An insider's guide to easier home loans

Arecent report by rating agency, Fitch, highlights the fact that there is a possibility the recent spate of 'teaser' home loan schemes could lead to a 'payment shock' for borrowers. Teaser loans have a fixed interest rate for one-two years, after which the rates jump to a higher level on a floating basis. So, if the interest rates rise sharply, there is a possibility that the borrowers' ability to repay is affected. According to the report, on an average, a percentage point increase in interest rates increases the monthly EMI by 6-8 per cent. However, there is no reason to panic, yet, since most bankers do not see a substantial increase in interest rates in the short term.

More interestingly, the report puts the spotlight on broad trends on defaulting patterns, which may help you gauge how banks evaluate a borrower's eligibility for a home loan.

Prepayments: The borrowers who make lumpsum prepayments have a relatively high degree of financial flexibility. Hence, it follows that this group typically experiences very low delinquency rates. In fact, the borrowers who are forced into an increase in their EMIs show the highest delinquency rates. But borrowers with discretionary incomes or personal savings enjoy the flexibility to prepay a home loan to keep the EMI payout in check even if the interest rates shoot up. It follows that prepayment rates will always keep pace with any hikes in a loan's interest rate.

Loan-to-value Ratio: This is the percentage of the property cost that is sanctioned by a bank for a loan. The higher the down payment paid by a borrower, the more his willingness to repay the loan since he has a higher stake in the property. However, the loans where the original loanto-value ratio exceeds 90 per cent are often the outcome of more stringent underwriting criteria, including authorisations from senior underwriting staff. As such, these loans have typically exhibited lower default rates.

Profile: By and large, borrowers with a salaried income exhibit default rates that are 20-50 per cent lower than the default rates of self-employed borrowers. An exception to this rule are self-employed professionals such as doctors and chartered accountants. This category exhibits default rates comparable with the salaried borrowers.

Geographical location: States such as West Bengal and Punjab have shown a higher default rate compared with the rest of the country. The relatively weaker performance in these regions could be attributed to lower levels of economic activity in specific sectors. Another factor could be the lack of underwriting and collection expertise. The loans originating in Delhi and Andhra Pradesh are at the other end of the spectrum, showing lower default rates in certain transactions. The report also highlights seasonal patterns that can influence your access to a home loan. For example, the collection efficiency of lenders varies with season. The highest efficiency is exhibited in March, which coincides with the end of a financial year.

The loan prepayment rates are as revealing. The highest prepayment rate is exhibited between March and June. This is understandable since this period usually corresponds with the time that a majority of salaried borrowers get their annual bonus payments. On the other hand, the period from September to December typically has a lower prepayment rate. Obviously, the festival-related spending in these months reduces a borrower's ability to prepay.

[tags dilbag koundal, IT Projects, ERP/SAP Consultant, Web designer, Pantnagar, Kangra, Weonlinecoders, Himachal News]

Think before you download

Are you downloading your favourite game or a particular application that allows you to share pictures, videos and information? These days, we have various gaming applications and individual developers coming out with unique and interesting downloadable applications. But, you need to make sure you are not inviting virus to disrupt your mobile handset. You should know that Internet/ mobile applications, if certified, can be trusted; if not, they can hamper your mobile data.

Worms, trojans, viruses and hackers - they not just threaten for your home PC or laptop anymore. As per Trend Micro, an Internet security firm, cyber crooks are on their way into your pocket. The popularity of smartphones like the Blackberry, iPhone and the emerging Droid is on a boom and that's making them a lucrative target for cyber crooks to cause mischief.

The possibility of someone hacking cellphone became public knowledge when Paris Hilton's mobile was hacked. Unfortunately for her, numbers of all her celebrity friends were also placed on the Internet - resulting in a barrage of calls to each of them. This was one of the highlighted cases of phone hacking through extracting personal information from the mobile handset.

The ingenuity of cyber criminals to come up with new social engineering angles seems endless. Mobile worms and viruses are similar to those that infect PCs. An unsuspecting user can be tricked into installing a harmless-looking file that infects a device and seeks additional mobile phones to target, often disrupting the phone's operations.

What can a mobile hacker do? There are quite a number of things that can be done by the mobile hacker. Depending on intent, their main targets are:

Steal your number: Your phone number can be accessed and obtained by hacking. This allows them to make calls and have it charged on your account.

