What TN Home Buyers Need to Know About THDA Loans

Some of the best loan programs in TN are right under our noses, and THDA loans (TN Housing Development Agency) are one of them. A few reasons why there isn’t a ton of press about these great loans is because 1) not all TN lenders can do them, 2) THDA loans tend to be smaller loan sizes (on average) and coupled with the limitation on allowable fees, many loan officers who could do them choose not to, and 3) many loan officers do not offer them because they believe that THDA loans are a lot harder to get closed, which is not true at all as long as they know the program guidelines. For brevity’s sake, this article will provide an overview for the THDA program rather than detail each of the 3 loans THDA offers (Great Rate, Great Advantage, and Great Start).

The THDA loan programs were designed to offer help to low to moderate income buyers in TN seeking to purchase an affordable home. Here are the main things to know about THDA loans:

  • these loans can be used only for primary residences in TN from one to four units
  • the loans are always 30 year terms with fixed rates.
  • the borrower must qualify for an FHA, USDA Rural Development, or VA loan program before the loan can “become” a THDA subsidized loan program. The vast majority of THDA loans are FHA, since FHA loans have the broadest in eligibility requirements. Minimum credit score for any THDA loan is 620 as of right now.
  • THDA loans can effectively make FHA loans near-100% or 100% financing when combined with available THDA grant money, a “community” 2nd mortgage program like The Housing Fund, or THDA’s “Stimulus” 2nd mortgage program.
  • THDA loans are made generally to first time buyers (including people who haven’t owned a home in 3 years); the exception to this rule is when a buyer is purchasing in a “targeted” county; for example, middle TN “targeted” counties include Cannon, Clay, Dekalb, Franklin, Giles, Grundy, Hickman, Houston, Jackson, Lawrence, Lincoln, Macon, Marion, Maury, Stewart, Trousdale, Van Buren, Wayne, and White.
  • THDA essentially sets its own subsidized or below-market rates, which are dependent on how much grant assistance one might need. There are 3 basic loan types: Great Rate (0% assistance), Great Advantage (2% assistance), and Great Start ( 4% assistance)
  • since THDA loans are intended for “modest” homes, properties must meet eligibility requirements; for example, the sales price cannot exceed the county’s limit. There are only 2 limits in the whole state of TN- either $226,100 or $200,160 (these limits are actually fairly liberal by TN’s standards). The counties which have the higher limit are the following counties: Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, and Wilson. All other counties in TN fall under the lower limit.
  • the household income of the borrower(s) cannot exceed the median income limit for the county, based on the number of persons in the household; for example, in Davidson County (Nashville), for a 1-2 person household, the total household income limit is $64,900 right now. For a 3+ person household, the limit is $74,635. The lowest limit in TN is $54,500 for 1-2 persons and $62,675 for a 3+ person household.
  • THDA loans limit origination fees to 1% and discount points to.25%, which simply protects the buyer from getting overcharged. And since all THDA rates are the same regardless of the lender used, the main things a borrower needs to do is to make sure they feel the loan officer knows this program well, and that they feel comfortable working with that person.
  • a homebuyer education class is strongly encouraged on the Great Rate program, and required for the Great Advantage and Great Start programs; this class (if applicable) must be completed prior to the purchase, and must be done in-person. It only makes sense for these subsidized loan programs that borrowers know what they are getting into, how to budget, etc. The last thing THDA wants is for a borrower to lose their home.
  • all THDA loans are subject to a federal recapture tax provision if the purchased home is sold within the first 9 years. This tax sounds much worse than it is, though. A very small percentage of people have to worry about this, and even if they do, it’s typically because their income or home value have gone up a good bit since the purchase. That’s certainly not a bad thing!

THDA loans are a great way for first time buyers in TN in get into a home with little to nothing down, with a low interest rate and reasonable payment. Just knowing some of the basics of the program will hopefully help you know if you might be a good candidate for a THDA loan before you even speak with a lender.



Source by Brian Randall Smith

Real Estate Courses Are Great But Mentoring Is Better

I’ve bought lots of real estate courses in my time some good, some not so good but I always learned a little something from each one. The thing that I notice when talking too many of my students for the first time is that they all say the same thing to me. It goes a little something like this, ” I’ve got a boat load of real estate courses on my shelf that cost me a kazillion dollars and I still haven’t closed a deal” or ” They said that they would help me after I bought the course but the person I talked to at the company seems to know less than I do about lease options”

Here’s the main problem with the real estate course buying student as I see it and it ain’t pretty. It’s called the magic bullet addiction. This lease purchase course will make you rich in 8 hours and the next one will do it 4 hours but wait, this one will do it in 2 hours. It’s an addiction and like all addictions it usually ends in disaster. Now don’t get me wrong I’ve learned a lot from real estate courses I’ve bought over the years but the difference between people like me and those with the addiction is that we’re looking for a little something that might help not the magic bullet to take us to the promise land. News flash, there ain’t no such thing as a magic bullet!

Having said all of the above I’m going to contradict myself and tell you that there is something very close to a magic bullet. It’s called a mentor or if you prefer a coach. Do you know of any big time athlete who doesn’t have a coach? How about great chess players, I bet they have a coach. What about people that join weight loss programs and succeed I’ll bet they had a coach. The thing of it is if you have someone coaching you that know what they are doing you’ll cut your learning curve down drastically and if you listen and learn you’ll succeed.

Now here’s the next problem we have to deal with and this ain’t pretty either. I have no problem with mentors that charge enough to buy a car and some of them are probably worth it. However, I see it another way.

Imagine if you will a mentor that had a financial interest in seeing his student succeed. What if a mentor didn’t get paid until his charge actually completed a rent to own deal and made money. In my world it’s called Earn While You Learn Mentoring and it takes the sticker shock out of mentoring and levels the playing field for students that don’t have enough money to finance a Guru’s next vacation.



