Money Matters[Updated]
1. Home Loans :
-----------
Link is :
Buyer --> HFC ---> Builder
Pre-requisite :
--------------
This article assumes that completion of the construction will take about 2 years.
HFC - Home Financing Company - Provides loans which comes in 2 flavors.
1. ADF - Advanced Disbursal Facility.
2. Pre-EMI.
ADF - Advanced Disbursal Facility :
----------------------------------
HFC will be giving the entire amount to the builder immediately. Then our EMI will be started immediately starting from the current month to the "n" no. of months.
Pre-EMI :
--------
HFC will be giving the partial amount to the builder as per an agreement. That is , if the builder completes 3rd floor , then 25% of amt will be given.If 6th floor is completed , then another 25% will be given to builder. Likewise disbursal of money from HFC will be subject to the completion of work of builder's.
Initially until the completion of the construction we would be paying only the interest on the disbursal amount from HFC to Builder. Then only, our EMI starts that will be
extending to "n" no. of months.
In the face of it , we will feel that Pre-EMI is costlier than ADF since additional interest amt
that we pay until the completion of the construction.
ADF = [ EMI for "n" months ]
Pre-EMI = [ EMI for "n" months ] + [ Interest paid initially until completion of construction ]
Experts feel that ADF is good option , not for us but for the "builders" as they are getting the amount immediately. Therefore pressure would be on us from HFC to pay the debt.
Our concern is to buy the property from builder.There should not be any pressure on us. Let the builder bear the pressure of completing the construction for getting his full dues from the HFC.
It is actually Pre-EMI is a good option when completion of construction takes longer period. ADF for smaller period.
Classic Example :
---------------
Suppose we have to pay EMI of Rs.23,431 for 20 yrs.
Construction period = 2 yrs.
For ADF scheme ,
Total amt paid = 23,431 * 240 = 56,23,440.
For Pre-EMI Scheme ,
Let the Interest paid per month for the first
2 years be Rs. 9,961.
Total amt paid = [ 9,961 * 24 ] + 56,23,440 = 5862504.
Under Pre-EMI , for the first 2 yrs , we are paying less compared to ADF.
Pre-EMI for the 1st 2yrs = 239064.
ADF for the 1st 2yrs = 562344.
Difference amt gained in Pre-EMI for the 1st 2yrs = 3,23,280.
We can do a investment of this amt. for the next 20 yrs at an interest rate of say 10% .. Then after 20yrs we can get Rs. 21,75,000 which is much more beneficial to us.
Pros & Cons :
-------------
-- The thing to be noted in Pre-EMI is , "THERE IS NO TAX BENEFIT DURING CONSTRUCTION PERIOD OF THE HOUSE".
-- Generally ppl may opt for "ADF" as completion period is less , So they can enjoy the tax benefit as soon as the construction is over.
-- We may do some corrections during the construction
period to suit the individual requirements but this amt needs to be given apart from the EMI.
With Pre-EMI , we can initially spend money to get the house of our choice.
If we go with ADF , as we have to pay apart from EMI , we will get cash flow problems as one may end up with credit card companies.
2. LTA -- Leave Travel Allowance :
------------------------------
LTA is meant only for travel costs , not for partying & hotel bills.
LTA is not related to DOJ of our employment.
Govt. fixes a block of yrs for LTA.
2002-2005 = block, set of 4yrs.
Next ongoing block is 2006-2009.
For one block , we can claim 2 LTAs.
We can claim only once in a yr.
Carry Forward Option :
-----------------------
Suppose in a block of 4 yrs , he claims only one LTA ,
then the pending one claim will carry fwd to the next
block.In the next block of 4 yrs , he can claim 3 LTAs.
If we didn't claim LTA , it gets added to salary but
taxed.
Koodi vaazhnthaal Kodi Nanmai :
-----------------------------
Suppose both u & ur spouse are employed, then each
person can claim LTA once in a year.
So we can make 2 journeys in a year.
For one trip , he can claim, for other trip she can claim.
Known Fact :
-------------
--- We can claim for LTA only if we apply for Leave.
--- We need to travel with our family to claim LTA.
--- Coverage is given to u , father & mother, spouse & 2 siblings.
-----------
Link is :
Buyer --> HFC ---> Builder
Pre-requisite :
--------------
This article assumes that completion of the construction will take about 2 years.
