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Home Financing Options – How to Finance a Home Purchase #boat #loans


#home financing
#

Home Financing Options

By Brandon Cornett | 2015, all rights reserved | Duplication prohibited

to see how much you can afford.

This article explains the financing options that are available to a first-time home buyer. We will talk about the different ways to finance a home, the pros and cons of each method, and other important topics for buyers.

Home Financing Defined

Within the context of this article, home financing refers to the mortgage loans people use to buy a house. This is one of the most important topics a first-time buyer must understand. It’s also where a lot of people make big mistakes, by choosing the wrong kind of loan for their situation.

With that basic definition out of the way, let’s talk about the different types of loans you can use to finance your home purchase.

Different Ways to Finance a Home

Understanding your home financing options is the first step to making a smart choice. So before we go any further, we need to talk about the different kinds of mortgage loans that are available to you. These days, most home loans fall into one of two categories. They are either fixed- or adjustable-rate mortgages. The primary difference between them has to do with the interest rate, and how it behaves over time.

With a fixed-rate mortgage loan, the interest rate you have at the beginning of the loan is the same rate you’ll have at the end of the loan (when you either sell the house, refinance the mortgage, or pay the loan off entirely). This is the primary benefit of this financing option — there are no surprises later on down the road. The initial rate you obtain follows you for the entire life or term of the loan.

Here are some related articles to help you learn more about this topic:

As the name implies, an adjustable-rate mortgage loan (ARM) works much differently. With this home financing strategy, the rate will change at a specific interval — usually every one to five years. When used properly, an ARM loan can save you money in the short-term. When used incorrectly, they can bring a lot of risk into the equation. Adjustable mortgages are rarely a smart option if you plan to stay in the home for a long time. In that kind of long-term scenario, a fixed rate loan is a better financing option for you.

Most of the adjustable mortgages in use today start off with a fixed rate for a certain period of time. After that introductory stage, however, the rate will begin to adjust or reset at specific intervals. Because of this, they are also referred to as hybrid loans. A person who only plans to live in a home for a few years might use an ARM loan to save money in the short-term. But once you get past the fixed stage of the loan, you have no idea what the rate will do (aside from changing in some way). If the rate adjusts upward by several percentage points, it could significantly increase the size of your monthly payment.

Remember, the interest rate is part of your overall mortgage payment. So when it goes up, your payment goes up as well. Depending on how much the payment increases, this could make the loan unaffordable for you. This is a very real risk that comes with this particular home financing option, so it’s a risk you need to take seriously.

If you think you might use an ARM loan to finance your home purchase, you have plenty of homework ahead of you. Here are some related articles to get you started:

Many first-time home buyers use FHA home loans as a financing option, and there are several key reasons for this. For one thing, a home buyer who uses an FHA loan can make a smaller down payment (when compared to someone who uses a conventional loan). Generally speaking, FHA mortgages are easier to qualify for, as well. This makes them popular among people with less-than-perfect credit. These two factors combined to make the FHA loan one of the most popular home financing options for first-time buyers.

If you want to finance your house with this type of loan (or simply learn more about it), you’ll find the following articles helpful:

Choosing the Best Option

These are some of the different ways you can finance a home purchase. So which option is right for you? In reality, there is no way I can answer this question for you, because I simply don’t know your situation. Depending on (A) your long-term plans, (B) your financial situation, and (C) your level of qualification, one financing option may be better than another. What you must do, as a home buyer, is learn about the pros and cons of each strategy. Once you do that, one option should emerge as the obvious choice for you.

For example, we talked about the primary differences between fixed and adjustable-rate mortgage loans. If you plan to stay in the home for many years, the fixed-rate loan is probably the best option for you. This method of home financing gives you the most predictability over the long term. No matter what happens with the economy, you’ll know that your interest rate will always stay the same. On the contrary, the interest rate on an ARM loan will change periodically. So it might not be the best finance strategy for a long-term stay. This is a prime example of choosing the best type of mortgage based on your particular situation .