Source by Joseph Bodek

Insurance Law – An Indian Perspective

INTRODUCTION

“Insurance should be bought to protect you against a calamity that would otherwise be financially devastating.”

In simple terms, insurance allows someone who suffers a loss or accident to be compensated for the effects of their misfortune. It lets you protect yourself against everyday risks to your health, home and financial situation.

Insurance in India started without any regulation in the Nineteenth Century. It was a typical story of a colonial epoch: few British insurance companies dominating the market serving mostly large urban centers. After the independence, it took a theatrical turn. Insurance was nationalized. First, the life insurance companies were nationalized in 1956, and then the general insurance business was nationalized in 1972. It was only in 1999 that the private insurance companies have been allowed back into the business of insurance with a maximum of 26% of foreign holding.

“The insurance industry is enormous and can be quite intimidating. Insurance is being sold for almost anything and everything you can imagine. Determining what’s right for you can be a very daunting task.”

Concepts of insurance have been extended beyond the coverage of tangible asset. Now the risk of losses due to sudden changes in currency exchange rates, political disturbance, negligence and liability for the damages can also be covered.

But if a person thoughtfully invests in insurance for his property prior to any unexpected contingency then he will be suitably compensated for his loss as soon as the extent of damage is ascertained.

The entry of the State Bank of India with its proposal of bank assurance brings a new dynamics in the game. The collective experience of the other countries in Asia has already deregulated their markets and has allowed foreign companies to participate. If the experience of the other countries is any guide, the dominance of the Life Insurance Corporation and the General Insurance Corporation is not going to disappear any time soon.

The aim of all insurance is to compensate the owner against loss arising from a variety of risks, which he anticipates, to his life, property and business. Insurance is mainly of two types: life insurance and general insurance. General insurance means Fire, Marine and Miscellaneous insurance which includes insurance against burglary or theft, fidelity guarantee, insurance for employer’s liability, and insurance of motor vehicles, livestock and crops.

LIFE INSURANCE IN INDIA

“Life insurance is the heartfelt love letter ever written.

It calms down the crying of a hungry baby at night. It relieves the heart of a bereaved widow.

It is the comforting whisper in the dark silent hours of the night.”

Life insurance made its debut in India well over 100 years ago. Its salient features are not as widely understood in our country as they ought to be. There is no statutory definition of life insurance, but it has been defined as a contract of insurance whereby the insured agrees to pay certain sums called premiums, at specified time, and in consideration thereof the insurer agreed to pay certain sums of money on certain condition sand in specified way upon happening of a particular event contingent upon the duration of human life.

Life insurance is superior to other forms of savings!

“There is no death. Life Insurance exalts life and defeats death.

It is the premium we pay for the freedom of living after death.”

Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

The essential features of life insurance are a) it is a contract relating to human life, which b) provides for payment of lump-sum amount, and c) the amount is paid after the expiry of certain period or on the death of the assured. The very purpose and object of the assured in taking policies from life insurance companies is to safeguard the interest of his dependents viz., wife and children as the case may be, in the even of premature death of the assured as a result of the happening in any contingency. A life insurance policy is also generally accepted as security for even a commercial loan.

NON-LIFE INSURANCE

“Every asset has a value and the business of general insurance is related to the protection of economic value of assets.”

Non-life insurance means insurance other than life insurance such as fire, marine, accident, medical, motor vehicle and household insurance. Assets would have been created through the efforts of owner, which can be in the form of building, vehicles, machinery and other tangible properties. Since tangible property has a physical shape and consistency, it is subject to many risks ranging from fire, allied perils to theft and robbery.

Few of the General Insurance policies are:

Property Insurance: The home is most valued possession. The policy is designed to cover the various risks under a single policy. It provides protection for property and interest of the insured and family.

Health Insurance: It provides cover, which takes care of medical expenses following hospitalization from sudden illness or accident.

Personal Accident Insurance: This insurance policy provides compensation for loss of life or injury (partial or permanent) caused by an accident. This includes reimbursement of cost of treatment and the use of hospital facilities for the treatment.

Travel Insurance: The policy covers the insured against various eventualities while traveling abroad. It covers the insured against personal accident, medical expenses and repatriation, loss of checked baggage, passport etc.

Liability Insurance: This policy indemnifies the Directors or Officers or other professionals against loss arising from claims made against them by reason of any wrongful Act in their Official capacity.

Motor Insurance: Motor Vehicles Act states that every motor vehicle plying on the road has to be insured, with at least Liability only policy. There are two types of policy one covering the act of liability, while other covers insurers all liability and damage caused to one’s vehicles.

JOURNEY FROM AN INFANT TO ADOLESCENCE!

Historical Perspective

The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered more risky for coverage.

The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during 20’s and 30’s desecrated insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create much needed funds for rapid industrialization. This was in conformity with the Government’s chosen path of State lead planning and development.

The (non-life) insurance business continued to prosper with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies – National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

The life insurance industry was nationalized under the Life Insurance Corporation (LIC) Act of India. In some ways, the LIC has become very flourishing. Regardless of being a monopoly, it has some 60-70 million policyholders. Given that the Indian middle-class is around 250-300 million, the LIC has managed to capture some 30 odd percent of it. Around 48% of the customers of the LIC are from rural and semi-urban areas. This probably would not have happened had the charter of the LIC not specifically set out the goal of serving the rural areas. A high saving rate in India is one of the exogenous factors that have helped the LIC to grow rapidly in recent years. Despite the saving rate being high in India (compared with other countries with a similar level of development), Indians display high degree of risk aversion. Thus, nearly half of the investments are in physical assets (like property and gold). Around twenty three percent are in (low yielding but safe) bank deposits. In addition, some 1.3 percent of the GDP are in life insurance related savings vehicles. This figure has doubled between 1985 and 1995.

