Understanding the key differences on Mortgage

 USA Mortgage vs Indian Mortgage: Understanding the Key Differences

When it comes to securing a mortgage, the process can vary greatly depending on where you live. In the United States and India, the mortgage industry operates differently, with each country having its own unique set of regulations, requirements, and procedures. In this article, we'll take a closer look at the key differences between USA Mortgage and Indian Mortgage, to help you make an informed decision when it comes to buying a home.

USA Mortgage

In the United States, the mortgage industry is highly regulated and overseen by the Federal Reserve System. The industry is also dominated by a few large lenders, including banks, credit unions, and mortgage companies. The most common types of mortgages in the US are fixed-rate and adjustable-rate mortgages, each with their own advantages and disadvantages. To qualify for a mortgage in the US, borrowers must have a good credit score, a stable income, and a down payment of at least 20% of the home's value.

Indian Mortgage

In India, the mortgage industry is regulated by the Reserve Bank of India and is still in the process of development compared to the US. The most common type of mortgage in India is a home loan, which is used for purchasing a home, constructing a new one, or for home renovation. Unlike the US, where a 20% down payment is standard, in India, the required down payment can be as low as 10%. Additionally, borrowers in India typically have to provide more documentation and paperwork to prove their financial stability.

Interest Rates

One of the key differences between USA Mortgage and Indian Mortgage is the interest rate. In the US, interest rates on mortgages are determined by the market, with the Federal Reserve System setting a target range for interest rates. In India, the interest rate on home loans is determined by the lending institution and is usually higher than in the US. This is because the Indian mortgage industry is still developing and the government regulates interest rates to control inflation.

Loan Terms

Another key difference between the two countries is the loan terms offered to borrowers. In the US, mortgage terms can range from 10 to 30 years, with 15- and 30-year terms being the most common. In India, the loan term for a home loan is typically 15 to 20 years. Borrowers in India also have the option to prepay their loan without incurring any penalties, which can be a great option for those who can afford to do so.

Credit Score Requirements

A good credit score is crucial for getting approved for a mortgage in both the US and India. However, the requirements for a good credit score are different in each country. In the US, a credit score of at least 620 is typically required to be approved for a mortgage, while in India, a score of 750 or higher is considered a good score.

In conclusion, the process of securing a mortgage in the US and India is different, with each country having its own unique set of requirements and regulations. When deciding between a USA Mortgage and an Indian Mortgage, it's important to consider factors such as interest rates, loan terms, and credit score requirements. By doing so, you can make an informed decision and find the mortgage that best fits your needs and financial situation.

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EFFECTS OF INFLATION ON YOUR MORTGAGE IN UNITED STATE AND INDIA

INTRODUCTION

  Do you have an idea the impacts the inflation have on the prices of the house in the market? Inflation is a monster which should be fought right back and center by the government for it has negative impacts on the economy. In a country that experiences uncontrollable rates of inflation it would lead rise in prices of the houses in the country. United State is in record for recording rise in the prices in the years 2008 which discouraged many buyers to buy the houses.

 Exactly what are the effects of the inflation on the prices of then various mortgages? This is common question that many people ask themselves when a country is experiencing some level of inflation in the country. At time a customer may be willing buy a house either in the United State or India but end up withdrawing due to the prices at which the mortgage is charged by the lender. I firmly believe that this article will be help you have a good understanding of the impacts inflation have in the mortgage:

 Rise of mortgages rates in US and India

 Overvaluing of house in both USA and India

 Rise of mortgage rates in the market

 The main effect of the inflation in the market would be the increase in the mortgage rates in the market. For instance, if the inflation rates would increase in more than 2% in the country economy it would have some impacts in the mortgage rates in the market.  Inflation has negative effects with the interest which would be the cause of the rise in the mortgage rates in the market. In the United States market an increase in the inflation rates would get reciprocated in rates of the mortgage in the country. On the other hand the same effects of inflation on the loan rates would get experienced in the Indian market.

 Rise in the mortgage rates would mean the rise in the prices of the house in the market.  In the situation where the interest would continue to raise in the market it would means that the customer in the market who will be looking for new mortgage in the market would part with more prices in both India and United State. Banks in India have developed some measure which helps to regulate the rise of the inflation rates in the country hence ensure the prices of the house in the market get regulated.

Overvaluing of the houses in the market

 The result of high inflation in the market would lead to overvaluation of the houses in the market. The rise in the inflation rates in the market would cause the loan rate to rise thus making the lender to overvalue the houses in the market. For instances the mortgages crisis in the US in the year 2008 caused the lenders in the market to increase value of the houses thus discouraging the clients to buy houses in the market.