This is obviously a top-level guide to home financing options, and that was my purpose. I wanted to give you a brief overview of the various ways to finance a home, and then provide you with some links to related information. I’ve hand-picked a few articles that will make a good follow-up to this one, and I highly recommend you read those as well. You can find these articles through the hyperlinks spread throughout this lesson.

I hope you’ve found this guide to home financing options helpful, and I wish you well in your future real estate endeavors.


Home Refinance, Home Purchase, Reverse Mortgage, Personal Loans, Auto Loans, Credit Cards, Auto Insurance, Life Insurance #harp #loan #program


#home equity loan calculator
#

Reverse Mortgage

Seniors over 62 may use their home equity to get cash through a reverse mortgage.

Auto Insurance

You might be able to save big on auto insurance by changing providers. fill out our 3 minute form to find out.

Life Insurance

Get peace of mind knowing that your family will be provided financial security when they may need it most.

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Home Financing Options – How to Finance a Home Purchase #home #mortgage #loans


#home financing
#

Home Financing Options

By Brandon Cornett | 2015, all rights reserved | Duplication prohibited

to see how much you can afford.

This article explains the financing options that are available to a first-time home buyer. We will talk about the different ways to finance a home, the pros and cons of each method, and other important topics for buyers.

Home Financing Defined

Within the context of this article, home financing refers to the mortgage loans people use to buy a house. This is one of the most important topics a first-time buyer must understand. It’s also where a lot of people make big mistakes, by choosing the wrong kind of loan for their situation.

With that basic definition out of the way, let’s talk about the different types of loans you can use to finance your home purchase.

Different Ways to Finance a Home

Understanding your home financing options is the first step to making a smart choice. So before we go any further, we need to talk about the different kinds of mortgage loans that are available to you. These days, most home loans fall into one of two categories. They are either fixed- or adjustable-rate mortgages. The primary difference between them has to do with the interest rate, and how it behaves over time.

With a fixed-rate mortgage loan, the interest rate you have at the beginning of the loan is the same rate you’ll have at the end of the loan (when you either sell the house, refinance the mortgage, or pay the loan off entirely). This is the primary benefit of this financing option — there are no surprises later on down the road. The initial rate you obtain follows you for the entire life or term of the loan.

Here are some related articles to help you learn more about this topic:

As the name implies, an adjustable-rate mortgage loan (ARM) works much differently. With this home financing strategy, the rate will change at a specific interval — usually every one to five years. When used properly, an ARM loan can save you money in the short-term. When used incorrectly, they can bring a lot of risk into the equation. Adjustable mortgages are rarely a smart option if you plan to stay in the home for a long time. In that kind of long-term scenario, a fixed rate loan is a better financing option for you.

Most of the adjustable mortgages in use today start off with a fixed rate for a certain period of time. After that introductory stage, however, the rate will begin to adjust or reset at specific intervals. Because of this, they are also referred to as hybrid loans. A person who only plans to live in a home for a few years might use an ARM loan to save money in the short-term. But once you get past the fixed stage of the loan, you have no idea what the rate will do (aside from changing in some way). If the rate adjusts upward by several percentage points, it could significantly increase the size of your monthly payment.

Remember, the interest rate is part of your overall mortgage payment. So when it goes up, your payment goes up as well. Depending on how much the payment increases, this could make the loan unaffordable for you. This is a very real risk that comes with this particular home financing option, so it’s a risk you need to take seriously.

If you think you might use an ARM loan to finance your home purchase, you have plenty of homework ahead of you. Here are some related articles to get you started:

Many first-time home buyers use FHA home loans as a financing option, and there are several key reasons for this. For one thing, a home buyer who uses an FHA loan can make a smaller down payment (when compared to someone who uses a conventional loan). Generally speaking, FHA mortgages are easier to qualify for, as well. This makes them popular among people with less-than-perfect credit. These two factors combined to make the FHA loan one of the most popular home financing options for first-time buyers.