Extract your information: Mobile hacking allows a hacker to contact your cellphone, without your knowledge, and to download your addresses and other information you might have on your phone. Many hackers are not content to just getting your information. Some will even change all your phone numbers! Be sure that you keep a backup of your information somewhere. All you have to do is to ensure that the handset is malware-protected. Here are some quick and easy points a user should keep in mind when downloading applications on mobile phones.

First, identify the source from where you are downloading the application. A general community site that does not have any face is not contactable. For example, download.com is the worst place to get the software from. You can download applications like our P2P software on your mobile.

Check the software for security certificates. Try not to use any unsigned application. These are third-party signatures from Verisign, Symbian and Sun. Absence of any trusted signature can make the application very dangerous. The only warning that you will get is when you install and load the application. So, go for trusted applications.

Once the signature is there, visit the company site to verify application that you have downloaded. Check for warnings, known bugs and the functions that it would provide. This may help you understand the resources the application will take, such as memory, CPU, etc. Applications like file share, Voip, etc use some core OS functionality. In case of a bug, such an application can disrupt other functionalities of the phone.

Social media-based applications that download the files can also bring in a virus-infected file to your handset. In such a case, one should have some anti-virus software installed in the system or the application should check for MIME-type before it allows the download of the content. But, make sure that you protect your handset with anti-virus software to ensure that even if by chance you have downloaded a non-trusted application, security solution providers like Trend Micro or McAfee have anti-virus solutions for you.

Check for your data plan before you start to use an application that uses some sort of data transfers. An application like mBit p2p can generate huge data transfers. The user is advised to get in touch with the customer care to identify an appropriate plan for it. The user can tell the customer support about the desired application and an appropriate plan for the same.

Follow these simple steps and you'll ahve a happy downloading session. So, treat your smart phones like your laptops or computers, and not a landline phone.

 [tags dilbag koundal, IT Projects, ERP/SAP Consultant, Web designer, Pantnagar, Kangra, Weonlinecoders, Himachal News]

Re: The taxpayers' checklist

World's 10 Worst cities for IT pros

Ever wondered which are the worst cities for techies? Cities which don't provide an ideal work environment for IT pros. CIO recently released a list of 10 cities that it thinks IT pros should avoid.
Here's over to the worst cities for IT pros.

Linfen, China

Situated along the banks of Fen River, Linfen in China tops the list of worst cities for IT pros.
The city also tops the Times' list of most polluted cities in the world with more than 3,000,000 people potentially affected due to automobile and industrial emissions. The city also figures among the world's ten dirtiest cities.
According to reports, Linfen residents are at high risk of skin diseases and lung cancer. With high levels of sulfur dioxide in the air, the city pays the price of China's high dependence on coal. China sources 70% of its energy requirements from coal.

Mexico City, Mexico

At No 2 on the worst cities list is Mexico's capital Mexico City. With an estimated population of 8.84 million as of 2009, the city is most densely populated in the country.
Also the largest city in Mexico, Mexico City is plagued by issues like high-level of pollution, noise and violence. Organized crime, drug abuse and alcoholism are some of the other factors that earns the city a place among the worst destinations for IT pros.

McMurdo Station, Antarctica

American Antarctic research center, McMurdo Station, located on the southern tip of Ross Island in Antarctica is at No. 3 on the worst cities list.
The largest community in Antarctica, McMurdo Station's summer population reaches 1,000 while the winter population swells to about 250. Though the station needs IT support, software training and a 24x7 help desk, but the freezing temperature is the biggest deterrent for IT pros.

Beijing, China

The capital city of China, Beijing, is at No. 4 on the worst cities for IT pros list.
China's second largest city, after Shanghai, Beijing figures among cities with worst traffic congestion globally. With over 17 million population, the city faces problem of high pollution, smog and degradation of natural resources.
The report also cites recent incident of Google threatening to pull out of China due to censorship and allegations of government hacking into systems of IT companies as issues.

Jakarta, Indonesia

The capital city of Indonesia Jakarta ranks at No. 5 on the worst cities for IT pros. The report quotes research from ORC Worldwide (a global human resources firm) that ranks Jakarta as the No. 2 riskiest place for workers.
According to Businessweek.com, other issues that puts Jakarta among worst cities are pollution, disease and sanitation, lack of medical facilities, political violence and repression and crime.
The ORC report quotes, "The threat of violence, from Islamic extremists in particular, is a serious drawback to living here."

