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9 easy steps to buy your dream home

The Union Budget 2008-09 has brought in cheer for the tax payers, particularly due to increase in the tax slab. Now many more will be able to convert their dreams of owning a home into reality. Let’s explore how this can be made possible along with various other facets of owning a home.



The sojourn begins!



The journey from applying for a loan to getting one is the most important part of reaching the goal, your dream house. The exercise begins with the property selection, moves on to bank selection and passing through many more procedures reaches the destination. We have made an attempt to simplify the journey so that it becomes a rewarding experience.



1. Identify the property



There is no dearth of options in the real estate market where builders are in a cut-throat competition to woo buyers. It is extremely necessary to do a check on the reputation of the builder associated with the project. Irrespective of whether you are investing in a resale property, a ready-to-move-in flat or an under-construction project, make sure that the title deeds relating to the property are in place.



Check if the property is available only on a power of attorney or pugree basis as funds for such properties may be a problem. Banks are known to reserve the best of deals for loan seekers who have already identified the property they wish to purchase. The advantage of this is that your chosen lender will not only have approved your credit but also the property. This will ensure that there are no surprises later.



2. How much loan are you entitled for?



While budget considerations always dominate your decision of buying a property, it is also good to have an idea of the extent of finance banks may offer. The loan amount sanctioned depends on three important factors:



~ Your income
~ Repayment history and
~ The cost of the property



Based on a broad and general set of calculations, you can get up to 3.5-4 times your annual gross income as home loan. Irrespective of the basis of calculation, the loan eligibility for a longer tenure loan will be much higher.



3. Never choose a lender till the property is identified



While most banks will provide finance for ready-to-move-in properties, some banks do not readily finance a property which is being self-constructed or a property under construction. Also, if the property is very old or is being developed by a relatively unknown builder, the bank might have an issue with providing a property loan.



Take a sanction for the loan only after identifying the property. Banks are known to reserve the best deals for immediate disbursement cases.



4. How the banks look at your loan eligibility



Banks have different ways to calculate your loan eligibility.



If loan eligibility based on your income is likely to be an issue, then talk to several banks to find out which bank can give you the maximum amount. It may so happen that based on your own income, as well as your spouse’s, you may still not be eligible to get the amount of loan that you require. Then you must seek a bank that allows you to club the incomes of your other close relatives (parents, siblings, children etc) to increase your loan eligibility.



You can use calculators available on various sites for calculating your eligibility like home loan eligibility.



Also preliminary enquiries with a couple of banks will give you a rough idea of your loan eligibility based on your income. The lender also restricts your loan amount to around 85-90 per cent of the cost of the property (even though the loan eligibility based on your income may be higher). Of course most lenders include the stamp duty and registration charges in the cost of the property while calculating this 85-90 per cent loan eligibility.


Valuation of real estate is still in its infancy in India. In many cases, the valuer determines the value of the property at an amount that is lower than the documented cost of the property and this would result in the loan amount being lower. Your bank will only fund a certain percentage of the cost or valuation of the property, whichever is lower.



So a good idea would be to buy a property from a reputed builder where such problems normally don’t arise. For other cases it might be a good idea to agree to pay a small fee to the bank to do a valuation before hand to ensure that you do not land up with a surprise later.



5. Loan eligibility calculation



The ability to repay a housing loan is based on your income and expenditure pattern. In case your monthly income is Rs 10,000 and your monthly expense is Rs 8,000, then Rs 2,000 can be considered as the sum you can pay as a home loan EMI (equated monthly installment).



A working example will give you an idea of how you can calculate your loan eligibility.




At an interest rate of 9 per cent, the monthly installment of an Rs 1 lakh loan for a 20-year loan is Rs 900. Banks calculate the loan eligibility based on a simple formula:



Home loan eligibility in lakhs is equal to the amount determined by the bank as available for loan repayment divided by loan installment per lakh for the selected tenure.



Or



Loan eligibility = Rs 2, 000/900 x 1 lakh = Rs 2.2 lakh



Larger your repayment capability, the higher will be your loan eligibility.



6. Fixed or floating interest rates



Banks offer home loans on fixed or floating interest rates. Irrespective of the option you have chosen; remember this is not a one-time decision.



Though banks claim to offer ‘fixed rate loans’, most of these are accompanied by a reset clause, that is, banks have the right to change the rate of interest after a specified time period. Only a few banks offer genuine fixed rates that remain fixed throughout the tenure of the loan, no matter what.



Floating rate loans are linked to banks’ benchmark rate, so interest rates on these loans fluctuate with the benchmark rates. If benchmark rates increase your loating home loan interest rate also increases and vice versa. Floating rate loans are, however, at least 2.5 per cent cheaper than a comparative tenure fixed rate housing loan.



