guarantee of expert advice by skilled professionals in the field.

Liquidity for Emergencies

One of the most important advantages of investing in a mutual fund is that you have instant access to money when any urgent need arises. You can withdraw the entire sum invested or a part of it any time you wish to. To tide over personal emergencies or financial crunches, you can get a loan against your Mutual Fund. Bajaj Finserv brings to you the option of a Loan Against Securities, which provides approval in minutes.

How to Qualify for a Mutual Fund?

Mutual funds eligibility criteria are extremely simple. You need to be an Indian resident or an NRI with full repatriation. You will require a copy of your PAN card and banking proofs. If investing on behalf of a minor, a parent or lawful guardian is required to sign. Financial institutions, partnership firms, special purpose vehicles and trustees on behalf of religious organizations are also eligible for mutual funds.

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The essential checklist for Real Estate Investors

Foraying into the real estate market is a serious and exciting prospect. Considered by many to be the king of all investments, the property sector can give you some incredible returns.

But with any investment comes some amount of risk, and as an investor you want to minimise that risk. It helps a lot to know beforehand the things to consider while making a real estate investment. This way you can ensure that all your real estate investments in India will only work towards strengthening your finances.

To help you with your planning, here is a property investment checklist that’ll make the best use of your hard-earned money.

  1. Are You Really Ready?
    Take a long, hard look at your finances. Even if you’re earning a comfortable salary, you can’t dedicate all your money towards this one investment. Allocate money to your recurring expenses first; food, electricity, water, transport are things you cannot ignore. Make a proper budget and check how much money you can actually invest without falling into a difficult financial situation later on. If you’re taking a loan you can calculate the instalment amount with the free Online EMI Calculator on the Bajaj Finserv website.
  2. What are You Looking for?
    There are a host of options available for investment in the property market. Empty plots of land, houses, apartments, commercial properties, the list is endless. Your choice will depend upon various factors like whether you want to rent out the property, save tax, or wait for a few years to exploit resale values. Just make sure you’re not buying protected or agricultural land.
  3. Where are You Looking?
    There’s no other place where the phrase ‘location, location, location’ holds more value than real estate. All properties appreciate overtime but some appreciate faster than the others. Scout out areas with high levels of development because this is where the real growth of the property sector lies and where phenomenal returns come from. Spots close to schools, hospitals and markets are your best bets.
  4. Mind Your Language
    Before you go marching into the real estate market, pick up a few books and learn all the jargon that you can. Don’t end up looking like a rookie when you’re faced with terms like carpet area, super built-up area, buy-out rate and effective rent. You want to conquer this trade, not be overwhelmed by it.
  5. Baby Steps
    It goes without saying that you don’t want your first investment to be your last one. Start off small; invest in a good property rather than investing in an expensive property. Real estate investments are no joke since they involve rather large sums of money. Learn the ropes properly before you make an investment which could put you at more risk than you’d be comfortable handling.
  6. The Extras
    There are always overhead expenses involved with buying property. These include registration, stamp duty, taxes, insurance and maintenance costs. These vary with the size and type of property that you’re planning to invest in, so make sure you take all of these into account when you’re planning your budget.

If you’re looking to make more investments in the future, especially if they involve taking up a loan, your property can be of great help. Financial institutions like Bajaj Finserv provide Loans Against Properties. These help you save a lot of money as loan against property interest rates are relatively lower compared to traditional loans.

Whenever you go out searching for properties to invest in, don’t forget to keep this property purchase checklist by your side. These simple steps are sure to take you a long way and help you grow your money with ease.

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Invest in a Fixed Deposit

7 Awesome Reasons to Invest in a Fixed Deposit

When you open a Fixed Deposit with a bank or NBFC, you agree to park the money with that financial institution for a stipulated period of time, for which you will be paid interest. There are currently many ways to invest your money and see it grow, so why should you open a Fixed Deposit account?