Riyadh, Saudi Arabia

Next worst city for IT pros is the capital city of Saudi Arabia, Riyadh that ranks at No. 6.
According to a survey by ORC Worldwide and BusinessWeek, Riyadh faces problem of political violence and repression, political and social environment.
The report says, "The possibility of a terrorist attack is an ongoing threat, while wide-ranging restrictions on dress, movement, conduct, food, alcohol, travel and communications limit expatriate life."

Mumbai, India

India's financial capital Mumbai too figures among the worst cities for techies.
Ranked as the seventh worst city for IT pros, Mumbai gets this dubious distinction for its high rate of pollution, disease & sanitation, infrastructure, political violence, climate and medical facilities.
According to Businessweek.com, other issues that makes Mumbai part of the list is worst slums, traffic jams and security issues.

Nairobi, Kenya

Next worst city for IT pros is the capital city of Kenya, Nairobi which ranks at No 8.
The city's share of problems include: Crime, infrastructure, disease & sanitation, political violence & repression, and social environment.
According to ORC Worldwide research, "Violent crime is a significant drawback and shortages of water and electricity can be a challenge in Nairobi."

Afghanistan

At No. 9 on the list is Afghanistan. According to the report, any city in Afghanistan is not an ideal destination for techies to work.
For reasons well known, many parts of Afghanistan fall under the sway of extremists. Almost all cities in the country reel under threats of terror attacks.

Iraq

At No. 10 on worst cities list is Iraq. The continuous war in Iraq makes the country not so ideal destination for techies. Since 2006, the place is not even safe for tourists.

[tags dilbag koundal, IT Projects, ERP/SAP Consultant, Web designer, Pantnagar, Kangra, Weonlinecoders, Himachal News]

The taxpayers' checklist

EPF and PPF
Returns: 8.5 per cent (EPF) and 8 per cent (PPF) per annum
Maximum deduction: Rs 1 lakh for EPF; Rs 70,000 for PPF
Income: Tax-free

It's compulsory and it's safe. However, in March, the Employee Provident Fund's (EPF) chief importance is that it automatically reduces the amount you must invest to exhaust the Rs 1 lakh limit. Jokes apart, the EPF has several advantages for taxpayers. To begin with, it offers a steady return of 8.5 per cent. Secondly, you cannot withdraw the money until you retire or change your job. This means you are exploiting the power of compounding to the fullest over your career span.

The best part is that the interest and the withdrawals are tax-free, a benefit available only in a couple of other products.

All these features make the EPF ideal for investing for a retirement corpus. However, if you really need the money, the authorities have the discretion of allowing you one withdrawal during your career even if you haven't changed your job or have not retired. For this, you must submit proof of expense for which the withdrawn amount will be used. Typically, a trans-Europe trip does not qualify as adequate reason for dipping into the EPF. If these features seem attractive, you can increase the contribution to the EPF from the mandatory 12 per cent to 25 per cent of your basic salary.

The returns from the Public Provident Fund (PPF) are slightly lower at 8 per cent per annum, but the interest and withdrawals are tax-free. The advantage over the EPF is greater flexibility of withdrawals. The maturity period of the PPF is 15 years. However, you can dip into the fund from the seventh year onwards. The maximum limit of withdrawal is 50 per cent of the account's balance as in the previous year or in the previous three years, whichever is lower. The cut-off date for calculating the balance is March 31, the last day of the financial year.

In case you want the money before the seventh year, you can take a loan from the account up to 25 per cent of the balance in your account in the third year. The loan must be repaid in a maximum of 36 EMIs. The interest on the loan works out to 12 per cent. As the interest on the money is not redirected to the PPF, it may be good idea to avoid taking a loan.

Five-year FDs and NSCs
Returns: 7-8 per cent
Maximum deduction: Rs 1 lakh
Income: Fully taxable

The National Savings Certificates are currently on a par with the PPF in terms of pre-tax returns. But they lose out to the PPF and EPF because the returns are taxable, thus reducing the post-tax yield. Needless to say, they are equally safe and have the advantage of a shorter lock-in period of six years.

