Planning to take a home loan? Read this

Have a query regarding your home loan? Maybe we can help.

Drop us a line and our expert, Harsh Roongta, will answer it.

Got a question for Harsh Roongta? Please write to us at getahead@rediff.co.in with the subject line Question for Harsh Roongta.

I am planning to purchase a land, which will cost near about Rs 3,00,000 (in West Bengal). Is there any bank, which will give me a loan for purchase of said land? If yes, then what will be the approximate interest rate? I am salaried employee and getting salary Rs 19,200 per month.

Yes, you can get a plot loan for agricultural land based on your income and the title of the property. It is advisable to take a property from a reputed developer. The interest rates on plot loan are about 2 per cent higher as compared to a home loan. You can get about 2.25 times the annual gross income as a plot loan. You will be eligible to get a loan of around Rs 2 lakh for a plot, assuming that you have no other loan.

There is a land on which one room is constructed only. Purchase price is around Rs 4,00,000. If I want to purchase the same does it come under House building loan?

You can get a home loan to buy the above-mentioned property based on your income.

I have brought a house in Feb 2007 for which I took a house loan and am claiming Income Tax benefits in terms of interest as well as principal. Now I plan to sell the house and acquire another house in the place of my work. As it has been less then three years, are there any tax implications for the same. Do I need to refund back the tax benefits claimed or I only have to pay the capital gains tax?

Can you kindly clarify the same for me?

Ram

Yes, short-term capital gains tax will be payable on the sale of the above mentioned property. If you have claimed any deduction on account of principal repayment of the loan, you need to add it back to your income in the current year.

I have short-listed a property worth 20 lakh and plan to invest around 5 lakh. The property is scheduled for possession in Mar'11 and the bank will disburse the 10 per cent (of Rs 15 lakh) every 3 months.

Considering that I pay up 15 per cent cash during booking and 5 per cent remaining on possession, the bank will disburse Rs 1.5 lakh every quarter towards phased progress.

Assuming the bank charges @9.25 per cent Rate what is the Pre-EMI expected to service during this period.

Pre-EMI is the simple interest payable on a home loan taken for an under-construction property where the loan disbursement is linked to the construction plan. It does not have the principal component. So, you will need to work it out for your self every month by multiplying the principal outstanding for the month by the interest rate divided by 12.

I had applied for rent discount loan with HDFC Bank in the year 2005.   The loan was approved and Rs 22.00 lakh sanction against collateral. Rent discounted value worked out for 5 years period and EMI fixed for 7 yrs. Period @ Rs 37,699.00 which is about 14.25 per cent interest rate with reducing balance.  I again approached the bank for top off loan and got the sanctioned and new loan stands at Rs 29.98 lakh and new EMI is Rs 48,066.00 for 9-year period.  This was sanctioned on April 2007. 

There was letter by HDFC Bank, at the height of increase in Bank interest for all sectors; by say April 2008.  The bank said that though they have kept the EMI same but have increased the payment period due to revision of floating rate. The Bank has yet to give me new pay schedule.

My question is based on my assumption that fixed rate of interest is applied for first three year than

How often the correction in floating rate is applied. A) every month, B) every quarter, C) every six monthly etc.

Can I not have advantage of lower interest rate now?

Can the top-off loan is considered as a fresh loan? 

How far bank is correct in adjusting previous out standings with 4 per cent penalty (they have charged me 2 per cent) ?

Hope you will be able to throw some of the rules on Bank loans. The loan sanctioned worked out to be merely 25 per cent of the Flat Value than (in the year 2004/05) now it is barely 12 per cent.

Harish Shah

A floating interest rate can be reset periodically based on the revision of a bank's prime lending rate, which is linked to market conditions. The periodicity of such revisions is defined in the loan document where they change the reference. If they are not giving you the market rate, you should explore the option of changing your home loan lender if you have maintained a good track record of repayment on the loan.

You should check the 'Should I switch my loan' (http://www.apnaloan.com/admin/openwysiwyg/loan-advice-india/switch-my-loan.html) calculator on Apnaloan.com to check whether it makes sense to change the lender.