A World viewpoint – Life Insurance in India

In many countries, insurance has been a form of savings. In many developed countries, a significant fraction of domestic saving is in the form of donation insurance plans. This is not surprising. The prominence of some developing countries is more surprising. For example, South Africa features at the number two spot. India is nestled between Chile and Italy. This is even more surprising given the levels of economic development in Chile and Italy. Thus, we can conclude that there is an insurance culture in India despite a low per capita income. This promises well for future growth. Specifically, when the income level improves, insurance (especially life) is likely to grow rapidly.

INSURANCE SECTOR REFORM:

Committee Reports: One Known, One Anonymous!

Although Indian markets were privatized and opened up to foreign companies in a number of sectors in 1991, insurance remained out of bounds on both counts. The government wanted to proceed with caution. With pressure from the opposition, the government (at the time, dominated by the Congress Party) decided to set up a committee headed by Mr. R. N. Malhotra (the then Governor of the Reserve Bank of India).

Malhotra Committee

Liberalization of the Indian insurance market was suggested in a report released in 1994 by the Malhotra Committee, indicating that the market should be opened to private-sector competition, and eventually, foreign private-sector competition. It also investigated the level of satisfaction of the customers of the LIC. Inquisitively, the level of customer satisfaction seemed to be high.

In 1993, Malhotra Committee – headed by former Finance Secretary and RBI Governor Mr. R. N. Malhotra – was formed to evaluate the Indian insurance industry and recommend its future course. The Malhotra committee was set up with the aim of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the needs of the economy keeping in mind the structural changes presently happening and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included:

o Structure

Government bet in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate.

Competition

Private Companies with a minimum paid up capital of Rs.1 billion should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state.

o Regulatory Body

The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance – a part of the Finance Ministry- should be made Independent.

o Investments

Compulsory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (there current holdings to be brought down to this level over a period of time).

o Customer Service

LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry. The committee accentuated that in order to improve the customer services and increase the coverage of insurance policies, industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new competitors could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores.

The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body – The Insurance Regulatory and Development Authority.

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has meticulously stuck to its schedule of framing regulations and registering the private sector insurance companies.

Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken at the same time to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity lid for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent.

The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 12 life insurance and 8 general insurance companies have been registered. A host of private Insurance companies operating in both life and non-life segments have started selling their insurance policies since 2001

Mukherjee Committee

Immediately after the publication of the Malhotra Committee Report, a new committee, Mukherjee Committee was set up to make concrete plans for the requirements of the newly formed insurance companies. Recommendations of the Mukherjee Committee were never disclosed to the public. But, from the information that filtered out it became clear that the committee recommended the inclusion of certain ratios in insurance company balance sheets to ensure transparency in accounting. But the Finance Minister objected to it and it was argued by him, probably on the advice of some of the potential competitors, that it could affect the prospects of a developing insurance company.

LAW COMMISSION OF INDIA ON REVISION OF THE INSURANCE ACT 1938 – 190th Law Commission Report

The Law Commission on 16th June 2003 released a Consultation Paper on the Revision of the Insurance Act, 1938. The previous exercise to amend the Insurance Act, 1938 was undertaken in 1999 at the time of enactment of the Insurance Regulatory Development Authority Act, 1999 (IRDA Act).

The Commission undertook the present exercise in the context of the changed policy that has permitted private insurance companies both in the life and non-life sectors. A need has been felt to toughen the regulatory mechanism even while streamlining the existing legislation with a view to removing portions that have become superfluous as a consequence of the recent changes.

Among the major areas of changes, the Consultation paper suggested the following:

a. merging of the provisions of the IRDA Act with the Insurance Act to avoid multiplicity of legislations;

b. deletion of redundant and transitory provisions in the Insurance Act, 1938;

c. Amendments reflect the changed policy of permitting private insurance companies and strengthening the regulatory mechanism;

d. Providing for stringent norms regarding maintenance of ‘solvency margin’ and investments by both public sector and private sector insurance companies;

e. Providing for a full-fledged grievance redressal mechanism that includes:

o The constitution of Grievance Redressal Authorities (GRAs) comprising one judicial and two technical members to deal with complaints/claims of policyholders against insurers (the GRAs are expected to replace the present system of insurer appointed Ombudsman);

o Appointment of adjudicating officers by the IRDA to determine and levy penalties on defaulting insurers, insurance intermediaries and insurance agents;

o Providing for an appeal against the decisions of the IRDA, GRAs and adjudicating officers to an Insurance Appellate Tribunal (IAT) comprising a judge (sitting or retired) of the Supreme Court/Chief Justice of a High Court as presiding officer and two other members having sufficient experience in insurance matters;

o Providing for a statutory appeal to the Supreme Court against the decisions of the IAT.

LIFE & NON-LIFE INSURANCE – Development and Growth!

The year 2006 turned out to be a momentous year for the insurance sector as regulator the Insurance Regulatory Development Authority Act, laid the foundation for free pricing general insurance from 2007, while many companies announced plans to attack into the sector.

Both domestic and foreign players robustly pursued their long-pending demand for increasing the FDI limit from 26 per cent to 49 per cent and toward the fag end of the year, the Government sent the Comprehensive Insurance Bill to Group of Ministers for consideration amid strong reservation from Left parties. The Bill is likely to be taken up in the Budget session of Parliament.

The infiltration rates of health and other non-life insurances in India are well below the international level. These facts indicate immense growth potential of the insurance sector. The hike in FDI limit to 49 per cent was proposed by the Government last year. This has not been operationalized as legislative changes are required for such hike. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have tipped into the Indian market and 21 private companies have been granted licenses.