If you want to finance your house with this type of loan (or simply learn more about it), you’ll find the following articles helpful:

Choosing the Best Option

These are some of the different ways you can finance a home purchase. So which option is right for you? In reality, there is no way I can answer this question for you, because I simply don’t know your situation. Depending on (A) your long-term plans, (B) your financial situation, and (C) your level of qualification, one financing option may be better than another. What you must do, as a home buyer, is learn about the pros and cons of each strategy. Once you do that, one option should emerge as the obvious choice for you.

For example, we talked about the primary differences between fixed and adjustable-rate mortgage loans. If you plan to stay in the home for many years, the fixed-rate loan is probably the best option for you. This method of home financing gives you the most predictability over the long term. No matter what happens with the economy, you’ll know that your interest rate will always stay the same. On the contrary, the interest rate on an ARM loan will change periodically. So it might not be the best finance strategy for a long-term stay. This is a prime example of choosing the best type of mortgage based on your particular situation .

This is obviously a top-level guide to home financing options, and that was my purpose. I wanted to give you a brief overview of the various ways to finance a home, and then provide you with some links to related information. I’ve hand-picked a few articles that will make a good follow-up to this one, and I highly recommend you read those as well. You can find these articles through the hyperlinks spread throughout this lesson.

I hope you’ve found this guide to home financing options helpful, and I wish you well in your future real estate endeavors.


Bridge Loans and Home Purchase Bridge Loans #low #interest #rate #loans


#bridging loans
#

Bridge Loans

A bridge loan is basically a short term loan taken out by a borrower against their current property to finance the purchase of a new property.

Also known as a swing loan, gap financing, or interim financing, a bridge loan is typically good for a six month period, but can extend up to 12 months. Most bridge loans carry an interest rate roughly 2% above the average fixed-rate product and come with equally high closing costs.

Bridge loans are generally taken out when a borrower is looking to upgrade to a bigger home, and haven’t yet sold their current home. A bridge loan essentially “bridges the gap” between the time the old property is sold and the new property is purchased.

Home Buying Contingencies

Many purchase contracts have contingencies that allow the buyer to agree to the terms only if certain actions occur. For example, a buyer may not have to go through with the purchase of the new home they are in contract for unless they re able to sell their old home first. This gives the buyer protection in the event no one buys their home, or if nobody is willing to buy the property at the terms they desire.

When a seller won’t accept the buyer’s contingency, a bridge loan might be the next best way to finance the new home.

How Do Bridge Loans Work?

A bridge loan can be structured so it completely pays off the existing liens on the current property, or as a second loan on top of the existing liens. In the first case, the bridge loan pays off all existing liens, and uses the excess as down payment for the new home. In the latter example, the bridge loan is opened as a second or third mortgage, and is used solely as the down payment for the new property.

If you choose the first option, you likely won’t make monthly payments on your bridge loan, but instead you’ll make mortgage payments on your new home. And once your old house sells, you’ll use the proceeds to pay off the bridge loan, including the associated interest and remaining balance.

If you choose the second option, you’ll still need to make payments on your old mortgage (s) and the new mortgage attached to your new property, which can stretch even the most well-off homeowner’s budget. So make sure you’re able to take on such payments for up to a year if necessary.

Most consumers don’t use bridge loans because they aren’t necessary during housing booms and hot markets. For example, if your home goes on the market and sells within a month, it’s typically not necessary to take out a bridge loan. But now that things have cooled off, they may become a bit more common as sellers experience more difficulty in unloading their homes.

Bridge Loans Can Be Risky

Many critics find bridge loans to be risky, as the borrower essentially takes on a new loan with a higher interest rate and no guarantee the old property will sell within the allotted life of the bridge loan. However, borrowers usually doesn’t need to pay interest in remaining months if their home is sold before the term of the bridge loan is complete. But watch out for prepayment penalties that hit you if you pay the loan off too early!

Make sure you do plenty of research before selling your home to see what asking prices are and how long homes are generally listed before they re ultimately sold. The market may be strong enough so that you don’t need a bridge loan. But if you do need one, be aware that a home could go unsold for six months, or longer, so negotiate terms that allow for an extension to the bridge loan if necessary.