Yes, a top-up loan is considered as a fresh loan and has a lower tenure and higher interest rate as compared to that of the earlier loan.

I have two home loans for 2 properties I bought. The first one is with IDBI with 17.4 lakh outstanding with EMI @ 18203 for 208 remaining installments. I think the current interest rate is 10.5 per cent.

The second home loan is with SBI where I have outstanding of 18 lakh with the current rate of interest around 10.25 per cent. I came across a couple of HL offers from SBI where the interest rate 8 per cent for first yr and then it varies according to market scenario. Does it make sense to switch my first HL from IDBI to SBI given that I have a 2 per cent foreclosure charge?? Please advise with some numerical proof if possible.

Also let me know if any other bank has a history of lower rates of interest.

Thanks and regards
Madhav

If your bank is not giving you the market rate, you should explore the option of changing your home loan lender if you have maintained a good track record of repayment on the loan. You should check the 'Should I switch my loan' (http://www.apnaloan.com/admin/openwysiwyg/loan-advice-india/switch-my-loan.html) calculator on Apnaloan.com to check whether it makes sense to change the lender.

You may want to consider the prepayment charges payable to the existing lender and the processing fee to the new lender. You can check the home loan comparator (http://www.apnaloan.com/home-loan-india/compare.html) to compare offers. 

On15 April 09 I had taken floating house loan from ICICI Bank in 2004 at 7.25 per cent. With the increase in rates the interest rate went up to 14.25 per cent. But after recent reduction in interest rates it now stands at 13.25 per cent. My loan amount is approx.Rs 10 lakh plus. Will it be good if I switch the bank and pay 2 per cent penal to ICICI? ICICI Bank has not reduced the rates by much and are not likely to do so in near future also seeing their present situation.

Jitin Bhargava

If your bank is not giving you the market rate, you should explore the option of changing your home loan lender if you have maintained a good track record of repayment on the loan. You should check the 'Should I switch my loan' (http://www.apnaloan.com/admin/openwysiwyg/loan-advice-india/switch-my-loan.html) calculator on Apnaloan.com to check whether it makes sense to change the lender.

You may want to consider the prepayment charges payable to the exisitng lender and the processing fee to the new lender. You can check the home loan comparator (http://www.apnaloan.com/home-loan-india/compare.html) to compare offers. 

We have taken loan of about Rs 31,00,000 from HDFC Bank in July 2008. Now as the market conditions have gone bad most of the banks have reduced the interst rate. We started with interest rate of 10.25 and now it is 10.5 per cent. The question is how we can avail the benefits of low interest rate? Should we transfer our loan to some PSU bank  or pay off extra to reduce and make it in limit of Rs 30,00,000. Can u please advice on same line?

Ritu

If you have surplus funds and you can also pre-pay a part of the home loan as it will reduce the monthly EMI burden. Quite a few banks do not charge pre-payment penalty if the loan is prepaid partially. The definition of what constitutes partial pre-payment varies from bank to bank. This will ensure savings in pre-payment penalty and at the same time help you to save on high interest costs on a substantial portion of the loan. However, before you decide to pre-pay a home loan, it is in your interest to first clear off all unsecured dues like credit card dues and personal loans. Also, make sure that you have some money set aside to meet emergency expenses. Tax calculation can change the view on pre-payment.

If your bank is not giving you the market rate, you should explore the option of changing your home loan lender if you have maintained a good track record of repayment on the loan. You should check the 'Should I switch my loan' (http://www.apnaloan.com/admin/openwysiwyg/loan-advice-india/switch-my-loan.html) calculator on Apnaloan.com to check whether it makes sense to change the lender.

You may want to consider the prepayment charges payable to the exisitng lender and the processing fee to the new lender. You can check the home loan comparator: (http://www.apnaloan.com/home-loan-india/compare.html) to compare offers. 

I am planning to purchase one flat in Kolkata costing around Rs 26 lakh + registration cost (could be around another Rs 3 lakh). I and my wife, working in central govt organization, are planning to take home loan each Rs 10 lakh and rest from GFP and other sources.