  1. Assured Security : Fixed Deposits are relatively safe investments as they are regulated by the Reserve Bank of India. They are also less risky since they are not sensitive to market fluctuations as investments in stock.
  2. Easy to Open and Maintain : All you need to do is open an FD account with a bank or other financial institution and deposit the amount. Unlike investing on the stock market, you won’t need to keep a close watch on your FDs. Bajaj Finserv explains the eligibility criteria for opening a Fixed Deposit. If you want to find out how much interest your investment would get, you can make use of an FD calculator.
  3. A Source of Regular Income : Interest on an FD is paid out regularly, generally on a quarterly basis. If you are a retiree, this is a good way to keep your money safe and also earn some extra income. Apply for a Fixed Deposit now or review the features of a Fixed Deposit with Bajaj Finserv.
  4. Tax Benefits on Fixed Deposits : You can open a tax-saving Fixed Deposit and get an exemption on the amount invested when paying your taxes. Under Section 80C of the Income Tax Act, you can open a 5-year fixed deposit, for amounts ranging from INR 100 to INR 1,50,000 and the principal amount would be exempt from taxation. However, the interest paid on the FD is taxable. Interest amounts above a certain limit per annum are taxable. You can still gain exemption by submitting Form 15G to clarify that you have no other source of income other than the interest derived from the FD. If you are a senior citizen, submitting Form 15H will fetch you tax exemptions.
  5. Compound Interest for More Earnings : If you do not need the regular pay-out of interest on your FD, you can choose to add the interest to your deposit amount. This earns you more interest in the long term because you increase your principal amount each time you add the interest pay-out to it. You can opt for monthly, or quarterly pay-out and reinvest to increase your earnings from the FD. If you are looking into multiple policies, you can use an FD calculator to find out which one pays out the best.
  6. Loan Against FD: If you need cash and you close your FD before the end of the tenure, you will lose out on the full interest and may also incur a penalty charge. Instead, you can opt for a loan against the FD. The bank or the finance company will loan you an amount that ranges from 70% to 90% of the total deposit. The interest rates will be lower than those for a personal loan as your FD is considered as security for the loan. Generally, the interest charged will be around 2% above the interest rate that is paid on the FD. Check out the benefits of a Loan Against Fixed Deposit. Also, you can use an FD calculator to figure out how much interest your FD will generate each month and the amount it gets you once it reaches maturity. There are plenty of FD calculators available online which will also help you figure out the loan amount you are going to take on your FDs.
  7. Credit Card Against Fixed Deposit : You can also opt for a secured credit card against the Fixed Deposit. These credit cards are backed by your FD, and the credit limit is fixed at a percentage of the deposit amount. As this is a secured card, the interest charged for your purchases will be less than on ordinary unsecured credit cards.

These are some of the many benefits of Fixed Deposits in India. It is a safe investment that provides you with many advantages. You can easily open an FD by just providing identity proof, address proof, and if you are a senior citizen, proof of age to acquire the associated benefits. Eligibility documents required for Fixed Deposits include the documents you provide for all the above verification.


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Insurance Cover for Home Loan

Is it Compulsory to take Insurance on a Home Loan in India?

Taking an insurance policy on a Home Loan is not a compulsion, however if there’s an emergency and the borrower is not present or able to pay the EMIs, the insurance policy comes to the rescue. So it’ll act as a cover you and your family through thick and thin. But there’re certain things that you need to be aware of if you want to insure your Home Loan.

Financiers like Bajaj Finserv offer a Home Loan with refinance facility, nil foreclosure charges, and part prepayment facility.

Insurance Cover for Home Loan

The most important thing that you need to be familiar with is the premium of the Home Loan insurance. There are certain factors which determine the premium amount such as the age of the insured, the loan tenure, the amount of loan, and medical history etc. If the repayment period is more, your premium will be more as well. The premium also depends on whether the insured has any terminal or serious illness. And finally, the greater the amount of your loan, greater will be the premium.

How to buy an Insurance for Home Loan

Usually, the lender will provide you with the appropriate insurance policy that suits your requirements. But, you also need to look out for certain important factors while considering a Home Loan insurance policy. The most important thing to check is whether the policy will offer death benefit or death by accident. Make sure the policy has a permanent disability benefit or not. This will ensure your family does not face any problems later. Also, you need to know how the benefits of the policy can be claimed beforehand.

Rate of Interest on Home Loans

In the present day, commodity prices have hiked up drastically and also affected the Home Loan interest rates in India. Since the interest rate is also a factor in deciding the premium for insurance cover, you need to take that into consideration. Bajaj Finserv offers Home Loans at lowest interest rates.

Ideally, you should always take an insurance cover for the Home Loan you are acquiring. This not only keeps you secure during times when you are low on cash but also ensures that you are not fined for non-payment of EMIs. Take your time, analyse the various factors involved and choose an insurance policy that works for you.

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Reliable investments through Mutual Funds

Mutual funds are always considered a safe and secure means of investment. One of the top reasons to invest in mutual funds is that it is managed by experts and people who are aware of the current happenings in the market. SEBI regulations require mutual fund distributors to clear their exam and be trained in the field. With expertise and sound advice from people who are constantly watching market trends, mutual funds make a sound investment. Here’s what you need to know about this much in-demand form of investment.

Benefits of Mutual Fund Investments

There are several advantages of investing in a mutual fund. You get to invest in diverse products such as gold, debt, and equity which also reduces the risk you are undertaking. Bajaj Finserv offers you Mutual Funds that comprise of shares, debt securities and more, all designed to give you good returns and minimize risk.

Mutual funds give you liquidity which means you have access to your assets any time you need them. In times of emergencies, you can use these investments to get a loan. The cost involved in mutual funds is lower as these investments work in bulk. At any given point, you can take out a part or entire sum of your mutual fund and reinvest. Alternately, you can reinvest the profits you make for greater returns.