 Many of the lenders in the market wishes to makes some handful profits in the course of selling the mortgage thus making them to take advantages of the rise in the inflation rate in the market. If the houses are overvalued in the market it would means that the buyer would pay more than what he or she is expected to pay in the market.  Most of the lenders would be making super profits in the expenses of the buyer in the market who are buying the mortgage. For instance if the interest rates in the United  State is 3% it  would  means the lenders  would set the prices of the house at higher  prices to ensure they make good profit. The same case would apply in India and the borrower would be looking to makes some super profits in the market.

 Remedies Of Inflation on the mortgages prices

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  Acquire fixed rate mortgages

Acquire fixed rate mortgages

 Mortgages rates are usually affected by the rise in the inflation rate in the market but that could be resolved by taking the fixed rate mortgages rather than flexible mortgages.  The fixed   mortgages will acts as insurance in case there is rise in the rates of the inflation in the market. When an investor is considering taking the fixed mortgage they would agrees on the interest rates with the lender before taking the mortgages plans. This plan would help the investor to secure his or her mortgages plans against the rise in the interest rates in the market.

 The idea of the fixed rate mortgages would apply both in the US market and also in the India if effective plans could be set by the government in defense of the rise in the inflation rate. For instance if the clients is willing to take a mortgages in the market he or she would approach the banks and the expert would calculate the expected rates by the banks and advise accordingly. However it is important for any the potential investors in the market to consider choosing the best lenders in the market who will offer the best mortgages plan for their clients.

 Conclusion

 Inflation is inevitable in the mortgage market since it is determined by factors beyond the market control. The government needs to introduce some fiscal policies in the market which would regulate the rate of the inflation in the market. In the mortgages market there are e various macroeconomic factors which influences the mortgages rates at any given time in the market.  Inflation rates affect both US and India mortgages in one ways or the other hence there is need for the government to develop all the necessary measures which would help reduce the rise of the inflation in the market.  There exits some avenue which could be used by the lenders to ensure the customers in the market do not suffer big blows when there is rise in the inflation.  For instance insurance covers would help to reduce the rise in the mortgages rates in the market.

REASONS WHY UNITED STATE MORTGAGE DOMINATES IN THE MARKET COMPARED TO THE INDIAN MORTGAGE

INTRODUCTION

Do you plan to buy a house anytime soon?  If the answer to the question is yes, the next move should be to consider the best lender who will arrange for you the best mortgage loan plan for your income. In the market, there are different countries which have mortgages for their clients, but the essential thing for any clients is to consider the best mortgage plan which the customer would consider. In the market, the two standard mortgages are the Indian and United State; however, the US mortgage continues to dominate over the Indian based mortgage.

   There are various criteria which are common in all the mortgages plans irrespective of the country which the plan is made. They include the lending interest's rate and the duration period under which the borrowers are expected to repay their debt. Mortgages are the most pleasant and convenient way for anyone to own a home. Having these facts in our mind, I believe this article will be helpful to you to make consideration of the best mortgage to consider in the market. 

 THINGS TO CONSIDER BEFORE APPLYING FOR ANY MORTGAGE

Level of Income

Credit Rating

Value of the house

ü LEVEL OF INCOME

 Your income is what the lender will consider, and also it will be used to services the long term loan.  Before someone would consider making any move to obtain a mortgage in the United States and India, he or she should consider his or her level of income.

The loan eligibility in many lending banks is based on a particular formula. However, the generally accepted norms are that the monthly payment should not exceed  28% of the client's gross income. The monthly payments should be $ 1,166.66 while the annual should be $ 14,000. When it comes it lending the lender can multiply up for times of your salary annually.

ü  VALUE OF THE HOUSE

 Every house has value, and the buyer should always assess the value of the home before considering the mortgage plan. Through valuation, one would ascertain if indeed he or she can manage to repay the house comfortably.  The values describe the amount quantified for the house, which will get covered by your mortgage. For instance, if you have saved $ 50,000 and you want to obtain a home worth $ 200,000, one will require to borrow $150,000.

ü CREDIT RATING

 Every lender in the market has some crediting rate history; one should consider the crediting rate before applying for the loans from such lenders. After reviewing the rating, the client would be in an excellent position to make the decisions on whether to proceed with the mortgage plan.

 The most common credit policy which is used is FICO scores, which would mean your score will keep on differing depending credit rating reports.  If the clients have high credit scores, it will qualify the customer for a loan. In the market, the lower the credit score, the higher the chance you will pay your mortgages and vice versa. 

REASON WHY UNITED STATES DOMINATES OVER INDIAN MORTGAGES

·       US lending rates Cheaper

·        Repayment period.

·       United State mortgages are well  structured

UNITED STATE LENDING RATES ARE CHEAPER

In the United States market, the lending rates are usually cheaper compared to the Indian based mortgage, thus making them favorable to many customers across the globe.  Due to the favorable lending rates in the country, it has led to a strong driving force in the market.  In the country, the average lending rates for the mortgages is set between 3 to 4.5%. On the other hand, the Indian bank usually charges its customer averages rates of between 10 to 12 % per year. Every customer would consider United State mortgage compared to the Indian if lending rates are the considerations. 