The involvement of the private insurers in various industry segments has increased on account of both their capturing a part of the business which was earlier underwritten by the public sector insurers and also creating additional business boulevards. To this effect, the public sector insurers have been unable to draw upon their inherent strengths to capture additional premium. Of the growth in premium in 2004-05, 66.27 per cent has been captured by the private insurers despite having 20 per cent market share.

The life insurance industry recorded a premium income of Rs.82854.80 crore during the financial year 2004-05 as against Rs.66653.75 crore in the previous financial year, recording a growth of 24.31 per cent. The contribution of first year premium, single premium and renewal premium to the total premium was Rs.15881.33 crore (19.16 per cent); Rs.10336.30 crore (12.47 per cent); and Rs.56637.16 crore (68.36 per cent), respectively. In the year 2000-01, when the industry was opened up to the private players, the life insurance premium was Rs.34,898.48 crore which constituted of Rs. 6996.95 crore of first year premium, Rs. 25191.07 crore of renewal premium and Rs. 2740.45 crore of single premium. Post opening up, single premium had declined from Rs.9, 194.07 crore in the year 2001-02 to Rs.5674.14 crore in 2002-03 with the withdrawal of the guaranteed return policies. Though it went up marginally in 2003-04 to Rs.5936.50 crore (4.62 per cent growth) 2004-05, however, witnessed a significant shift with the single premium income rising to Rs. 10336.30 crore showing 74.11 per cent growth over 2003-04.

The size of life insurance market increased on the strength of growth in the economy and concomitant increase in per capita income. This resulted in a favourable growth in total premium both for LIC (18.25 per cent) and to the new insurers (147.65 per cent) in 2004-05. The higher growth for the new insurers is to be viewed in the context of a low base in 2003- 04. However, the new insurers have improved their market share from 4.68 in 2003-04 to 9.33 in 2004-05.

The segment wise break up of fire, marine and miscellaneous segments in case of the public sector insurers was Rs.2411.38 crore, Rs.982.99 crore and Rs.10578.59 crore, i.e., a growth of (-)1.43 per cent, 1.81 per cent and 6.58 per cent. The public sector insurers reported growth in Motor and Health segments (9 and 24 per cent). These segments accounted for 45 and 10 per cent of the business underwritten by the public sector insurers. Fire and “Others” accounted for 17.26 and 11 per cent of the premium underwritten. Aviation, Liability, “Others” and Fire recorded negative growth of 29, 21, 3.58 and 1.43 per cent. In no other country that opened at the same time as India have foreign companies been able to grab a 22 per cent market share in the life segment and about 20 per cent in the general insurance segment. The share of foreign insurers in other competing Asian markets is not more than 5 to 10 per cent.

The life insurance sector grew new premium at a rate not seen before while the general insurance sector grew at a faster rate. Two new players entered into life insurance – Shriram Life and Bharti Axa Life – taking the total number of life players to 16. There was one new entrant to the non-life sector in the form of a standalone health insurance company – Star Health and Allied Insurance, taking the non-life players to 14.

A large number of companies, mostly nationalized banks (about 14) such as Bank of India and Punjab National Bank, have announced plans to enter the insurance sector and some of them have also formed joint ventures.

The proposed change in FDI cap is part of the comprehensive amendments to insurance laws – The Insurance Act of 1999, LIC Act, 1956 and IRDA Act, 1999. After the proposed amendments in the insurance laws LIC would be able to maintain reserves while insurance companies would be able to raise resources other than equity.

About 14 banks are in queue to enter insurance sector and the year 2006 saw several joint venture announcements while others scout partners. Bank of India has teamed up with Union Bank and Japanese insurance major Dai-ichi Mutual Life while PNB tied up with Vijaya Bank and Principal for foraying into life insurance. Allahabad Bank, Karnataka Bank, Indian Overseas Bank, Dabur Investment Corporation and Sompo Japan Insurance Inc have tied up for forming a non-life insurance company while Bank of Maharashtra has tied up with Shriram Group and South Africa’s Sanlam group for non-life insurance venture.

CONCLUSION

It seems cynical that the LIC and the GIC will wither and die within the next decade or two. The IRDA has taken “at a snail’s pace” approach. It has been very cautious in granting licenses. It has set up fairly strict standards for all aspects of the insurance business (with the probable exception of the disclosure requirements). The regulators always walk a fine line. Too many regulations kill the motivation of the newcomers; too relaxed regulations may induce failure and fraud that led to nationalization in the first place. India is not unique among the developing countries where the insurance business has been opened up to foreign competitors.

The insurance business is at a critical stage in India. Over the next couple of decades we are likely to witness high growth in the insurance sector for two reasons namely; financial deregulation always speeds up the development of the insurance sector and growth in per capita GDP also helps the insurance business to grow.



Source by Sowmya Suman

Mortgage Pay Off Trap – Why the First Five Years of Your Mortgage is Set to Work Against You

The first 5 years of your mortgage is the most critical. The general rule of thumb is that you spend at least 5 times more in principal than interest. You can run the numbers for yourself at http://www.bankrate.com

The banks’ hope you won’t break free from this cycle and have designed the mortgage tables to trap you into paying interest for a longer period of time.

To get ahead of your mortgage…

…it is important you have a basic understanding of your mortgage amortization schedule so that the banks don’t take advantage of you and suck you into a lifetime of payments.

HUH!

I know this may sound strange but nothing in life is constant.

Chances are at some point you will move, need to borrow money from your mortgage, pay for the kids education or take out a reverse mortgage in retirement. Knowing how your mortgage works will help you make those important financial decisions.

Let’s take a closer look at an example.

For a $334,000 mortgage at a 6.3% interest rate you will end up paying approximately $774,252.88 in repayments over 30 years.

You will spend $410,252.88 in interest and $334,000 in principal.

That sounds pretty fair right?

At approximately year 21, you will pay off 50% of your mortgage. So in the last ten years you will still owe $167,000.