There is safety in numbers, though. Over 90 per cent of the home loan consumers opt for floating rate loans. If you go in for a floating rate home loan, you also get the benefit of reducing interest rates as (not if) and when the interest rate cycle turns and commences on its downward journey. Even if the interest rates rise, in the interim as long as they do not rise above the 2.5 per cent differential; you are still a net gainer. Remember there is a gap of 2.5 per cent between floating and fixed rate home loans as mentioned earlier.



We advise you to go in for a transparent floating rate loan unless, you want to play it completely safe and are willing to pay the premium (in terms of high interest rates) for such safety. In any case, signing a fixed rate loan, that is not a genuine fixed rate loan makes no sense, whatsoever.




One thing to watch out for is the bank not reducing the floating rate applicable to you even though it is giving loans to new consumers at a lower rate. The only safeguard against this is to keep checking the market and if such a situation arises you should threaten to (and should actually) change your lender unless your lender actually gives the benefit of the reduced rates to you.



7. Keep checking around



Be a vigilant consumer even if you have opted for a fixed rate of interest. As a matter of practice, assess how the markets have moved in a six-month period and consider the costs and benefits of changing your decision.



Go window-shopping, then bargain and bargain. Bargain for some more then till you are sure that you have got the best deal.



You should shortlist four or five banks and get the short listed banks to compete for your loan. The cost of your loan depends a lot on your ability to negotiate. Interest rates offered by banks take your income and repayment profile into consideration. Apart from interest rates, also check various charges like processing fees, pre-payment charges, legal fees, valuation fees and other hidden costs.



8. Getting your sanction letter



Once your application is accepted, your interpersonal communication with your bank begins which entails your assessment regarding loan repayment capacity.



The next step is your credit appraisal and sanction of the loan. If all goes well, your loan is sanctioned. If the bank is not convinced about your credentials, your application may get rejected. The sanction letter is an important piece of document.


The bank will give you an offer letter informing you of the following; loan amount, interest rate (fixed or floating) tenure, repayment mode and the general terms and conditions. You will be asked to sign on, on a copy of this letter as your acceptance.



The moment of reckoning has finally come! You receive your home loan cheque.



9. The sojourn is not over yet



In insurance parlance, an insurance policy which covers a home loan is known as ‘loan cover term assurance policy’. This policy covers the home loan amount taken in case of an unfortunate event such as untimely demise of the borrower. The cover on such a policy keeps reducing with the amount of EMIs paid. So, the loan amount covered reduces with the loan amount outstanding.




Lenders nowadays offer home loans bundled with insurance companies. Some lenders also offer insurance policies and the amount payable towards the same is a part of the loan as well as the loan EMI. Though insurance-cum-home loan tie-up offers convenience to the borrower, most insurance companies offer single premium or the ‘limited premium paying term’ plan to home loan seekers. This may prove to be a costly affair in the long run.



Limited premium payments (LPP) are not favourable on one more count? It has been observed that home loan borrowers pay-off the home loan well within the tenure because with time their repayment capacity also increases.



A lot of individuals are also under the illusion that if they are sufficiently covered, they don’t need to insure themselves further just to cover the loan amount. But they should understand is that the current life insurance cover was actually meant to serve a different purpose like retirement or financial needs of the family in their absence.



In case of an eventuality, the survivors will find it difficult to payoff the outstanding home loan amount. And it wouldn’t hurt your housing finance company to sell the property to recover the dues in case of a loan payment default. This alone makes a case for individuals to consider buying a term plan/loan cover term assurance.



As housing loan durations are long, it would be prudent to take such a cover. So go ahead and follow your dream…

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By Ashok Advani – April 30, 2008

10 golden rules to become rich!

 

Once you decide to put your money to work to build long-term wealth, you have to decide, not whether to take risk, but what kind of risk you wish to take. Here are 10 investing rules that can make you rich:

1. There’s no escaping risk

Once you decide to put your money to work to build long-term wealth, you have to decide, not whether to take risk, but what kind of risk you wish to take.

Yes, money in a savings account is dollar-safe, but those safe dollars are apt to be substantially eroded by inflation, a risk that almost guarantees you will fail to reach your wealth goals.

And yes, money in the stock market is very risky over the short-term, but, if well-diversified, should provide remarkable growth with a high degree of consistency over the long term.

2. Buy right and hold tight

The most critical decision you face is arriving at the proper allocation of assets in your investment portfolio — stocks for growth of capital and growth of income, bonds for conservation of capital and current income.