If you think a bridge loan is right for you, try to work out a deal with a single lender that provides both your bridge loan and long-term mortgage. Usually they’ll give you a better deal, and a safety net as opposed to going with two different banks or lenders.

Also keep in mind that there are other alternatives to a bridge loan such as financing down payments with your 401k, stocks, and other assets. Remember to compare each scenario before signing anything!


Compare Today – s Mortgage Rates and Home Loans #mortgage #rates, #home #loans, #refinance, #heloc, #purchase, #mortgage #quotes


#

Find the best mortgage rate for you.

Shop for a Mortgage on NerdWallet

What s a mortgage rate?

A mortgage rate is the amount of interest paid on the mortgage, quoted as an Annual Percentage Rate (APR). Current rates are 4.03% for a 30-year fixed, 3.41% for a 15-year fixed, and 3.84% for a 5/1 adjustable-rate mortgage (ARM).

Compare current mortgage rates

The more lenders you check out when shopping for mortgage rates, the more likely you are to get a lower interest rate. Getting a lower interest rate could save you hundreds of dollars over a year of mortgage payments — and thousands of dollars over the life of the mortgage. Yes, finding the best mortgage interest rate is a big deal.

With NerdWallet’s easy-to-use mortgage rate tool, you can find the best home loan interest rate for you, whether you’re a first-time homebuyer looking at 30-year mortgage rates or a long-time homeowner comparing refinance mortgage rates.

How to find the best mortgage rates

Start with the “Loan Purpose” box above and fill in as many of the fields as you can to get the most accurately personalized quotes. For best results, try different scenarios. See how the mortgage rates differ from each lender, depending on your down payment or credit score. That can be a real eye opener.

And if you qualify, remember to check the “Military/Veteran” box, too. Qualified borrowers can get a VA mortgage with no down payment and low rates, too. Definitely worth checking into.

If you want to do some serious mortgage rate research, click on the “Advanced” link just above “Get Rates.” That’s where you can provide information on annual income, debt, property type and other factors that affect the mortgage rate you’ll be quoted from each lender.

You can also select different loan programs and compare 30-year mortgage rates to 15-year mortgage rates. Fixed and adjustable rate options are available as well.

Mortgage interest rates on demand

When you click “Get Rates” you’ll instantly find pages of home loan results from a variety of mortgage lenders. If you see an interest rate you like, you can click to view the details or head straight to the mortgage lender’s website.

But don’t just stop at one lender. Most people do, but shopping at least three lenders can save you more than $3,500 in just the first five years of your loan, according to research conducted by the Consumer Financial Protection Bureau.

Check out our other mortgage tools


FHA Loan Refinance and Home Purchase Loans at #personal #loans #for #students


#get a loan
#

FHA Loans for Home Owners

Whether you’re a first time homebuyer, moving to a new home, or want to refinance your existing conventional or FHA mortgage, the FHA loan program will let you purchase a home with a low down payment and flexible guidelines.

FHA Limits for 2015

Refinance Your Home With an FHA Loan

FHA Loan Articles

Smart borrowers take plenty of time to plan their new home purchase. It s important to set budget, examine credit scores and reports, save up money for a down payment, plus the fees and expenses required as part of getting the loan.

Does it hurt a borrower s chances when applying for an FHA mortgage loan if there s a debt owed to the federal government? Can unpaid federal taxes become a barrier to an FHA mortgage loan? The FHA recognizes two types of circumstances tax debt and non-tax debt.

Some FHA loan applicants may feel there is a contradiction between FHA loan rules for FICO score minimums, creditworthiness issues, and loan repayment history requirements. There is no actual contradiction once borrowers realize these are just minimum requirements. Lenders may have higher standards.

Occupancy rules for single family FHA home loans are very important for a borrower to understand. HUD 4000.1 has a specific occupancy requirement for new purchase single-family home loans requiring the borrower to occupy the home.

Home loans can be complex, confusing, and hard to understand. A government agency known as CFPB, or Consumer Financial Protection Bureau, exists to protect consumers and help potential homeowners as they navigate the path to buying a home.

