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Glossary

  1. Absolute title
    This provides the property title to the owner of the legal registered property, confirming his right of ownership. It indicates the clear ownership of the owner.
  2. Acceptance Letter
    It is a letter given by the borrower of a home loan (after accepting the terms of contract) to the lender confirming the former’s willingness to accept the loan. This letter can be given within 1 to 3 months from the date of receiving the sanction letter from the lender.
  3. Administrative Fee
    You pay this fee to the lender towards the overhead expenses of the administrative work he handles. Usually this fee is to be paid while giving the acceptance letter.
  4. Agreement for lease / sale
    This is a contract for lease or sale, which should be signed by the person against whom action may be taken in case the terms and conditions of the contract are not met. The contract is taken in writing and is forcible by law, subject to sufficient act of part performance.
  5. Amenity
    This includes facilities such as swimming pool, tennis court, etc. These features, though not necessary, are facilities offering additional convenience.
  6. Annual Reducing Method
    In this method, though the EMI (Equitable Monthly Installment) is paid monthly, the adjustment towards interest and principal is made at the end of the year. For instance, if someone has taken a loan for Rs 50 lakh for 20 years at 9% interest, his EMI comes to say Rs 45,000. When he starts repaying the loan, though his loan amount decreases by Rs 45,000 every month, the interest is calculated on Rs 50 lakh for 12 months. The repayments towards principal loan amount are adjusted only towards the end of the year so the borrower is at a disadvantage.
  7. Approved building plans
    These are plans of the architecture of the building, which need to be approved by the Municipal Corporation/ Town Planning authority or other concerned authorities like CIDCO, MHADA, HUDCO, Gram Panchayat, etc. as applicable depending on the location of the project.
  8. Broker/dealer
    A person or company, who brings the sellers and perspective buyers together for buying or selling property.
  9. Brokerage
    Commission paid to a broker.
  10. Building contract
    It is a contract between the owner of land and a building contractor, stating the terms under which construction will be undertaken.
  11. Bullet Repayment
    Repayment of the entire loan is made at the end of the loan term.
  12. Carpet Area
    Carpet area is the area from the inner sides of wall-to-wall. It is the net usable area by the occupant.
  13. Certificate Of Title
    This statement confirms that the current owner legally holds the title of the house. This is necessary to avoid people from fraudulently selling a property they don’t own.
  14. Construction loan
    This loan provides the funds necessary to pay for the construction of buildings or homes; the lender provides funds to the builder at periodic intervals, as the work progresses.
  15. Clear Title
    It is a title that is free from all legal or other hassles.
  16. Collateral
    It is an asset, which serves as a security for a loan.
  17. Conveyance / Sale deed
    This is a document by which the title of a property is conveyed by the seller to the purchaser. Conveyance is the act of transferring ownership of a property from a seller to the buyer.
  18. Deed of conveyance
    A written and signed instrument, which transfers the title of a property
  19. Depreciation
    It is a decline in the value of property or asset over time.
  20. Disbursement
    This is the actual money that the lender pays the borrower, after sanctioning the loan
  21. Documentation
    These are the necessary papers which need to be submitted or signed in connection with the loan.
  22. EMI (Equated Monthly Installment)
    This is the installment amount the borrower pays towards repayment of his loan every month. The EMI amount comprises of both the principal and interest.
  23. Foreclosure
    This is a legal process applied by the mortgagee (usually the lender) to terminate the owner's right to a property. This is usually done in case the owner has mortgaged the property and defaults on the same. The mortgagee sells the mortgagor's interest in the property to recover payments towards the mortgage, also called "foreclosure sale".
  24. Fixed Interest Rate
    This interest rate does not fluctuate as often as market rates. It is reviewed and may change at predetermined time intervals.
  25. Floating Interest Rate
    This interest rate is linked to a market rate like the bank's lending rate. The interest rate fluctuates according to the market movement. The floating interest rates are offered at slightly low rates as compared to the fixed rates, since the borrower bears the risk of fluctuations.
  26. Guarantee
    It is a promise that one party (guarantor) makes, offering to repay a debt or fulfill an obligation on behalf of another party, in case the latter defaults on the same.
  27. Guarantor
    Someone who commits in writing to repay a loan to the lender in case the borrower can't repay. The liability will include interest and other charges. Any individual who has good income/net worth can be a guarantor for a loan.
  28. In Principal Approval
    It is a written agreement from the lender to offer a specified interest rate, if the mortgage goes to closing within a set period of time, subject to the legal and technical clearances and the creation of a valid and equitable mortgage over the property.