Can you see what going on?

For the 1st 20 years you are working for the bank. Most of your hard-earned paycheck goes towards interest.

Which sucks!

Let’s take a closer look at the first 5 years of your amortization schedule. You will notice that you spend $22,068.33 in principal and $101,973.82 in interest.

Out of a total repayment of $124,042.15, you would pay approximately 82% in mortgage interest as compared to principal.

This made me feel sick when I found about this for my mortgage.

So where did it leave me and what does this mean to you?

You really start making a small dent in your mortgage after the first 8 years.

Please don’t take my word for this. You can go directly to http://www.bankrate.com and check this for yourself if your mortgage balance has changed. Pay close attention to your outstanding balance and how much of your monthly repayments are applied to interest at this point.

At the year 21 mark of your monthly mortgage payments, more of your money will go towards principal than interest. Your hard-earned paycheck would finally begin to work for you.

There are two key numbers to understand when dealing with your mortgage.

  • The first 5 years, where you would typically pay five times more in interest than principal, is the first key milestone.
  • The second key point is at year 21 when you still owe at least 50 percent of your mortgage principal.

This is interesting to know that at the 21 year mark, you pay less in interest and in the last 10 years you get very little to almost no tax deductions for your mortgage interest.

To make a dent in your mortgage, the first barrier you need to break is the five to eight year mark. Once you get past this, a little more of your cash goes towards principal and you begin to build some momentum.

Just imagine if you refinance or take out a new home.

The process starts all over again and you are stuck in a lifetime of payments.

Now here is how the banks really make their money by lending your funds to buy a home.



They count on a homeowner like you to move within the first 8 years or refinance their home. The more times you do this, the cycle starts all over again and you end paying a significant amount of your money on interest.

The goal is to break through this barrier.



Source by Neil Venketramen

What Factors Affect Home Resale Value? Simple Home Improvements To Increase Your Home’s Value

It’s never too early to start thinking about selling your home, and many real estate experts say that the best time to start is before you even buy it. If you’re buying a new home, chances are you’re going to be selling it in five, ten, or twenty years from now. While reselling may be far from the top of your priority list, there are a few interesting facts to keep in mind. Some attractive features of your new home might turn out to be investments that don’t pay off when it comes time to sell, while other features that you overlook now could have a positive effect on your home’s value over time.

When looking for a new home, your top priority should still be your own needs and desires, but it can’t hurt to have “resale value” in the back of your mind. After all, a home is a huge purchase, and it can turn out to be a great investment.

All features of a home will essentially be built into the price. If you do your best to learn about the true value of these features, especially their effects on the value over many years, you will have a better idea of how much you should be paying initially.

Features that add to your home resale value

Good location

Real estate experts agree that a good location is the biggest factor in adding value to a home. The home should be in a growing community; close to freeways and commercial areas, but not so close that the neighborhood is too noisy or congested. It’s also a good idea to check city records for any proposed land use action that will affect the area. The neighborhood may look peaceful now, but the city could be planning on tearing down the green space to build a new freeway. Planned city action could drastically change the value of the house over time, positively or negatively.

Large kitchen

The kitchen is one of the most important rooms in the house. It’s a central location for gatherings, and it’s a room in which you spend a great deal of time. Large kitchens that are open, accessible, and adjacent to dining and family rooms will add substantially to your home resale value.

Three or four Bedrooms

Bedrooms provide room to spread out, secluded workspaces, or extra space for a growing family. As far as the home resale value is concerned, three or four bedrooms is ideal. If the house has five or more bedrooms, make sure they’re not inflating the price too much. You shouldn’t be paying much extra for more rooms, as they won’t add significantly to the resale value. Also, if the home has less than three rooms, your pool of buyers will be limited and you could have a harder time selling in the future.

2.5 Bathrooms

One bathroom in the master bedroom, one shared bathroom, and a half bathroom for guests is ideal. If the house has more than 2.5 bathrooms, make sure it’s not inflating the price, as more bathrooms will do little to increase the resale value. Two bathrooms is also an acceptable number, but any less than two will hurt the value of the home.

Large, rectangular lot

Most buyers are looking for a fair sized, rectangular, level lot. Small yards, odd shapes, or sloped lots will decrease the home resale value. There should be enough space in the front and back yards for a person to consider them accessible. Enough room for decorations or activities is a huge plus.

Closet space

A walk-in closet for the master bedroom is a very desirable feature. Aside from the master bedroom, a home should have enough closet space scattered throughout. A lack of closet space can alienate certain buyers, and depreciate the value of the home.

Two-Car garage

Depending on the location of the house, a two-car garage is most desirable. If the house is surrounded by other homes with larger garages, it might be best to consider a larger garage size to match. In general, two is the magic number. More or less could affect the home value in undesirable ways.

Hidden, main floor laundry room

A laundry room should be out of sight to avoid becoming an eyesore, and it should be located on the main floor of the house. An easily accessible laundry room can cut back on trips up and down stairs. Remember, even if an inconvenient laundry room isn’t an issue for you, it could be an issue for your potential buyers, and it could hurt the value your house.

House size vs. surrounding houses

The size of the house can either increase or decrease its value, depending on its location. If the house is a large luxury house surrounded by smaller homes, the surrounding houses will drag down the value over time. On the flip side, if the house is small or medium and it’s surrounded by larger homes, the value could increase over time. If you’re looking at a home, compare its value with the values of the surrounding homes, keeping size in mind.

Surprising Features that don’t add to home resale value

A view

While a pretty view is easy on the eyes, it doesn’t do much for the value of a house, and it could be costing you a lot of money. Compare the price of the house that has a view with another comparable house in the area that doesn’t have a view. Is the price inflated because of the view? Chances are, when it comes time to sell, you won’t be getting the extra money back from the sale.