There are many situations where getting an FHA home loan might be complicated by circumstances. A borrower who has co-signed with a family member on another financial obligation such as a rental unit or a student loan are good examples.

The new HUD 4000.1 handbook includes new rules about existing policy, revised language for some loan rules, and other changes. Has qualifying for an FHA mortgage under the new rulebook changed?

Many questions about FHA home loans and FHA refinance loans that require a new credit check include some type of concern over a past credit mistake. Or an unforeseen situation that caused the borrower to miss payments.

There are sometimes legal issues that arise as a result of applying for an FHA refinance loan. Those issues give way to frequently asked questions and in many cases the best advice is to seek legal advice for a lawyer and avoid taking legal guidance or tips from a non-lawyer.

If you purchased a home with an FHA mortgage loan, does the FHA allow you to sign that loan over to another qualified borrower? This type of transaction is permitted for FHA single family home loans, but there are certain considerations you should know about.


How to Use TSP to Purchase Your First Home #free #loan #calculator


#tsp loan
#

How to Use TSP to Purchase Your First Home

by Mark Kennan

You’ll owe extra tax penalties if you take an early TSP distribution.

TSP Loan

Complete the TSP application, including the amount you want to borrow from the defined contribution retirement savings plan. Loans are limited to no more than $50,000. You may be able to apply online or by using the TSP-20 form. Do not send in documentation of your home purchase with the loan application.

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  • How to Sell – Buy Mutual Funds Online #how #to #buy #mutual #funds #online,how #to #sell #mutual #funds #online,how #to #purchase #mutual #funds #online,how #to #trade #mutual #funds


    #

    Chapter 3.4: How to Buy Sell Mutual Funds

    Mutual funds have been around in India for nearly three decades now, but the number of people who actively buy and sell mutual funds in the country remains abysmally low as a percentage of the population.

    The fundamental reason for poor participation in the mutual fund market is the lack of awareness; not just about the benefits of mutual funds, but also the knowledge of how to buy and sell them.

    You have tackled the question of how mutual funds help you achieve your investment goals in earlier chapters. Now, let’s go through the process of buying and selling mutual funds.

    How to Buy Mutual Funds :

    Mutual funds are versatile instruments that can be bought and sold in a variety of ways. Once you get all your paperwork in order, here are some of the various ways you can acquire mutual funds in India through Kotak Securities:

    • Buying mutual funds through Kotak Securities is a great option for investors with limited knowledge about investing and even lesser time to do the paperwork by themselves.
    • You can either trade mutual funds online through your trading account or call us and place an order.
    • The brokerage house can also double up as a financial advisor, helping you out with options that you may not be aware of, offering tips and tricks to help you make the
      most of your investments.
    • In addition to these, you can either buy directly from the
      asset management company or through a bank that sells mutual funds.

    Once you have decided which way you want go and which mutual fund scheme(s) you want to invest in, you will have to place the order. Here’s the step-by-step procedure of buying a mutual fund:

    • Get a demat account
    • Go to the Mutual Funds section of Kotak Securities webpage. Login and then click on ‘Place order’. Or, you can call your broker.
    • Select the name of the mutual fund or the AMC’s name that you wish to invest in.
    • Then select the correct scheme as many fund houses offer multiple schemes.
    • Specify the amount you wish to invest in the scheme.
    • In case of a dividend scheme, select one of the two dividend options — payout or reinvestment. If you select the payout option, the mutual fund’s dividends will be credited to your bank account. The reinvestment option allows the amount to be used to buy additional units of the scheme. You thus won’t get the dividends credited to your bank account. Select the former if you want a secondary source of income. The reinvestment option, however, helps you increase the size of your holdings and increase returns.

    How to Sell Mutual Funds :

    If you thought the amount of research done for buying a mutual fund was hard work, you’re about to repeat a lot of such work while selling your mutual funds. You need to do your homework and sell your mutual funds only if the timing is right to ensure that you always make a profit on your sale.