The tax treatment of NSC income makes all the difference for taxpayers who have an income that falls within the 30 per cent tax slab. However, if you are a retiree or have an annual income lower than Rs 3 lakh, the tax rate is marginal (only 10 per cent, plus 3 per cent cess). Five-year fixed deposits also have a short lock-in period and offer almost the same returns. The difference is that the interest rates of FDs are more variable and the deposits in private banks are not as safe.

Senior citizens' savings scheme
Returns: 9 per cent per annum
Maximum deduction: Rs 1 lakh
Income: Fully taxable

Whether or not you are looking forward to a retired life, there is one sure reason to celebrate. It is called the Senior Citizens' Savings Scheme, which offers a higher rate of returns 9 per cent than most bank deposits. Though the income is taxable, it is unlikely that you will pay tax because the exemption limit for senior citizens is Rs 2.4 lakh per year.

The twist is that though you are eligible for earning 9 per cent interest after the age of 60, the tax exemption limit comes into effect only after you complete 65 years. Never mind this minor problem. The impact of the extra tax paid in five years will be minimal compared with the long-term benefits of this scheme. So do not ignore this option if you are planning a carefree retired life.

Equity-linked saving schemes
Returns: Market-linked
Maximum deduction: Rs 1 lakh
Income: Tax-free

They have been in the recovery mode since 2009, giving returns of about 76.1 per cent last year. This bounceback from the lows of 2008 (the ELSS funds lost 55.5 per cent on an average) proves that long-term investors cannot overlook the ELSS for saving tax. The returns offered by these funds are unmatched by any other tax-saving instrument. Of course, they have the same risk profile as other equity funds. However, you can play your cards right by choosing funds that have been consistent performers and by staying invested for long periods.

To further hedge your risk, you can invest via SIPs that give you the benefit of averaging out costs. This automatically makes tax planning a year-long affair, as it ought to be. You also have the option to choose dividend payouts for periodic payments. This doesn't affect the taxability of income as both dividends and capital gains at the end of the three-year lock-in period are tax-exempt.

Unit-linked insurance plans
Returns: Market-linked
Maximum deduction: Rs 1 lakh
Income: Tax-free

Last year, Ulips got a major facelift. The insurance regulator capped the difference between the gross yield and the net yield earned by a Ulip. The ceiling is 3 per cent for Ulips with a tenure of less than 10 years and 2.25 per cent for policies with longer tenures. However, mortality charges have been kept out of this calculation. The rule became effective from 1 January 2010.

Now that the steep charges are gone, you have hardly any reason to ignore this instrument that combines equity exposure, life cover and tax savings. In fact, if the Swarup Committee's recommendations are accepted, all the upfront commissions of Ulips will be phased out by 2011. Therefore, investing in this product will become more profitable.

Understanding the features of this financial instrument is important to optimise its benefits. For instance, in addition to saving tax, Ulips can also act as an effective allocation tool. This is because Ulips allow investors to change the equity-to-debt ratio without any penalty for a fixed number of switches every year. Even if you are not market savvy and are unable to take the decision on your own, there are Ulips that change the allocation according to your life stage.

However, if you are looking at short-term returns, stay way from Ulips. This is because they may not be able to recover the upfront charges unless you stay invested for at least 10-12 years. Do not be swayed by agents who claim that you only have to pay premiums for a minimum period of three or five years. In this way, your corpus is not likely to grow enough and will only be able to pay the charges for the life cover.

Life insurance policies
Returns: 5-6 per cent
Maximum deduction: Rs 1 lakh
Income: Tax-free

There may not be many advantages to the expensive endowment or money-back policies that your friend had recommended a few years ago, but there is one silver lining. The premium of the policy is covered by Section 80C of the Income Tax Act and is exempt from tax. This is not to say that you must buy such a policy now. If you are inadequately insured, opt for pure term plans, which are significantly cheaper than traditional policies. In fact, the premiums paid for all insurance policies that cover you, your spouse and dependent children are exempt from tax. But remember that experts are against buying insurance for saving tax alone. The latter should be an added advantage.

Pension plans
Returns: Market-linked
Maximum deduction: Rs 1 lakh
Income: Pension income taxable

It's a must-have for all investors. If your employer does not provide one, buy a pension policy that ensures a steady income after retirement. What can be better than earning tax benefits on the investment as well?

