__RETAIL BANKING ( RB) __

Unit 22 : Mortgage Advice

Unit 22 : Mortgage Advice

In India, mortgage advice profession is carried out without any regulations. There are regulations in US, UK and other countries regulating the mortgage advice services.

Sale statement providing basic information about the site including the address of the property being sold, whether the property is freehold, leasehold,whether or not the property is being sold with vacant possession.

Evidence of title to prove that the seller owns the property and therefore has the right to sell it.

Energy Performance Certificate indicating how energy efficient a home is on a scale of A-Q The most efficient homes - which should have the lowest fuel bills are in band A.

The process of converting future sums into their present equivalents is known as discounting, which is simply the opposite of compounding.

What if interest is paid more frequently?

Annually = P( 1 + r) = Annual compounding

Quarterly = P(l + r/4)4 = Quarterly compounding

Monthly = P(l+r/l2)12 = montly compounding

The Rule of 72

This rule allows you to determine the number of years before your money doubles whether in debt or investment.

If Rs. 100000 is invested for a period of 5 years at interest at 10% p.a. find the maturity sum i.e. future value Solution The formula for finding FV is

FV = PV( 1 + r)n = 100000(1 +0.10)^5

= 100000(1.10)^5

= 100000(1.61)

= 1610000 So the maturity sum will be Rs. 1,61,000

Where,

F = future value of an annuity

A = annuity

i = interest rate

n = term

F = future value of an annuity

A = annuity

i = interest rate

n = term

Example : Future value of annuity due of Rs. 1000 for a period of 5 years at interest rate of 5% would be FV (Annuity Due) = A [(1+i)^n - 1] / i x (1+i)

= 1000[(l+0.05)^5 - 1)] / (0.05) x (1+0.05)

= 1000 x 5.525 x 1.05

= Rs 5801.91

Where,

PV means present value

1 means one rupee

r means rate of interest

n means period or term

FV means future value

The formula for finding PV is

PV = FV/( 1 + r)n = 161000/(1 +0.10)^5

= 161000/(1.61)

= 100000 So the present value will be Rs. 100,000

Equity or pref. shares (quoted as well as unquoted) Debentures/Govt. securities listed in a recognized stock exchange. Units of UTI/Mutual fund specified under section 10(23D) Zero coupon bonds (whether quoted or not)

Capital gains from transfer of land used for agricultural purpose (Section 54 B) is exempt if utilized for purchase of another land.

Capital gains on compulsory acquisitions of land and building of an industrial undertaking - (Section 54 D) is exempt if utilized for purchase of another land and building

Capital gain is invested in bonds issued by National Highway Authority of India or RECL (Section 54 EC)

Capital gains on transfer of long term capital assets other than a house property - (Section 54 F) is exempt provided the transferor has purchased residential house by utilizing the capital gain amount within one year before the date of transfer or within 2 years from the date of transfer or construct a new house within a period of three years from the date of transfer. If the amount of capital gain is not fully utilized for above, then only proportionate amount that is utilized will only be exempt.

Long term capital gain on transfer of property is taxable at a flat rate of 20% (plus surcharge and education cess). The surcharge @ 10% is applicable if the total income including capital gains exceeds Rs. 10 lakh.

The documents relating to the following transactions of immovable properties are required to be compulsorily registered :

Gift

Lease of immovable property from year-to-year or for any term exceeding one year

Instruments which create any right in an immovable property of a value of more than one hundred rupees

The registration fee for the following immovable property transactions is leviable on the market value of property on which stamp duty is charged.

Conveyance

Exchange Gift

Partition

Transfer of Lease by way of Assignment

Sale

Settlement

Power of Attorney given for consideration

Authorising the attorney to sell the property