    Some instances for when mutual funds ought to be redeemed:

    • Most people sell their mutual funds to finance some immediate or upcoming financial requirement, like buying a house or car, paying for children’s education, a health crisis or even an upcoming foreign holiday.
    • Another good time to sell off your mutual funds is when your investment requirements undergo a change – this could be due to inherent growth or changes in your existing portfolio or due to a life event that reorganizes your priorities.
    • If the performance of a mutual fund dips consistently below expectations and other comparable funds for a sustained period of time. Here, ‘sustained’ refers to a time period of 1 to 5 years at least.
    • Changes on the part of the mutual fund – a reset of its investment objectives or strategy, a rejig of its favored stock picks or sectors in which it invests or even the departure of a trusted fund manager often leads to the sale of such mutual funds by investors.

    Do you see yourself in any of the scenarios? Then it’s probably a good idea to sell your funds and cut your losses early on.

    There are two ways to sell your mutual funds – to another investor or back to the mutual fund. The latter is called redemption of mutual fund.
    Mutual funds are best redeemed the same route through which they are purchased. This means you could choose to redeem them online or offline, through an agent or broker or directly by yourself.

    However, remember to check for any exit load or charges for sale of your MF units. This will be deducted from your total proceeds from the sale.

    Common Mistakes to Avoid When Buying and Selling Mutual Funds

    Mutual funds are managed portfolios of stocks, bonds and securities that offer investors the perks of participating in the stock market, but with a limited exposure to the risks involved.

    Since this is the case, the need for 24 x 7 monitoring of your investments is probably unnecessary. However, this does not mean that you go into this process of investing in mutual funds completely blind and then live to regret your rash decisions.

    Don’t be in a hurry to sell off low performers

    Some funds are slow starters that even out their losses given enough time and attention. Patience truly is a virtue when dealing with mutual funds. Exercise it and hold on to your low performers for at least a year before you decide to get rid of them.

    A lot can change with the stock market or even your low performing fund in the span of a year. Experience shows that funds that are left to accumulate returns on for the longest periods of time are often the ones that offer the highest returns on investment for the investor.

    In a downturn, don’t sell everything off

    Mutual funds, as mentioned earlier, are managed by professional stock market analysts and fund managers with years of experience in investing under their belts. In tough economic times, they take proactive measures to minimize the impact of the downturn on their portfolios, like switching sectors or specific stocks to minimize losses.

    Don’t use your ‘gut feel’ over the training of these professionals as a justification for selling off your funds as the economy starts cooling off.

    Avoid putting your money into stock market bubbles

    Every few years, we see at least one sector that shows extraordinary promise and has investors making a beeline for such stocks. This tendency to favor sectors that are the ‘flavor of the season’ spills over into mutual fund trading too.

    Be very careful of such deep, sector-specific investments. They could well be the next dotcom bubble in the making. Check your call with a financial advisor, read up investing literature online or otherwise, speak to other experienced investors and then proceed with your sector specific picks

    Don’t pick funds based on their short term performance

    Mutual funds must be evaluated based on not just their current returns but also on their long term – 1 to 5 year – returns. This is necessary to know if there has been a consistent pattern in the fund’s performance over the years and also to ensure that short term market corrections don’t negatively impact your choice of funds.

    Don’t go too narrow with your mutual fund choice

    You may have done the most extensive research to arrive at the number one mutual fund option according to you. However, there are no guarantees in the world of stock and securities trading. There’s always a small risk of failure even with the best managed funds.

    Don’t put all your investments in one basket. Pick your top three or four choices and spread your risks among them. Make sure they are different types of mutual funds to actually benefit from this move.

    Don’t sell before your lock-in periods are over

    Selling a fund before the lock-in period runs out is a wasted opportunity to make some returns on your investment. There are exit loads attached to such premature exits and they often nullify the profits that you might have made had you stuck till the end of the lock in period.

    Another problem is short term capital gains tax that would become applicable on your investment, thus decreasing even further the ROI from the original investment.

    WHAT NEXT?

