Property Insurance � The Importance of Buying One and Transfer
You are in love with every inch of your house. And why not? After all, your home is adorned with so many beautiful memories. However, what about huge number of perils a home and its interiors are vulnerable to? This is something only a few of homeowners realize and act upon. No wonder security of owned property is a significant issue these days.
The returns on these properties are also highly beneficial. Therefore, the number of investors from all over the world has been consistently growing and enjoying the benefits of real estate in India.
Even though, the Indian government and the legal system guarantee support to the NRIs investing in India, the NRIs are keen on securing homes through a home insurance policy. The facility is widely available to Indian property owners. But is the facility considered as important by Indian home owners?
The sad truth is that most home buyers are under the notion that home insurance in India can be ignored. This is also the reason only a few of those who invest in these plans are able to secure their homes.
The Real Estate Scenario in India
The overall quality of real estate properties across India is improving at a regular pace. In general, with only a few norms and laws, the real estate industry is laying emphasis on using high quality products for property construction.
Home Insurance in India Details
Leading financial institutes and insurance companies across the nations offer home insurance plans, these days. Under these plans, the structure and/or contents of the home are protected according to the owner�s preference. In India, man-made damages are covered under property insurance.
To be precise, the insurance policy insures the damages done to property and its contents including jewellery, silver articles, precious stones etc. from the following listed below:
- Terrorism (optional cover)
- Aircraft damage
- Bursting of pipes
- Damage done by road vehicles
- Explosion of hazardous material
The sum insured under the home insurance plan is for home structure. However, it is calculated on the basis of a home�s reconstruction value. To be precise, it is about the cost incurred after the damage and not in proportion to the market value of the home.
What is Reconstruction Value?
The reconstruction value of a property is based on the labour and material used inside the home. In the same way, even as setting the overall value of the contents within the home, the value of future depreciation is calculated.
Research is Crucial
Investing in a home is considered as one of the most significant financial investments in one�s life. In fact, it is one of the most important decisions an individual ever makes. Hence, it is advisable to get into a detailed market research as well as survey prior to finalizing on a specific property.
Understanding Home Loan
A home or a property in India is usually bought through home loan. It is a kind of secured loan. The loan provides prospective buyer with the necessary amount to buy their dream home.
However, home loan also means that one must pay back the principal amount in conjunction with the interest for a long period of time. This could be anywhere between 15 and 20 years. Finding out about varying interest rates is important in this case. Some lenders offer lower interest rates and it would be better to opt for them. In fact even after having finalised everything with a lender, if you find out about another lender willing to offer the loan at a lower interest rate, you should make the switch.
Why the Switch?
Many a times, it is possible that the new lender may be offering buyer a lower interest rate as compared to the present lender. However, prior to switching, one must consider few important things in order to make sure that the home loan transfer from one lender to another is actually profitable.
What to Consider before the Switch?
Switching to a new lender is specifically favourable in the initial stages. This is because during this period, the interest is deducted from the loan amount. When only a few years are left for the loan tenure to complete, the majority of EMI (equated monthly instalments) payment is shifted towards principal repayment. Switching early gives an opportunity to the buyer to pay lower interest amount.
The charges must be paid as you are terminating loan prior to the stipulated term. This is a kind of penalty charged by home loan lenders. The lenders in India usually charges prepayment fee ranging between 2 per cent to 5 per cent of the outstanding amount (loan). So before making the decision of switching, consider whether prepayment would be a comfortable option for you.
The new lender generally charges a processing fee for approval of loan. One should be prepared to pay this amount. The charge typically ranges between 0.5 per cent and 1 per cent of the entire loan amount. So, if you are planning to switch lenders make sure that you are prepared to also provide the processing fee.
In order to apply for a loan with your new lender, you must go through the complete loan process. This means the buyer needs to focus on furnishing the lender with all of the requisite documents. Soon after the verification of documents and detailed survey of the property in question, the approval is offered by the lender.
Your task is to read the details to determine whether this shift in lender is actually beneficial. Many shirk the details and then complain later on when there is simply no way out. The key is attention to detail.
Once all of the charges involved are assessed, one can get a detailed idea of benefits accrued from shifting to new lender. Weighing these benefits with the facilities offered by the old lender will help in deciding on the necessary move.