Once you get your balance right, then just hold tight, no matter how high a greedy stock market flies, nor how low a frightened market plunges. Change the allocation only as your investment profile changes. Begin by considering a 50/50 stock/bond-cash balance, then raise the stock allocation if:

  • You have many years remaining to accumulate wealth.
  • The amount of capital you have at stake is modest.
  • You don’t have much need for current income from your investments.
  • You have the courage to ride out the stock market booms and busts with reasonable equanimity.

As these factors are reversed, reduce the 50 per cent stock allocation accordingly.

3. Time is your friend, impulse your enemy

Think long term, and don’t allow transitory changes in stock prices to alter your investment program. There is a lot of noise in the daily volatility of the stock market, which too often is ‘a tale told by an idiot, full of sound and fury, signifying nothing’.

Stocks may remain overvalued, or undervalued, for years. Realize that one of the greatest sins of investing is to be captured by the siren song of the market, luring you into buying stocks when they are soaring and selling when they are plunging.

Impulse is your enemy. Why? Because market timing is impossible. Even if you turn out to be right when you sold stocks just before a decline (a rare occurrence!), where on earth would you ever get the insight that tells you the right time to get back in? One correct decision is tough enough. Two correct decisions are nigh on impossible.

Time is your friend. If, over the next 25 years, stocks produce a 10% return and a savings account produces a 5% return, $10,000 would grow to $108,000 in stocks vs. $34,000 in savings. (After 3% inflation, $54,000 vs $16,000). Give yourself all the time you can.

4. Realistic expectations: the bagel and the doughnut

These two different kinds of baked goods symbolize the two distinctively different elements of stock market returns.

It is hardly farfetched to consider that investment return — dividend yields and earnings growth — is the bagel of the stock market, for the investment return on stocks reflects their underlying character: nutritious, crusty and hard-boiled.

By the same token, speculative return — wrought by any change in the price that investors are willing to pay for each dollar of earnings — is the spongy doughnut of the market, reflecting changing public opinion about stock valuations, from the soft sweetness of optimism to the acid sourness of pessimism.

The substantive bagel-like economics of investing are almost inevitably productive, but the flaky, doughnut-like emotions of investors are anything but steady — sometimes productive, sometimes counterproductive.

In the long run, it is investment return that rules the day. In the past 40 years, the speculative return on US stocks has been zero, with the annual investment return of 11.2% precisely equal to the stock market’s total return of 11.2% per year.

But in the first 20 of those years, investors were sour on the economy’s prospects, and a tumbling price-earnings ratio provided a speculative return of minus 4.6% per year, reducing the nutritious annual investment return of 12.1% to a market return of just 7.5%. From 1981 to 2001, however, the outlook sweetened, and a soaring P/E ratio produced a sugary 5% speculative boost to the investment return of 10.3%.

Result: The market return leaped to 15.3% — double the return of the prior two decades.

The lesson: Enjoy the bagel’s healthy nutrients, and don’t count on the doughnut’s sweetness to enhance them.

5. Why look for the needle in the haystack? Buy the haystack!

Experience confirms that buying the right stocks, betting on the right investment style, and picking the right money manager — in each case, in advance — is like looking for a needle in a haystack.

Investing in equities entails four risks: stock risk, style risk, manager risk, and market risk. The first three of these risks can easily be eliminated, simply by owning the entire stock market — owning the haystack, as it were — and holding it forever.

Owning the entire stock market is the ultimate diversifier. If you can’t find the needle, buy the haystack.

6. Minimize the croupier’s take

The resemblance of the stock market to the casino is not far-fetched. Yes, the stock market is a positive-sum game and the gambling casino is a zero-sum game . . . but only before the costs of playing each game are deducted. After the heavy costs of financial intermediaries (commissions, management fees, taxes, etc.) are deducted, beating the stock market is inevitably a loser’s game. Just as, after the croupiers’ wide rake descends, beating the casino is inevitably a loser’s game. All investors as a group must earn the market’s return before costs, and lose to the market after costs, and by the exact amount of those costs.

Your greatest chance of earning the market’s return, therefore, is to reduce the croupiers’ take to the bare-bones minimum. When you read about stock market returns, realize that the financial markets are not for sale, except at a high price.

The difference is crucial. If the market’s return is 10% before costs, and intermediation costs are approximately 2%, then investors earn 8%. Compounded over 50 years, 8% takes $10,000 to $469,000. But at 10%, the final value leaps to $1,170,000 — nearly three times as much . . . just by eliminating the croupier’s take.

7. Beware of fighting the last war

Too many investors — individuals and institutions alike — are constantly making investment decisions based on the lessons of the recent, or even the extended, past. They seek technology stocks after they have emerged victorious from the last war; they worry about inflation after it becomes the accepted bogeyman, they buy bonds after the stock market has plunged.

