Home Loan Glossary
NO, AC does not mean an air-conditioner; neither does FI stand for something like Formula – 1 in the home loan parlance. Here is a list of words, with their meanings, that could baffle you otherwise…
AC – Additional Charges (AC) are levied by HFIs that are over and above the
AF- Administrative Fees (AF) is charged by a HFI on the loan amount sanctioned to you. This fee is normally payable at the time of accepting the offer letter. It is charged mainly to meet the operating expenses of the loan amount for the entire tenure. The expenses for technical site visits made to the property are also covered under this fee.
DAS- Deduction Against Salary. This is an arrangement when a salaried employee asks his employer to deduct the instalment from his salary and pay it to the financier. This is done with the mutual consent of the employer and the financier. Some HFIs offer better rates for customers who are employed in organizations where the HFI has a DAS arrangment.
DMA/DSA/ Franchisee – Direct Marketing Associate / Direct Sales Associate. This is an agency of a financier which takes care of customer sales and service. Most car financiers do not have their field sales force as this is handled by the agency. They are authorised by the financiers. [Top] DPC – Delayed Payment Charges. It is the penalty for delay in paying the instalments. [Top] EMI – Equated Monthly Instalment. This is the instalment and which is payable every month and is a fixed amount payable every month.
DPC- Charges on the DPC in case of a further delay on your part to pay the installment due are termed as Additional Charges.
EMI Break up – The EMI is broken up into principal and interest. This break up of the EMI is never constant and keeps changing from month to month, year to year. However, the EMI remains constant over the tenure of the loan.
FCNR – FCNR refers to Foreign Currency Non-Repatriable account. This is a Fixed Deposit Foreign Currency account and not a savings account. Deposits in this account can be made in any of the five currencies – US Dollar, UK Pound, Deutsche Mark, Japanese Yen and Euro.
FI – Stands for Field Credit Investigation or plain Field Investigation – most financiers appoint an outside agency, who authenticates the identity of the client and confirms his place of residence and office address.
FOIR – The Fixed Obligation to Income Ratio (FOIR) is similar to the IIR as detailed above. The difference in case of a FOIR is that in FOIR calculation, the HFI takes into account the installments of all other loans previously availed including the Housing Loan applied for. In other words, this ratio includes all the fixed obligations that you pay every month. The Fixed Obligations however, do not include statutory deductions like PF, Profession Tax, etc. and deductions for investment like Voluntary PF, LIC Premium, Recurring deposit, Contribution towards society, etc.
FSI – Floor Space Index or FSI as it is more popularly known as refers to the ratio of the Built up area of a property to the area of the land on which it is built. An FSI of 2:1 would mean that the total built up area of the building can be equal to twice the area of the land on which it is being built.
HFI – HFI stands for Housing Financial Institution and covers banks, corporates and financial institutions that offer Housing Loans. [Top] IC – Incidental Charges (IC) are levied by some HFIs for visits made by the collections team to the customers houses who have delayed the payment of installment.
IIR – The Installment to Income Ratio (IIR) is a term very commonly used by HFIs to calculate your loan eligibility. It is generally expressed as a percentage. This percentage denotes the portion of your monthly installment on your Home loan. This figure is normally pegged at 40% but can vary on the basis of actual salary details, qualifications, employer / business, years of experience, growth prospects and sources of other income. For Example : if IIR is 40% and your Gross Income is Rs. 10,000/- per month, then as per the IIR ratio you will be eligible for a loan where the installment does not exceed Rs. 4,000/- per month (40% multiplied by Gross Monthly Income)
LTV / LCR – LTV stands for the loan to value ratio while LCR stands for the loan to cost ratio. They are terms used by various HFIs to signify the loan amount that a person is eligible for on the total cost of the property. There is a limit on the maximum loan amount that a person can get for a property irrespective of the loan eligibility.
NeAR – Net Effective Annualised Rate. This is the net rate paid by the client after taking into account all discounts, other charges paid, subventions, advance instalments and is the rate to be used for evaluation of two or more offers.
NOC – This is a document required by all HFIs from the concerned authority in cases where you are not the owner of the land in which your property is being built. The authority depends on the type of property i.e. society if the society has been formed and conveyance deed executed. Builder if it is purchased from a builder directly or if the society has not been formed. Development authority if the property has been directly allotted by a development authority, etc. However, if the customer is building a property on a plot of land that he owns, a NOC is not be required.
NRE – NRE or Non-Resident External Account refers to a savings or a Fixed Deposit account held by a Non-resident Indian in a bank in India. This account can be jointly held with an NRI only. The interest income is totally tax free and the principal and interest are fully repatriable in any of the five currencies – US Dollar, UK Pound, Deutsche Mark, Japanese Yen and Euro. This is also a rupee account.
NRNR – NRNR refers to Non-resident non-repatriable account. The is a Fixed Deposit Rupee account and cannot be a savings account. The interest earned in this account is repatriable in any of the five currencies – US Dollar, UK Pound, Deutsche Mark, Japanese yen and Euro.
NRO – NRO or Non-Resident Ordinary account refers to the savings or Fixed Deposit account of a Non-resident Indian in a bank in India. This is a Rupee account. Interest earned in this account is taxable. The account can be jointly held with a resident Indian. The principal and interest in this account are non-repatriable.
PDC – Post Dated Cheques. These are issued in favour of the financier for repayment of loan.
PEMI – This refers to the Pre EMI that you pay when your loan is partly disbursed. In Home Loans, the disbursement is made as per the stage of construction of the property. When your loan is partly disbursed, you cannot start paying your EMI. Instead you pay simple interest on the part amount drawn by you at the rate that is applicable to you. This is called a PEMI.
PF – Processing fees (PF) is charged at the time of submission of the application form and covers expenses incurred for processing the application form. This fee has to be paid upfront by the customer.
PPC – Pre Payment Charges or PPC as it is known stands for the charges that you incur when you pay back the loan before the completion of the tenure. PPC varies from one HFI to another. It is either a percentage of the loan amount being prepaid or a flat value based on the amount of prepayment.
ROI – Rate of Interest or the ROI as it is more popularly known refers to the rate of interest charged by the HF on your loan. It is the rate at which you pay interest on the loan that you availed.
Framed construction / RCC – This is a type of construction which is most commonly used by developers for construction of their project. This indicates that the entire load of the property rests on the slabs and columns that are constructed with the use of reinforced concrete. When all the slabs and the columns of the construction are cast, it is called as the RCC structure or skeleton structure.