Fancy landscaping

Unless you are thoroughly impressed with the fancy landscaping, don’t pay extra for it. Landscaping can be the sign of a hobby or investment made by the previous owner. If you can’t imagine yourself enjoying the landscaping in the future, let the seller know. If it doesn’t interest you and you’re not willing to invest the same amount of time and money as the previous owner, the landscaping will eventually deteriorate, and you won’t get your money’s worth when it comes time to sell.

Swimming pools

Houses with swimming pools were very popular a few years ago, but with the recent awareness of dangers and injury statistics, families with children are steering clear of them. Unless you want a pool for your own recreational use, make sure you’re not paying extra for it, as you won’t be seeing a return on the investment.

Multiple stories

In the past, multi-story homes were very popular. Recently, the market has made a surprising shift, and now single-story homes are far more desirable. The exception is single-story homes surrounded by multi-story homes. In most cases, a single-story home will pay off more in the end.

Fireplaces

Though they are quaint and comforting, fireplaces do little to increase the value of a home. Let the seller know that you’re indifferent to the fireplace, and you don’t see it as an additive feature of the house-at least not one that’s worth paying for.

Home Improvements That Increase Home Resale Value

While you’re looking for a home, or if you’ve already moved in, you can always think about ways to increase the resale value. Here are a few tips to keep in mind:

Home improvements

While you’re browsing homes, look at any “less than desirable” features as an opportunity to make some home improvements. Any ideas you have, from paint color to new furniture, could go a long way toward increasing the home’s value. Assess your own skills, or form a relationship with a contractor, and view the home from the perspective of a restorer. If the lot is sloped, could a new terrace or porch do the trick? If the home only has two bathrooms, could a new half bathroom be added in? Can you turn the home’s imperfections into assets?

Kitchen & bathroom renovation

If you’re checking out a new house, and the kitchen or bathrooms appear uninviting or cramped, consider the cost of renovating these rooms compared with the money saved from purchasing the house in such condition. Even do-it-yourself fixes, like new tiles, new cupboards, or a new coat of paint can increase the value drastically. Keep in mind that most buyers scrutinize the kitchen the most, with the bathrooms a close second, followed by the master bedroom. If you see beauty potential in these rooms, you could turn that potential into profit.

Remove wallpaper

Most buyers don’t like wallpaper. The design is often dated, and buyers don’t want to have to remove it themselves. Here’s where you can turn a hindrance into an opportunity. If you’re willing to put in the effort to remove the wallpaper yourself, you can significantly increase the home’s resale value. When the wallpaper is removed, make sure to paint the walls a neutral color, as this allows a wider range of buyers to essentially project themselves into the home and imagine their lives within its walls.

Your house is your home

While these facts represent the opinions of many real estate experts, thinking about home resale value is still a guessing game. You’re betting that today’s valuable features will retain their value in the future. There are many proven trends, and it’s always a good idea to educate yourself on the local markets and neighborhoods in which you plan on commencing your search. While your house is a large investment, it’s also simply a home. You need to find a house that you can see yourself living in for many years. Keep these tips in the back of your mind, begin your search with confidence and optimism, and when you’ve finally found a new home it will be a positive financial investment, as well as an investment in the future of you and your family.



Source by D Patrick Pflager

4 Types of Prefab Homes

The range of prefab homes continues to grow. They are built using an assembly line type of construction and mostly seen as a low-cost alternative to the standard bricks and mortar home. Here are a few of the different types of prefab homes:

Modular

The modular home is built in multiple parts in a factory environment and later transported to its permanent place of residence. Once it arrives at the building site, the individual parts are put together to create a structurally sound home. The individual modules are fully outfitted in the factory with things like stairs, closets, doors, electrical points, and plumbing. Everything is already in place for the parts to be assembled.

The construction period for the modular home from initial order to being able to move in is in the region of 3 to 4 months.

Panelized

The panelized home is built in a lot more parts compared to the modular home. For instance, these homes are built one panel or wall at a time. Once the panels are prepared they are moved to the place of residence to complete the construction. Plus, the individual panels are not completely finished in the factory and will require extra work like installing flooring, stairs, cabinetry and painting on-site.

Even though the panelized home is built in a lot more parts than the modular homes, the total time before it is ready to use is similar at about 4 months. In general, the main structural panels take about one week to put up, and the interior fit out takes a further month or more.

Pre-cut

The pre-cut home is much like a kit home like the dome homes or log cabin kits. The parts for the home are strictly cut in a factory and shipped to the build site for the construction to take place. Many of these kits are designed to be self build and practical for the enthusiastic do-it-yourselfer.

The kit is packed with all materials and step-by-step instructions to make it easier to put together. However, they can also be constructed with the help of a general contractor. The build time for the pre-cut home is in the region of 4 to 5 months.

Shipping container

The shipping container home is basically a refurbished steel shipping container that has been converted into a usable home. They are easily pieced together or stacked to create the sufficient creative and funky designs. They give a strong and sturdy build, but not yet as popular as other choices and have more building restrictions in place.



Source by Leo Eigenberg

What Does ("PID") Mean in The Real Estate Industry?

A Public Improvement District (“PID”) is a financing tool created by the Public Improvement District Assessment Act as found in Chapter 372 of the Texas Local Government Code. The PID enables any city to levy and collect special assessments on property that is within the city or within the city’s Extraterritorial Jurisdiction (“ETJ”). A county may also form a PID,but must obtain approval from a city if the proposed PID is within the city’s ETJ. The PID establishes a mechanism to finance improvement projects through the issuance of bonds secured by special assessments levied on all benefited properties. Because PID bonds can be used to reimburse the developer for eligible infrastructure early in the development process, often before the closing of the first home.