There are three types of pension plans to choose from. The first is the unit-linked pension plan. It offers greater control over your retirement corpus by allowing you to choose the mix of equities and debt according to your risk appetite. A unit-linked pension plan is not as costly as a Ulip because it does not offer life insurance.

However, keep in mind that on maturity, only 33 per cent of the corpus can be withdrawn tax-free. If you do not get gratuity, up to 50 per cent of the pension corpus can be commuted. You must use the balance to buy an annuity from an insurance company that will give a monthly pension.

This pension is fully taxable.

The second type of pension plan is offered as a mutual fund. In most of these funds, the money cannot be withdrawn before the investor turns 58. Even if early withdrawals are allowed, you have to pay a penalty. For instance, the Templeton India Pension Plan charges a hefty 3 per cent exit load on amounts withdrawn before the vesting age of 58.

The third option is the New Pension Scheme (NPS) launched with much fanfare in 2009. However, it is yet to attract investors in hordes. To know more about why the scheme has been a non-starter, read our story 'All you Need to Know About Pension' on our Website, www.moneytoday.in. Sign up only if you are convinced that the NPS has the potential to take care of your pension needs. The contributions fall within the Section 80C ambit.

Home loan EMI
Maximum deduction: Rs 1 lakh

For the past few months, the hefty home loan EMI had been one of the most important reasons employees feared the job axe. Now, the same EMI is cause to rejoice. The cumulative principal of your EMIs is eligible for a Section 80C deduction. This is usually a large amount and, along with the Provident Fund, should take care of most of your Rs 1 lakh limit. If you also factor in the deduction available under Section 24 on the interest paid, the effective loan rate comes down significantly.

Another way to increase the benefit is to take a joint loan with a sibling, spouse or parent. This way, both coowners of the property can claim individual tax benefits on the home loan. A word of caution: do not let tax saving inspire you to extend your loan tenure. It is equivalent to spending more to get a discount. The shorter the tenure of a mortgage, the better it is.

Tuition fees
Maximum deduction: Rs 1 lakh

The ever-increasing school fees of your children could burn a hole in your wallet. There is some respite because the tuition fee of up to two children is taxdeductible. Note that only the tuition fee is included. Other myriad charges in various forms, such as the building development fee, bus fee, etc, are not eligible for deduction. Another rider is that the fee must be paid to a recognised educational institution in India. This means that playschools, foreign colleges and private coaching classes do not qualify. Also, the fee must be paid for the taxpayer's children, not siblings, nephews, nieces or grandchildren.

The benefit cannot be availed of by both the parents. If there's one child, only one of the parents can claim tax benefits on the school tuition fee. Otherwise, each parent can claim tax benefit for different children. Even so, the tax benefit is helpful, especially for those who can't save enough to cut taxes.

[tags dilbag koundal, IT Projects, ERP/SAP Consultant, Web designer, Pantnagar, Kangra, Weonlinecoders, Himachal News]

How to write a love letter

Love, they say is in the air and don't you feel you would love tell them in simple words how special they make you feel? It might get embarrassing talking about it, but imagine their pleasure when you pop them a love letter. Here are some tips that will make any love note extra special.

 

Take some time off, clear the clutter in your mind and concentrate on the person you love. You will be amazed to know that there are several things which you took for granted from your partner. It can be anything -as mundane as a smile you both shared after cleaning out the cupboard to being a moral support during a crisis. Once you are clear what all you would write to your love, you can really get started.

 

Start the note by sweet endearments – my dearest sounds quite right in this context. Of course, if you are in a long term relationship, there might be nick names you have for each other. Every thing goes, as long as it speaks about the commitment you have.

 

Once you are through with this, tell them about those special occasions which made all the difference to you. Make the words come from deep within the heart, the message, will then be loud and clear. Tell them how special they make you feel. In simple terms just open up and spill your heart out and do not be timid.

 

The main body of the letter could involve things like what made you love your partner, the things you have in common – or you don't, the special moments you have shared, and what makes every day you spend with them special. There is a catch though, don't go overboard with the praise, if you have some resentment; make it clear, in a sweet way.

 

End it on a positive note. It is just fine to talk about all those future plans you have with your partner. And don't forget to profess your love.