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Glossary - Property Loan


Advance EMI
Number of equated installment(s) paid in advance at the time of disbursement in the form of post dated cheques.
Amortisation
Reduction of an amount at regular intervals over a certain time period. Usually, refers to the reduction of debt by regular payment of loan installments during the life of a loan. Also describes the accounting process of writing off an intangible asset.
Amortization Schedule
An amortization schedule is a table giving the reduction of your loan amount by monthly installments. The amortization schedule gives the breakup of every EMI towards repayment interest and outstanding principal of your loan.
Annuity

A series of payments of a fixed sum at regular intervals.
Annual rest
In an annual rest, the interest is calculated on your outstanding principal at the beginning of every year. Once the interest is calculated at the rate charged to you for the entire year it is deducted from the EMIs received during the year. The balance EMI is taken as principal repaid during the year. This amount is deducted from the opening balance of principal (i.e. the amt on which the interest was calculated). The balance amount is carried forward as the opening balance of principal for the next year.
Down Payment
Bank normally give loans up to 80-85% of the value of the property. The balance would have to be paid by the buyer, as a payment before he draws on the loan amount which is called down payment.
Fixed rate loan

Fixed rate of interest is one where the rate charged by the Bank on the loan is constant over the tenure of the loan. It is advisable to go in for a Fixed rate if you feel that the rate of interests in the market have touched rock bottom and the rates can only move upwards.
EMI
EMI stands for Equated Monthly Installments. This installment comprises both principal and interest components. Use our EMI calculator to find out your monthly payments based on the loan amount, the rate of interest and the repayment period. Choose the combination that best meets your financial resources and requirements.
Interest is calculation on a daily reducing balance
On an annual reducing balance method, you will continue to pay interest on amounts you repay during the coming one year as the interest for the year is determined on the basis of the balance outstanding at the beginning of the year.
In the case of the daily reducing balance, interest is calculated only on the outstanding loan amount, which reduces every time you pay off your EMIs or make any prepayments.
Interest Rate
Rate at which the lenders charge interest for the loan amount.
IRR
Internal Rate of Return is the rate at which the lender accounts for interest.
Legal Scrutiny Report
The documents which are pertaining to your property needs to be scrutnised by the legal personnel or advocate of the Bank to ensure that you are buying a property that is clear and marketeable.
Margin Amount
Margin Amount is the difference between the total cost of the project and the loan amount sanctioned.This money has to be invested by the borrower prior to the release of the loan amount.
Market Value
This is the value of the property as per the prevailing market value.
Marketable Title
A person is said to have a marketable title only when the title to the property is clear and he/she has the right and capacity to transfer the same.
Monthly rest
In a monthly rest, the interest is calculated on the outstanding principal at the beginning of every month. Once the interest is calculated at the rate applicable to you for the month it is deducted from the EMI received during the month. The balance component of the EMI forms the principal paid during the month. This amount is then deducted from the opening balance of the principal (i.e. the amt on which the interest was calculated). The balance amount is carried forward as the opening balance of the principal for the next month.
NPA (Non Performing Assets)
As per the extant norms, among other conditions, if interest and/or instalments remain unpaid in a loan account for a period of more than 180 days on the relevant date, the loan account concerned is to be classified as NPA. With effect from 31.3.2004, the period is reduced to 90 days. Accordingly, with effect from 31.3.2004, an account will be classified as NPA, if, inter alia, interest and or instalment remains unpaid in a loan account for a period of more than 90 days.
Overdue
Any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the bank.
Penal interest
If the installments are not received as per the repayment terms, by the end of the month, the borrower will be charged interest on the installments delayed which is called as penal interest.
Pre EMI
You've chosen a property that's yet under construction. So the Bank makes the disbursement in parts based on the progress of the construction of your property. However till the loan is fully disbursed you have to pay simple interest at the rate you have agreed upon with the Bank. This is known as the Pre EMI. And from the month following in which the full disbursement is made you will start paying your EMI.
Prepayment Charges
Most Banks charge some fee for pre-payment of loan before the tenure is over.Your earning capacity normally increases with your age and a pre-payment fee can be a big cost.The fee is normally in the range of 1-2% of the pre-paid amount.
Tenure of the Loan
It is the Repayment Period of loan. Normally, loans are given for a period of 1-15 years. Some Banks also give loans upto 20 years at an additional interest cost of 0.25% -0.5%.
Variable rate loan
Variable rate is one where the rate charged by the Bank on your loan keeps changing with respect to the rates in the market over the tenure of the loan. Typically, the rate charged by the BankI is on the basis of their cost of funds and the prevailing market rates. These rates change periodically. Accordingly the tenure increases or decreases or alternatively the EMI increases or decreases based on whether the rates move upwards or downwards. Every Bank decides whether to change the rate of interest or change the tenure at the time of sanction. It is advisable to go in for the Variable rate if you feel that the interest rates have reached its peak and can only go downwards.

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