  29. Inspection of property
    Inspection of property, which is to be purchased/constructed, is done at regular intervals, both before and after loan disbursement. Once the loan is sanctioned, inspection of the property is done at each stage of the disbursement to ensure that the borrower invests the margin money and the work progresses as per schedule.
  30. Late Charge
    This is a charge payable by the borrower as a penalty for making late payments.
  31. Loan Tenure
    The time duration for which loan has been provided.
  32. Lease agreement
    This agreement is written and signed by the individual/party who is leasing out the property and an individual/party who is occupying the property. Through this agreement, the lessee/tenant allows use and rights to the lessee/tenant for the duration of lease. The contract contains the financial terms and conditions as well as several clauses describing the other binding terms and conditions of the agreement.
  33. Legal scrutiny report
    This report is given by the legal department of the lender, after scrutinising borrower’s documents to ensure that he is buying a property that is clear and marketable.
  34. Margin Amount
    This is the difference between the total cost of the property and the actual loan amount sanctioned. The borrower has to shell out this sum before the lender gives him the loan to buy a house. In case it is for purchase of a house, then the loan amount will be released on the day of registration of the property, after the borrower has paid the margin money. This applies to purchase of flats too.
  35. Professional Inspection
    An inspection performed by a specially trained inspector to provide a comprehensive report on the condition of a house.
  36. Power of Attorney
    This instrument empowers a specified person or persons to act for and in the name of the person executing it. The person for whom the act is done or who is so represented is called principal. The person who is so authorized to do or represent is called agent. It may be either notarized or registered depending on the transaction.
  37. Pre-EMI
    Equated Monthly Instalment (EMI) for the loan begins after the loan has been disbursed in full. Till such time, the borrower has to pay the interest for the loan. This amount of interest payable every month is called as pre-EMI.
  38. Pre-sanction inspection of property
    Once the loan application is received, the lender sends a loan officer to conduct an inspection of the property to ascertain the location of the property, verify the technical details of the house like structural stability etc and the stage of construction, if the loan is for construction. This is the pre-sanction inspection of property.
  39. Rack-rent
    It is a rent representing the full, or nearly the full letting value of a property on a given set of terms and conditions.
  40. Registration and mutation
    It is mandatory for the sale deed of all property transactions to be registered at the regional sub registrar's office of the local municipal authority. Thereafter, the buyer has to apply for mutation, which involves a change in the title records to incorporate the name of the buyer of the property. In order to complete the transfer of property, it is mandatory for the seller to furnish or arrange a valid "certificate of completion" issued from the local municipal authority to the buyer.
  41. Reducing Balance factor
    This is a method of calculating interest that benefits the borrower the most. First, the principal amount is reduced from the outstanding loan amount. So, on every successive repayment, the interest he pays gets reduced correspondingly since it will be only on that part of the principal that remains unpaid.
  42. Security deposit
    This is the interest free deposit paid to the landlord at the commencement of the lease. This is refundable at the end of the lease term. Though the deposit amount varies depending on city, property type, location and the period of the lease, it may range anywhere between 6 to 18 months of monthly rentals. It is not uncommon for some landlords to provide a bank guarantee to the tenant as security for the repayment of the initial deposit amount.
  43. Sale agreement
    This is an agreement between the parties for dealing with the property and which creates a right to obtain a sale deed mentioning the property. Normally it fixes a time for completion, payment of earnest money or part payment of purchase consideration. Usually it is a document that precedes a sale deed. However in some states the sale agreement itself can be registered and will act as a sale deed.
  44. Sale Deed
    An instrument in writing which transfers the ownership of the property or properties in exchange for a price paid/consideration. This is a document that requires to be registered compulsorily.
  45. Settlement
    The process by which a sale and purchase of property takes place. It is commonly done by lawyers and involves the payment of the settlement amount in exchange for the Certificate of Title, a transfer document and a release of previous charges over the property.
  46. Sanction Letter
    It is a letter that the borrower gets from the lender, after the loan is approved, mentioning the conditions of the loan.
  47. Stamp Duty
    It is the tax/fee payable on the different instruments / documents as per the prescribed rate.
  48. Term
    It is the lifespan of the contract to repay a loan.
  49. Transfer
    This act changes the ownership of securities from one person to another.
  50. Valuation of Property
    The process of arriving at a value to a property for the purpose of letting, purchase, sale, audit, rating, compulsory purchase or taxation; the reason and circumstances for valuation will determine the assumptions and facts that are appropriate.
  51. Yield This is the return earned on an investment, usually expressed as a percentage. There are specific measures of yield to deal with different securities and situations.
  52. Zone A defined area of land or part of a building allocated for a particular purpose, for instance land allocated for a park in a development project.
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