You should not ignore the past, but neither should you assume that a particular cyclical trend will last forever. None does. Just because some investors insist on ‘fighting the last war,’ you don’t need to do so yourself. It doesn’t work for very long.

8. Sir Isaac Newton’s revenge on Wall Street — return to the mean

Through all history, investments have been subject to a sort of law of gravity: What goes up must go down, and, oddly enough, what goes down must go up. Not always of course (companies that die rarely live again), and not necessarily in the absolute sense, but relative to the overall market norm.

For example, stock market returns that substantially exceed the investment returns generated by earnings and dividends during one period tend to revert and fall well short of that norm during the next period. Like a pendulum, stock prices swing far above their underlying values, only to swing back to fair value and then far below it.

Another example: From the start of 1997 through March 2000, Nasdaq stocks (+230%) soared past NYSE-listed stocks (+20%), only to come to a screeching halt. During the subsequent year, Nasdaq stocks lost 67% of their value, while NYSE stocks lost just 7%, reverting to the original market value relationship (about one to five) between the so-called ‘new economy’ and the ‘old economy.’

Reversion to the mean is found everywhere in the financial jungle, for the mean is a powerful magnet that, in the long run, finally draws everything back to it.

9. The hedgehog bests the fox

The Greek philosopher Archilochus tells us, ‘The fox knows many things, but the hedgehog knows one great thing.’ The fox — artful, sly, and astute — represents the financial institution that knows many things about complex markets and sophisticated marketing.

The hedgehog — whose sharp spines give it almost impregnable armour when it curls into a ball — is the financial institution that knows only one great thing: long-term investment success is based on simplicity.

The wily foxes of the financial world justify their existence by propagating the notion that an investor can survive only with the benefit of their artful knowledge and expertise. Such assistance, alas, does not come cheap, and the costs it entails tend to consume more value-added performance than even the most cunning of foxes can provide.

Result: The annual returns earned for investors by financial intermediaries such as mutual funds have averaged less than 80% of the stock market’s annual return.

The hedgehog, on the other hand, knows that the truly great investment strategy succeeds, not because of its complexity or cleverness, but because of its simplicity and low cost. The hedgehog diversifies broadly, buys and holds, and keeps expenses to the bare-bones minimum.

The ultimate hedgehog: The all-market index fund, operated at minimal cost and with minimal portfolio turnover, virtually guarantees nearly 100% of the market’s return to the investor.

In the field of investment management, foxes come and go, but hedgehogs are forever.

10. Stay the course: the secret of investing is that there is no secret

When you consider these previous nine rules, realize that they are about neither magic and legerdemain, nor about forecasting the unforecastable, nor about betting at long and ultimately unsurmountable odds, nor about learning some great secret of successful investing.

In fact, there is no great secret, only the majesty of simplicity. These rules are about elementary arithmetic, about fundamental and unarguable principles, and about that most uncommon of all attributes, common sense.

Owning the entire stock market through an index fund — all the while balancing your portfolio with an appropriate allocation to an all bond market index fund — with its cost-efficiency, its tax-efficiency, and its assurance of earning for you the market’s return, is by definition a winning strategy.

But if only you follow one final rule for successful investing, perhaps the most important principle of all investment wisdom: Stay the course

 

 

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By Ashok Advani – April 14, 2008

Contact Details

Movie Time

Nirlon Complex
Hub, Western Express Highway
Goregaon East
Mumbai - 400063
Phone: 022-67066000, 67066019
*————————————————————————

HDFC : Santosh 9870105835  fax 26841536 santoshhdfcltd@rediffmail.com

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By Ashok Advani – April 12, 2008

SAP Contract Dates

 

We have found new problem while creating contract,

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By Ashok Advani – March 11, 2008

Beach

 

We spend a evening at a beach, a very intersting place. Lot of hawkers for food, clothes, juice, toys, keychains.

It was very lovable to be in water till knees

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By Ashok Advani – February 23, 2008

Expenses

A day of normal person life starts with a tea, and end with dinner. and in middle of day he takes order from wife, kids, bosses, collegues etc…

It is really very hard to summarize what he has done in entire week . Although he is very busy when ever he get a call he say i am busy, he comes home late because of pressure in work and so on, what ever he earn is been spend and taken some more credit on Cards, which he is aware that there is no repayment plan with him

Let we make a simple plan that instead of we paying for expenses Uncle Sam will pay.