I need your valuable suggestion regarding: What are the points to check before applying/taking home loans

What should be the EMI and tenure of home loan?

Looking for your kind suggestions at the earliest,

S Mukherjee

1. When selecting a home loan lender, check for various terms and conditions and charges regarding home loans.
2. Never choose a lender till the property is identified.
3. Get clarity about the loan amount you are eligible for.
4. Remember to have own funds to the tune of 10-15 per cent of the house cost.
5. Go window-shopping, then bargain and then, bargain some more.
6. Apart from interest rates, also check various charges like processing fees, pre-payment charges, legal fees, valuation fees and other hidden costs.
7. Take all these factors into account before choosing your bank.
8. Remember, processing fee is non-refundable unless the bank's agent specifies otherwise in writing.

Check the link for more: http://www.apnaloan.com/home-loan-india/homeloangyan.html  

I have a taken a home loan SBI Max Gain for which presently I am paying pre-EMI for 2 disbursement done by SBI bank to the builder. Possession is around Dec 09. I got an offer from abroad & will be moving next month. My queries are:

Can I able to pay the pre-EMI /EMI from abroad? What are the precautions I have to take? Please advice / suggest.

Lalit Kalihari

Yes, you can pay the pre-EMI and the EMI from abroad. You can pay it either from your NRE or NRO account.

I have a home loan with HDFC Ltd, the first disbursement/payment made in August 2006 and claimed Tax benefits for the year 2006-07. For work reasons, I relocated to USA and my Indian salary is paid in USD. And for the same reason, I don't have Form16s for the years 2007-08 and 2008-09 and subsequently did not file my Tax returns for the two years. I'm planning to payoff the whole loan by January 2010. Will there be any implications on the Tax benefit I availed for 2006-07? Can you please educate me on this so that I can make an informed choice?

Giridhar Maddikonda

Early repayment of the loan has zero impact on already claimed tax benefits.

I have availed a home loan from a private bank 2 years ago for 14.55lakh and have paid a total of Rs 3.13 lakh as EMI so far.

Now, I am looking at transferring the balance to a nationalised bank. When I enquired with my current bank about the outstanding principal, I got an answer saying it is about 14.67 lakh (which is about 0.12 lakh more than my sanctioned amount!).

The split given by private bank is as follows:

Paid so far: Rs 3.13 lakh (interest Rs 2.91 lakh, principal Rs 22,000)
Outstanding: Rs 14.67 lakh (principal: Rs 14.34 lakh, interest + preclosure: Rs 33,000)

I feel cheated because even after paying more than 3 lakh thru EMIs, my outstanding is more than my sanctioned amount. What happened to the EMIs I have paid? Can you please throw light on whether this is a standard practice or can I approach some legal entity to help me?

Raghu

When you pay the loan EMI, in the initial years, the interest component in the loan higher compared to that of the principal. Hence, the principal repaid will be significantly lesser. You can also check the loan amortization calculator on Apnaloan.com to check what is the principal outstanding at the end of 24 installments. Click on the link: http://www.apnaloan.com/loan-advice-india/amortisation.html

I would appreciate if you could guide me for clarifying my dilemma. I took home loan of Rs 20 lakh from ICICI bank at 7.25 per cent in Dec 2005 for which the interest rate is 12.25 per cent. I feel I should get it refinanced from some other nationalised bank. I am not sure which bank I should chose for Balance transfer. LIC housing finance announced ROI as 8.75 per cent but from some sources I came to know that this is only for next 3 months after that ROI will again be as per the market condition which may be some where between 9.25 to 10. Can you please guide me which bank I should opt for?

Kundan Sharma

If your bank is not giving you the market rate, you should explore the option of changing your home loan lender if you have maintained a good track record of repayment on the loan. You should check the 'Should I switch my loan' calculator on Apnaloan.com to check whether it makes sense to change the lender.

You may want to consider the prepayment charges payable to the existing lender and the processing fee to the new lender. You can check the home loan comparator to compare offers.