    While researching for mutual funds, you will come across multiple types of mutual fund schemes designed to suit every investor’s needs. These may sound confusing. In the next section, we will go through the multiple types of mutual funds in detail. We will also take you through the Systematic Investment Plan and Hedge Fund investing. To read these, Click here .


    Loan for Land Purchase #cheap #loans


    #land loan
    #

    Plot Loan/ Land Loan

    If you have a plot of land in mind or your want to purchase a land on which you wish to build your dream home, DHFL can help you do just that, with a Plot Loan.

    Features and Benefits of Plot Loan/ Land Loan

      1. Tenure Term:  The tenure of your loan ranges from 1 to 20 years. The term however does not extend beyond the retirement age or 60 years whichever is earlier (65 years for self employed individuals).
      2. Purpose:   Avail a Plot loan on purchase of Non Agricultural land situated within Municipal / Local Development Authority limit.
    1. Reduce your EMI :  With tenure of 20 years, you can reduce the EMI amount on your Loan, so that your outgoings every month do not come in the way of your lifestyle and living standards
    2. Interest Rates:  The Interest rate applicable is based on the DHFL’s Retail Prime Lending Rate (RPLR) which fluctuates from time to time based on the money market conditions
    3. Processing Fees:  This is charged as the fee towards processing your Plot loan application

    How to Sell – Buy Mutual Funds Online #how #to #buy #mutual #funds #online,how #to #sell #mutual #funds #online,how #to #purchase #mutual #funds #online,how #to #trade #mutual #funds


    #

    Chapter 3.4: How to Buy Sell Mutual Funds

    Mutual funds have been around in India for nearly three decades now, but the number of people who actively buy and sell mutual funds in the country remains abysmally low as a percentage of the population.

    The fundamental reason for poor participation in the mutual fund market is the lack of awareness; not just about the benefits of mutual funds, but also the knowledge of how to buy and sell them.

    You have tackled the question of how mutual funds help you achieve your investment goals in earlier chapters. Now, let’s go through the process of buying and selling mutual funds.

    How to Buy Mutual Funds :

    Mutual funds are versatile instruments that can be bought and sold in a variety of ways. Once you get all your paperwork in order, here are some of the various ways you can acquire mutual funds in India through Kotak Securities:

    • Buying mutual funds through Kotak Securities is a great option for investors with limited knowledge about investing and even lesser time to do the paperwork by themselves.
    • You can either trade mutual funds online through your trading account or call us and place an order.
    • The brokerage house can also double up as a financial advisor, helping you out with options that you may not be aware of, offering tips and tricks to help you make the
      most of your investments.
    • In addition to these, you can either buy directly from the
      asset management company or through a bank that sells mutual funds.

    Once you have decided which way you want go and which mutual fund scheme(s) you want to invest in, you will have to place the order. Here’s the step-by-step procedure of buying a mutual fund:

    • Get a demat account
    • Go to the Mutual Funds section of Kotak Securities webpage. Login and then click on ‘Place order’. Or, you can call your broker.
    • Select the name of the mutual fund or the AMC’s name that you wish to invest in.
    • Then select the correct scheme as many fund houses offer multiple schemes.
    • Specify the amount you wish to invest in the scheme.
    • In case of a dividend scheme, select one of the two dividend options — payout or reinvestment. If you select the payout option, the mutual fund’s dividends will be credited to your bank account. The reinvestment option allows the amount to be used to buy additional units of the scheme. You thus won’t get the dividends credited to your bank account. Select the former if you want a secondary source of income. The reinvestment option, however, helps you increase the size of your holdings and increase returns.

    How to Sell Mutual Funds :

    If you thought the amount of research done for buying a mutual fund was hard work, you’re about to repeat a lot of such work while selling your mutual funds. You need to do your homework and sell your mutual funds only if the timing is right to ensure that you always make a profit on your sale.