What ever  you e

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By Ashok Advani – February 17, 2008

Shopping Problem at D-Mart


 


Hi,


 


My Wife & I visited your D-mart branch at powai. And done shopping of some household item under bill no BD-1140  23.06.2007  Cashier no MSG/06  time 4:26 pm


 


Wherein we would like to bring in  your notice that the counter staff was not a tall customer friendly. Apart of being rude and arrogant she was just throwing the things after the scanning was done, when she repeated the same thing more than 3 times my wife pinpointed it.


 


But nothing changed.


 


Sorry to say you that you have just lost 3 yrs old customer.


 


We use to shop from D-mart for 3yrs. But this time we have taken decision Never ever shop from D-Mart.


 


This mail I am going to post in my yahoo and rediff blog for others information.


 


Warm Regards


 


 


Advani - 9324647666


 


 


 

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By Ashok Advani – June 25, 2007

26 commandments for personal interviews.doc

26 commandments for personal interviews

advanisons@yahoo.com


You have fared well in the written test and the group discussion.

You are just a step away from admission to your dream programme — the personal interview.

A panel of management experts, a battery of questions. Are you perspiring already?

Well, a personal interview could actually be challenging and fun if you just relax and remain focused. Think of it as a conversation between the interview panel and yourself, so enjoy it thoroughly.

To begin with, there are four main focus areas in any personal interview:

Commandments for every personal interview

Even after months of preparation, some candidates do not perform well inside the interview room.

The trick is to follow the below commandments practice them during mock interview sessions diligently. You are sure to crack the personal interview.

1. Whenever the interviewer asks any questions, listen carefully. Do not interrupt him midway. Ask for a clarification if the question is not clear. Wait a second or two before you answer. And don’t dive into the answer!

2. Speak clearly. Don’t speak very slowly. Be loud enough so that the interviewers don’t have to strain their ears.

3. Brevity is the hallmark of a good communicator. An over-talkative or verbose person is disliked and misjudged instantly, so keep it short.

4. If you don’t know an answer, be honest. The interviewer will respect your integrity and honesty. Never exaggerate.

5. Never boast about your achievements. Don’t be overconfident — it is often misinterpreted by interviewers for arrogance.

6. Don’t get into an argument with the interviewer on any topic. Restrain yourself, please!

7. Remember your manners. Project an air of humility and be polite. 

8. Project enthusiasm. The interviewer usually pays more attention if you display enthusiasm in whatever you say.

9. Maintain a cheerful disposition throughout the interview, because a pleasant countenance holds the interviewers’ interest.

10. Maintain perfect eye contact with all panel members; make sure you address them all. This shows your self-confidence and honesty.

11. Avoid using slang. It may not be understood and will certainly not be appreciated.

12. Avoid frequent use of words and phrases like, ‘I mean’; ‘You know’; ‘I know’; ‘Well’; ‘As such’; ‘Fine’; ‘Basically’, etc.

13. When questions are asked in English, reply in English only. Do not use Hindi or any other languages. Avoid using Hindi words like matlab, ki, maine, etc.

14. Feel free to ask questions if necessary. It is quite in order and much appreciated by interviewers.

15. Last but not the least, be natural. Many interviewees adopt a stance that is not their natural self. Interviewers find it amusing when a candidate launches into a new accent that s/he cannot sustain consistently through the interview or adopts a mannerism that is inconsistent with their own personality.

It is best to talk naturally. You come across as genuine.

Mind your body language!

1. Do not keep shifting your position.

2. Your posture during the interview adds to or diminishes your personality. Be a little conscious of your posture and gestures. They convey a lot about your personality.

3. Sit straight. Keep your body still. You may, of course, use your hand gestures freely. 

4. Avoid these mannerisms at all costs:

  • Playing with your tie
  • Theatrical gestures
  • Shaking legs 
  • Sitting with your arms slung over the back of the adjoining chair

Post interview etiquette

1. Make sure you thank the interviewers as a mark of respect for the time they have spared for you.

2. As you rise and are about to leave, make sure you collect up your pen/ pencil/ all other stationery.

3. After getting up, place your chair in its original position.

The last word

1. Some institutes (like the Faculty of Management Studies) ask you to deliver an extempore speech suddenly while the interview is going on. Be mentally prepared for the same.

2. Competition will be very tough. Every mistake you commit will turn into an advantage for the other candidates. Hence, be very particular about your preparation. Do not leave anything to chance or the last minute. 

3. Remember you have to sell yourself in an interview.

4. Be very particular about what you write in your resume. Check and re-check your resume for facts, spelling errors, etc. Ensure that there are no grammatical errors in the descriptive type questions in the sheet.

Use these hints, and say goodbye to your interview phobia

 

 

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By Ashok Advani – August 4, 2006