 For the Indian bank's lenders to be competitive like their counterpart in the US, they need to review the lending rates and lower the rates. With the reduction in the lending rates, it would make the Indian mortgages to be attractive and thus increase the number of customers who seek for a mortgage plan. However, the progress of the economy would determine the lending rates which are set by the regulating body in the country.

  LOAN REPAYMENT PERIOD

 Every mortgage has a duration period similar to any other long term loan. In the United States market, the repayment period for the mortgages is usually 360 months, which is equivalent to 30 years. The loan term is convenient for any customer who is seeking for the mortgages plan. On the other hand, Indian mortgages have a loan term of 20 years, which is ten years or less compared to the US.

Most of the clients in the market would consider the US mortgages because its repayment period is longer; hence, the installment would get distributed over a long period, thus reducing the amount paid.  The mortgage plans will be favorable to both high-income earners and also the middle-income earners, unlike the Indian mortgage.

·       UNITED STATE MORTGAGES IS WELL  STRUCTURED

United States mortgage market is well structured and regulated in a manner, thus reducing any form of malpractices in the market. For instance, the market has all sort of regulation and rules which ensure all the banks and other stakeholders in the industry adhere to the set rules in the market. Rules and regulations ensure that the mortgage plans stages get adhered with a lot of concern. 

In one way or the other, the rules cover, among other areas such as application time and also the agreements which are significant impediments to the growth of the market.  On the other, the biggest competitor of US mortgages is Indian mortgages, which are less structured and have fewer regulations.

 CONCLUSION

Buying a house should be done through a mortgage plan due to the benefits it accrues to the client who considers this plan. For instance, one would pay for the house at a more extended period, thus allowing one to consider some essential things in life, which also needs money. In addition to that, one would get access to the right home, which would have been only a dream.  United State mortgage is more favorable compared to the Indian mortgage; hence, any customer in the market should consider taking these mortgages when or she wishes to have a home under his or her name.

 Mortgages market could get determined by the progress in the economy of the country in several ways. For instance, in the United States, the economy is doing well compared to the Indian economy hence making then the United States, lenders to lend loans with cheaper interest rates.

Mortgage Industry in future

Mortgages are a very common term nowadays and I am not sure people have really understood the real meaning of this term. I can explain that a mortgage is nothing but loan given by any financial institution, upon the accepting a real property as the collateral. The purpose of this can be purchase a home, for business needs, to meet personal expenses, constructing new homes etc.

When we discuss about the difference between US mortgage and Indian mortgages, we need to consider different terms associated with it.

The first term is Mortgage Backed Securities (MBS). Most of the US mortgages are converted into sold in secondary market and converted in Mortgage backed securities. To facilitate this the public agencies such as Fannie Mae and Freddie Mac play vital role. When it comes to India, even now less than 1% of the mortgages are being converted into MBS. In India this is mostly been facilitated by National Housing Board (NHB). That too they sell mostly through HDFC Ltd. Indian mortgages are mostly could be called as home loans.

Second is rate of the loan. As you all now the lending rates in US is much cheaper than India and that makes a huge driving force in US mortgage market. The average interest rate of US mortgage rate is 3 to 4.5% APR. Whereas in India the average bank lending rates are varied from 10 to 12% per annum. But we can be optimistic that the lending rates of mortgages in India may come down in near future as economy is improving in the recent years.

Third term I would like to discuss is term of the mortgage loans. In US most of the loans are for term of 360 months, means 30 years. But in India the term of normal mortgage loan is 20 years. It is significantly important that as the rate of Indian mortgages are high, people prefer for a term that is minimum as possible.

Next term we need to discuss is the scope or future of Indian and US mortgages. When we consider US mortgages, it is steady and would not be having a significant growth in the sales of mortgage, as the US market is already a grown one. But when we look at Indian market for mortgage sales, 210 million new urban Indians will need about 60 million new homes by 2030. It should be kept in mind that India already need 21 million homes as of now to meet the current demand in urban areas. So, urban India needs 81 million new homes by 2030, or an average of 4.5 million homes per year. It comes roughly 12 times of US mortgage sales output. Keep in mind that this figures only the urban India statistics in case of mortgage. This is a huge potential and shows a massive opportunity for Indian financial institutions in the coming years for selling mortgage loans.

Finally, the US mortgage industry is a well regulated and structured industry. It has all the applicable rules and regulations to make sure that different financial institutions follow uniformity in different stages of mortgage loan processes. But in India it still needs to be structured and regulated. Examples are common set of rules to be followed at the time of loan application, a common loan application form, a standard mortgage loan agreement etc. It can be expected in the near future that there is a standard procedure would come in place and government of India would take necessary steps to set up this.

----------- JOJAN MATHEW, Market Analyst