Risks Involved in Mutual Funds

On the flip side, there are certain disadvantages of investing in a mutual fund that cannot be ignored. They are unpredictable because certain mutual funds include investment avenues like futures and options that do carry a higher level of risk. The cost involved will also be high if you opt for an aggressive fund option. There are also tax payments involved in mutual funds. Because your fund manager decides what to invest in, you do not have sole control over the mutual fund. Another disadvantage is that a mutual fund lacks an insurance cover. If you are looking for something else, Bajaj Finserv also has the option of Fixed Deposit with six flexible tenors.

Mutual Fund Application Simplified

Before you apply for a mutual fund, have all the necessary documents ready. Keep copies of bank statements and proofs. You will also need a copy of your PAN card. To meet the mutual funds eligibility criteria, you need to be a resident of India. For NRIs, full repatriation is necessary. If you are a trustee of a charitable organization, you are also eligible to invest in mutual funds. Any International Multilateral Agencies that are approved by the government are allowed to invest.

Bajaj Finserv provides you a wide variety of mutual funds to choose from with features like low transaction cost, liquidity, diversification, and transparency.

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What is a Fixed Deposit

What is a Fixed Deposit and How Can It Help Your Life?

A Fixed Deposit (FD) is an investment instrument through which an individual can deposit a certain amount for a specific period of time. The bank or financial company would pay interest on the amount deposited.

The Fixed Deposit definition given above is appropriate for all kinds of FDs offered by banks and other institutions. The FD has traditionally been a favoured instrument of savings in India. However, in recent years, other options like investing in the stock market and real estate have become more popular among younger generations since they offer the potential for higher capital appreciation. However, Fixed Deposit still remains an attractive method of saving funds. Questions you might have about opening a Fixed Deposit

A Few Things to Know About Fixed Deposits:

  • Fixed deposits are safe because they are regulated by guidelines set by the Reserve Bank of India.
  • An FD earns a higher rate of interest than an ordinary savings account.
  • Fixed deposit rates of interest are generally defined at the time of opening the account. Look at the Fixed Deposit interest rates offered by Bajaj Finserv to get an idea of how much a good FD can earn you.
  • You can deposit an amount into the FD only once—when you open the account.
  • Interest is paid out on a quarterly basis, but the depositor can choose to be paid monthly. This interest, by default, is credited to a linked savings account.
  • When you open a Fixed Deposit, you are given an FD Receipt which you have to keep safe and produce at the time of maturity to redeem your deposit amount.
  • Fixed Deposits have to remain in the account for the tenure period to provide maximum benefit.
  • If you redeem your FD before the full term, you might be charged a penalty fee.
  • Senior citizens generally earn a higher rate of interest on FDs.
  • The interest on an FD is considered income. If the interest amount per annum exceeds a defined limit, it is taxable.
  • TDS can be activated on the interest amounts if applicable. The TDS is 10% of the interest amount.
  • The full tax on interest that the individual has to pay is defined by the tax slab they are in. So, if you are in the 30% tax slab, besides the 10% TDS on the interest, you will have to pay an additional 20% during your final tax assessment. You can also use an FD calculator to help save tax deducted at source by splitting your FDs over different financial institutions.
  • You can earn more on a Fixed Deposit by choosing to reinvest the interest paid out. This results in compound interest as the total deposit amount increases with each additional deposit of the interest amount.

Eligibility Documents Required for Fixed Deposits Account:

Any individual, business, or institution can open a Fixed Deposit. To open a Fixed Deposit, you have to furnish proof of identity, and proof of address. The document you present to verify the information might include PAN Card, Passport, Voter ID, Driving License, and/or Utility Bills.

FD Calculator:

There are plenty of FD calculator available in the market which help you determine the returns you get. Basically, a typical FD calculator requires 4 different parameters to give you a result. They are amount, rate of interest, FD period, and compounding frequency. All you’d have to do is type in the details you have to get all the details you will ever need.

Types of Fixed Deposits:

In India, there are different types of Fixed Deposit options, allowing you to choose the one that fits your needs best.

Regular FD:

This FD that has a set interest rate, and requires you to deposit the amount for a definite tenure. This can range from 7 days to 10 years.

Special FD:

This kind of FD is deposited for a specific number of days. The bank or NBFC offers a defined tenure like 333 days or 555 days. This earns a slightly higher rate of interest than the Regular FD.

Tax Saving FD:

This kind of Fixed Deposit lets you use the FD as a tax-saving instrument. Deposit amounts of up to INR 1,50,000 are exempt from income tax, but there is a lock-in period of five years on the deposit.

Floating FD:

This allows for a flexible rate of interest, which is adjusted based on the market rate.

A Fixed Deposit is a safe and convenient way to invest your money and earn interest on it. Apply for a Fixed Deposit with Bajaj Finserv, as they offer attractive interest rates and other features.

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