Public Improvements Eligible for PID Financing are; Acquisition of Right of Ways, Art, Creation of pedestrian malls, Erection of foundations, Landscaping and other aesthetics, Library, Mass transit, Parks & Recreational or Cultural Facilities, Parking, Street and sidewalk. Supplemental safety services for the improvement of the district, including public safety and security services. Supplemental business-related services for the improvement of the district. Water, wastewater, health and sanitation or drainage.

Benefits of a PID

A PID may be established early in the development process allowing the developer to be a reimbursed upon completion of the public infrastructure. Furthermore, unlike a Municipal Utility District (“MUD”), Water Control and Improvement District (“WCID”), or Fresh Water District (“FWSD”), PIDs do not require TCEQ approval, and are governed by the governing body of the city or county, thereby alleviating concerns regarding board turnover and the integrity of the board. If the city chooses to annex property that is within the boundaries of a PID, the city is not forced to pay off the assessments, and the assessments do not affect the city’s debt capacity or rating.



Source by John Foreman

Loophole – Use it to Repair Your Credit

Using the Internet to “Repair Your Credit” can be very dangerous and time consuming don’t you agree? When you search under the term “credit repair” you will get over 14 million articles and websites. If you search the term “credit repair tips” you’ll get over 131 million results. You only have to spend an hour reading through a few of the search engine results to realize that you have better odds of winning the mega jackpot in this weeks lottery to pay off all your debts than achieving a high credit score using the search engines.

Most of the websites you find are filled with articles that were either written by robots (bots) or freelance writers from India. Hey, just click on the authors name and then read their credentials. After you get tired of reading through articles that really won’t help you all of a sudden get excited when you stumble on discussion forums. Here you find people like yourself who are asking specific questions regarding their situation and they are getting their questions answered. GREAT right? Don’t be so quick to make that judgment. How do you know the answers you are given are correct?

If you follow enough debt or credit related forums you’ll usually discover that they are full of people offering advice on things that they know nothing about. A lot of the advice will sound good if you assume that the person giving you the advice knows what he or she is talking about. But do they? Again, check their credentials and you soon find out that their free advice is worth what you paid for it. Zero or maybe worse, their advice will usually cost you a lot of time and money and leave you worse off than when you started.

So what is the solution? I recommend searching for a “Paid Membership Site” that deals with consumer credit and or debt. When you find a few of them they will usually offer you a free or trial membership where you will have time to judge whether the tools and resources they give you access to are of value or not. Sure, you are going to find some membership sites dealing with improving your credit scores and getting rid of consumer debt that are based on unproven hypothetical theories or crazy far fetched ideas. But if you keep on looking you will eventually find one or two membership sites that have tools based on existing laws and statutes that you can use to get the results that you want. I personally like sites that have tools and resources that are based on “legal loopholes” pertaining to Federal Laws and Statutes.

Every category of law has loopholes that experts in the field find and who create ways to take advantage of the loopholes. Better yet, they will be able to provide you with copies of actual court cases or court orders that you can investigate and hopefully get your hands on actual documents that were successfully used by others to get the results that you are trying to get for yourself. If they follow that up with simple step-by-step instructions for you to follow in order to duplicate the previous results then you’ve hit jackpot.

A good example of a “loophole” that anybody who wants to repair or restore their credit is the “Section 609 of the Fair Credit Reporting Act Loophole“. This loophole is SO BIG that in my opinion EVERY SINGLE PERSON who takes advantage of it could save themselves hundreds of dollars a month in lower monthly payments. Some of you who live in California and NYC could see your monthly mortgage payments be lowered more than a thousand dollars a month.

This is a loophole that every financial institution in the universe does not want you to know about. It’s a loophole that the BIG 3 Credit Bureaus don’t want you to know about. Why you ask?

To answer you, let me first explain something to you. I am sure that you know this already but I want to remind you in case you have been brainwashed into forgetting. “Credit Bureaus” are paid HUNDREDS OF MILLIONS OF DOLLARS a year by financial institutions to “Report bad credit to credit bureaus” by placing negatives on your credit reports so that you will have the lowest credit score possible. Why do they want you to have the lowest credit score possible? They benefit when you have bad credit showing on your credit report. The more bad credit you have the more they can charge you the highest rate on every loan and mortgage etc that you apply for.

How will any of this “Section 609 of the Fair Credit Reporting Act Loophole” benefit you? It will mean that once all 3 credit bureaus are forced to remove all of the negatives from your credit report including bankruptcy, judgments, repos, foreclosures, collections and late-pays etc… your credit score will go up. For some of you, way way up. Most of you, if not all of you could end up with a very High Credit Score. You’ll be able to lower every single loan rate including mortgages and car loans you have so that your monthly payments will go way down. And if you buy anything new and need financing for it you will now qualify for the lowest rates available. Maybe even zero interest rates. Won’t that be enjoyable?

The bottom line is, the Internet can be used to restore your credit score and repair your credit and if you take the “Section 609 of the Fair Credit Reporting Act Loophole“. approach to your Google search you might just stumble on your jackpot.



Source by Thomas Mathews

How to Identify Emerging Real Estate Markets

If you are interested in making a career out of real estate investment, it is important to have the ability to spot emerging markets before they reach their full potential. This allows you to get in early and support the growth of the market, while also ensuring that you are in a position to make as much money as possible form your initial investment.

Of course, that sounds far easier than it actually is, as it is not always easy to see where the next market is going to emerge and it can often be difficult to get all of the pieces of the puzzle to align so that you can take advantage of it.

Here we will look at a few tips that will serve you well when you are considering your investments.

Take Away Personal Taste

If you are looking to invest in property, the first thing that you need to do is take away your own personal tastes. After all, the property isn’t intended for your own use, so what you think about it is actually not all that much of an issue.