HFC - Home Financing Company - Provides loans which comes in 2 flavors.
1. ADF - Advanced Disbursal Facility.
2. Pre-EMI.
ADF - Advanced Disbursal Facility :
----------------------------------
HFC will be giving the entire amount to the builder immediately. Then our EMI will be started immediately starting from the current month to the "n" no. of months.
Pre-EMI :
--------
HFC will be giving the partial amount to the builder as per an agreement. That is , if the builder completes 3rd floor , then 25% of amt will be given.If 6th floor is completed , then another 25% will be given to builder. Likewise disbursal of money from HFC will be subject to the completion of work of builder's.
Initially until the completion of the construction we would be paying only the interest on the disbursal amount from HFC to Builder. Then only, our EMI starts that will be
extending to "n" no. of months.
In the face of it , we will feel that Pre-EMI is costlier than ADF since additional interest amt
that we pay until the completion of the construction.
ADF = [ EMI for "n" months ]
Pre-EMI = [ EMI for "n" months ] + [ Interest paid initially until completion of construction ]
Experts feel that ADF is good option , not for us but for the "builders" as they are getting the amount immediately. Therefore pressure would be on us from HFC to pay the debt.
Our concern is to buy the property from builder.There should not be any pressure on us. Let the builder bear the pressure of completing the construction for getting his full dues from the HFC.
It is actually Pre-EMI is a good option when completion of construction takes longer period. ADF for smaller period.
Classic Example :
---------------
Suppose we have to pay EMI of Rs.23,431 for 20 yrs.
Construction period = 2 yrs.
For ADF scheme ,
Total amt paid = 23,431 * 240 = 56,23,440.
For Pre-EMI Scheme ,
Let the Interest paid per month for the first
2 years be Rs. 9,961.
Total amt paid = [ 9,961 * 24 ] + 56,23,440 = 5862504.
Under Pre-EMI , for the first 2 yrs , we are paying less compared to ADF.
Pre-EMI for the 1st 2yrs = 239064.
ADF for the 1st 2yrs = 562344.
Difference amt gained in Pre-EMI for the 1st 2yrs = 3,23,280.
We can do a investment of this amt. for the next 20 yrs at an interest rate of say 10% .. Then after 20yrs we can get Rs. 21,75,000 which is much more beneficial to us.
Pros & Cons :
-------------
-- The thing to be noted in Pre-EMI is , "THERE IS NO TAX BENEFIT DURING CONSTRUCTION PERIOD OF THE HOUSE".
-- Generally ppl may opt for "ADF" as completion period is less , So they can enjoy the tax benefit as soon as the construction is over.
-- We may do some corrections during the construction
period to suit the individual requirements but this amt needs to be given apart from the EMI.
With Pre-EMI , we can initially spend money to get the house of our choice.
If we go with ADF , as we have to pay apart from EMI , we will get cash flow problems as one may end up with credit card companies.
2. LTA -- Leave Travel Allowance :
------------------------------
LTA is meant only for travel costs , not for partying & hotel bills.
LTA is not related to DOJ of our employment.
Govt. fixes a block of yrs for LTA.
2002-2005 = block, set of 4yrs.
Next ongoing block is 2006-2009.
For one block , we can claim 2 LTAs.
We can claim only once in a yr.
Carry Forward Option :
-----------------------
Suppose in a block of 4 yrs , he claims only one LTA ,
then the pending one claim will carry fwd to the next
block.In the next block of 4 yrs , he can claim 3 LTAs.
If we didn't claim LTA , it gets added to salary but
taxed.
Koodi vaazhnthaal Kodi Nanmai :
-----------------------------
Suppose both u & ur spouse are employed, then each
person can claim LTA once in a year.
So we can make 2 journeys in a year.
For one trip , he can claim, for other trip she can claim.
Known Fact :
-------------
--- We can claim for LTA only if we apply for Leave.
--- We need to travel with our family to claim LTA.
--- Coverage is given to u , father & mother, spouse & 2 siblings.
Ah, you have straightaway lifted the content from Rediff at http://in.rediff.com/getahead/2006/jul/03loan.htm. You should have credited the original author or at least changed the numbers.
Posted by
Anonymous |
7:54 AM
Post a Comment