    Some instances for when mutual funds ought to be redeemed:

    • Most people sell their mutual funds to finance some immediate or upcoming financial requirement, like buying a house or car, paying for children’s education, a health crisis or even an upcoming foreign holiday.
    • Another good time to sell off your mutual funds is when your investment requirements undergo a change – this could be due to inherent growth or changes in your existing portfolio or due to a life event that reorganizes your priorities.
    • If the performance of a mutual fund dips consistently below expectations and other comparable funds for a sustained period of time. Here, ‘sustained’ refers to a time period of 1 to 5 years at least.
    • Changes on the part of the mutual fund – a reset of its investment objectives or strategy, a rejig of its favored stock picks or sectors in which it invests or even the departure of a trusted fund manager often leads to the sale of such mutual funds by investors.

    Do you see yourself in any of the scenarios? Then it’s probably a good idea to sell your funds and cut your losses early on.

    There are two ways to sell your mutual funds – to another investor or back to the mutual fund. The latter is called redemption of mutual fund.
    Mutual funds are best redeemed the same route through which they are purchased. This means you could choose to redeem them online or offline, through an agent or broker or directly by yourself.

    However, remember to check for any exit load or charges for sale of your MF units. This will be deducted from your total proceeds from the sale.

    Common Mistakes to Avoid When Buying and Selling Mutual Funds

    Mutual funds are managed portfolios of stocks, bonds and securities that offer investors the perks of participating in the stock market, but with a limited exposure to the risks involved.

    Since this is the case, the need for 24 x 7 monitoring of your investments is probably unnecessary. However, this does not mean that you go into this process of investing in mutual funds completely blind and then live to regret your rash decisions.

    Don’t be in a hurry to sell off low performers

    Some funds are slow starters that even out their losses given enough time and attention. Patience truly is a virtue when dealing with mutual funds. Exercise it and hold on to your low performers for at least a year before you decide to get rid of them.

    A lot can change with the stock market or even your low performing fund in the span of a year. Experience shows that funds that are left to accumulate returns on for the longest periods of time are often the ones that offer the highest returns on investment for the investor.

    In a downturn, don’t sell everything off

    Mutual funds, as mentioned earlier, are managed by professional stock market analysts and fund managers with years of experience in investing under their belts. In tough economic times, they take proactive measures to minimize the impact of the downturn on their portfolios, like switching sectors or specific stocks to minimize losses.

    Don’t use your ‘gut feel’ over the training of these professionals as a justification for selling off your funds as the economy starts cooling off.

    Avoid putting your money into stock market bubbles

    Every few years, we see at least one sector that shows extraordinary promise and has investors making a beeline for such stocks. This tendency to favor sectors that are the ‘flavor of the season’ spills over into mutual fund trading too.

    Be very careful of such deep, sector-specific investments. They could well be the next dotcom bubble in the making. Check your call with a financial advisor, read up investing literature online or otherwise, speak to other experienced investors and then proceed with your sector specific picks

    Don’t pick funds based on their short term performance

    Mutual funds must be evaluated based on not just their current returns but also on their long term – 1 to 5 year – returns. This is necessary to know if there has been a consistent pattern in the fund’s performance over the years and also to ensure that short term market corrections don’t negatively impact your choice of funds.

    Don’t go too narrow with your mutual fund choice

    You may have done the most extensive research to arrive at the number one mutual fund option according to you. However, there are no guarantees in the world of stock and securities trading. There’s always a small risk of failure even with the best managed funds.

    Don’t put all your investments in one basket. Pick your top three or four choices and spread your risks among them. Make sure they are different types of mutual funds to actually benefit from this move.

    Don’t sell before your lock-in periods are over

    Selling a fund before the lock-in period runs out is a wasted opportunity to make some returns on your investment. There are exit loads attached to such premature exits and they often nullify the profits that you might have made had you stuck till the end of the lock in period.

    Another problem is short term capital gains tax that would become applicable on your investment, thus decreasing even further the ROI from the original investment.

    WHAT NEXT?

    While researching for mutual funds, you will come across multiple types of mutual fund schemes designed to suit every investor’s needs. These may sound confusing. In the next section, we will go through the multiple types of mutual funds in detail. We will also take you through the Systematic Investment Plan and Hedge Fund investing. To read these, Click here .