Instead, try to consider how the property fits into the surrounding area and if there is going to be a demand for what it has to offer. Cheap apartments, for example, may not be to your personal taste but they may well serve a purpose to the area in which they are being built. Put your business head on and try to see the big picture in terms of how the market looks in a particular area.

Get In Early

The term “emerging” is important to consider here, as your investment will be worth less if you jump on a bandwagon that is already well-established. Keep your eyes open for news of potential investments and try to get on board at the earliest possible stage, so that you can reap the largest rewards at a later date.

Of course, this doesn’t just mean that you should invest in everything that is just starting up. Consider the reputations of the people behind the project and their previous successes. Be sure to meet with them to discuss their plans and the research they have put into the project, and be very wary of anybody who is not willing to speak to you directly but still wants you to invest in their venture.

Know The Local Market

The property market is extremely complex, with national cycles not always matching up to the way that the market is going in various localities. As such it is extremely important that you do the research into any area that you are looking to invest in and, just as importantly, you keep on top of the changes in that market that are always bound to happen.

Simply put, you are not going to make any money if you invest in a project where there is no demand. Find out if the area is a renter’s market, or a comfortable place for people to purchase a first home and look for upcoming projects that will satisfy that demand.



Source by Bill Len

Property Development – What’s an Entitlement and Why Do I Need it to Build?

What is An Entitlement?

The definition of entitlement with regard to land development is the legal method of obtaining approvals for the right to develop property for a particular use. The entitlement process is complicated, time consuming and can be costly, but know what you can and can’t do with a piece of property is vital to determining the real estate feasibility of your project. Some examples of entitlements are as follows:

Entitlement Examples:

1. Zoning and zoning variances for building heights, number of parking spaces, setbacks. Your land use attorneys and zoning experts come into play here. My advice is to heavily rely on their expertise and follow their directions to avoid unnecessary delays in your approval process.

2. Rezoning. Depending on the current use allowed for the property, you might need to have the site rezoned which is a complicated process and sometimes cannot be done.

3 Use Permits. You may need to obtain conditional use permits and this goes hand in hand with zoning and zoning variances.

4. Road approvals. Do you need to put in existing roads? Who maintains the roads? Are there shared roads via easements? These are all questions that you need to have the answers to and be prepared to comply with in the regulatory process.

5 Utility approvals. Are utilities available to the site? Do you need to donate land to the city in exchange for utility entitlements? Again, you will need to comply with the municipality regulations and standards.

6. Landscaping approvals. The city planning and development agencies must also approve your design and landscaping. Your architect and engineers will be most helpful in this area.

Hire an Experienced Development Team:

The best advise is to hire an experienced development team of architects, developers, lawyers, project consultants, civil, soil, landscape and structural engineers and consultants at the onset to help you analyze, review, interpret and advise you regarding design studies, applicable zoning and code requirements, and maximum development potential of the property. Without an experienced team, it is extremely difficult and a lot of time will be wasted in trying to complete the regulatory process because the very nature of the regulatory process is so complicated.

Here is how the process works. First, remember to keep in mind that the process is very slow and frustrating and can take approximately 3 to 12 months or sometimes years depending on how complicated the project is. Part of the reason is that each city planner has different interpretations of their local rules. Today, approvals involve jurisdictions overlapping such as city, county and state and these jurisdictions do not communicate with each other. It is extremely crucial that you establish good working relationships with these planners to obtain your approvals. Again, this is why you need to work with a development team that has already built these relationships with local staff of the local jurisdiction where your property will be developed. These relationships will streamline and help to expedite your approval process. Your experienced team of experts will be able to negotiate issues for you and eliminate additional requests by the local jurisdiction to avoid further delays in obtaining your approvals.

Regulatory Process:

Majority of development projects must go through certain aspects of the entitlement process and some projects will be required to go through several public hearing processes for approval depending on each jurisdiction’s rules. To begin, commercial development of land requires a review and approval from the local Development Review Board or Planning Department Review Division. Each municipality has a different name but the functions are similar.

  1. The process starts with obtaining site approval from the local Planning and Development Department. By contacting the local Planning and Development Department Review Division, your expert team will then put together a land use pre-application which complies with the codes of that particular jurisdiction. By complying with the codes, this will eliminate additional requests by the jurisdiction, further review and extension and unnecessary delays of the approval process.
  2. Next a meeting date will be set. You and/or your representatives will meet with the Planning Department to discuss the proposed project and review process. The process includes approval of your site plan, elevations, colors, landscaping, vicinity map, etc. Environmental information will need to be submitted also. There is usually a fee that accompanies the application. The fees vary from jurisdiction to jurisdiction.
  3. If for some reason your site plan is denied, you can appeal to the City Council. The appeal process varies from each jurisdiction.
  4. Once you obtain site approval, then you will need design approval, master use permits. The design approval process is where your architect will design the building shell, core layout, exterior appearance, building height, site layout, landscaping concepts, traffic impact, site access and utility layouts and submit them for approval.
  5. Neighborhood hearings are generally required for all general plan conditional use permits. You may be required to send out written notice or post information on the site. Normally the City will send notices to the neighbors also. Signs should be placed on the property, and an open house meeting is generally held. Your development team will be instrumental in advising and assisting you so that you have a higher probability of achieving success in obtaining neighborhood approval. Be prepared, even if you comply with the regulatory process codes and regulations, there is always the possibility that the neighborhood may have their own agenda and that the hearings and decisions may not be favorable to your project going forward. This is where your attorneys and the rest of your development team’s expertise and participation are crucial.

If wetlands are located on the property you will need special documentation that states whether the Wetlands Act applies or not. If it does, either it will result in significant or insignificant impact as granted by evidence of a permit. Sometimes it is best to set aside or donate the wetlands portion of the property and avoid development issues. Your development team will be able to advise you on the best course of action once they have assessed all the information and reviewed the reports.



Source by Bart S Pair