'Can I get tax benefit on home improvement loans?'

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 as: Question for Harsh Roongta.

I have a home loan account with ICICI bank. In case I make a part payment will the company reduce the EMI or will it reduce the tenure?

Govind Prasad, Manager Sales and Operations.

Normally, the bank reduces the home loan tenure but based on your requirement, they may reduce the EMI as well.

I applied for a loan from LIC Housing Finance Ltd. and loan also got sanctioned. Now my agent is asking me to give Pre-EMI amount. I am ready to give it but the problem is that he is asking me to give a blank cheque for that!

I am not comfortable with that. Can you please let me know if it is legal to ask for a blank cheque?

Maitri

There is absolutely no reason to give a blank cheque. You can give out a cheque favouring LIC Housing Finance Ltd. and if the exact amount is not known, you can enclose an upper limit on the cheque as "Not over Rs. .........".

In February 2009, I availed a home loan of  Rs 31.5 lakh from Deutsche Bank at the rate of 13.25 per cent with an EMI of Rs 35,148. Due to recession, I am facing problem to pay my EMI and requested the bank to reduce it. They offered me a package whereby if I paid Rs 65,148 to them my EMI will be reduced to Rs 28,352 and if I paid a conversion fees of Rs 49,265 my new EMI would be Rs 28,800 and so on.

I am confused whether this will be profitable for me. I plan to go for 9 per cent rate of interest and I need your guidance in this regards.

Xavier.g, Bangalore

You have not stated the tenure of the loan. In any case, current interest rate seems to be comparatively higher when compared to prevalent market rates. You should explore the option of changing your home loan lender if you have maintained a good track record of paying your EMIs on time.

I have seen one resale room for which previous owners cash transaction and they not paid any stamp duty and registration fees. Last purchaser notarised his agreement and I am the fourth one. I am ready to pay stamp duty & registration fee, can I purchase the above said room?
I wanted the home loan also. I need your suggestion.

Prakash

It is unlikely that you will get a loan for such a property but do ask one of the banks around your area.

My father has an independent house. He had constructed it from his own funds. He has permitted me to construct 1st floor. We would not like to make any changes to the ownership. The issue is with funding. As per my income I can get Rs 20 to 25 lakh loan from bank. Will the bank sanction the loan even when the property is in my father's name?

JC

You can get a construction loan based on your income but your father will necessarily have to be a loan co-borrower as he is the owner of the property. You will also not be able to claim tax deduction benefits as you are not the owner of the property.

I am a working lady. Recently I purchased a house. The house agreement is made in joint name as my name stands first and my husband's as second name. My husband made initial payment of 20 per cent of the agreement value, and for remaining 80 per cent, I had applied for home loan from a nationalised bank. The loan application is also made in joint name, first my name and second name is of my husband. I paid the entire registration and stamp duty applicable and all other expenses incurred in this purchase. The loan has been sanctioned entirely on my eligibility as I am going to pay the entire EMI directly from my salary. My husband's name is added to the loan application just as a formality as the agreement was in joint name.

My query is:

Shall I avail entire tax rebate on this housing loan, as I am going to pay the entire EMI?
 
The house is taken for self-occupation and we both husband and wife are staying in that house.
My husband is not willing to avail any tax benefit out of this loan and he is ready to give it in writing to me in case of need.

In this situation, kindly let me know whether I can take rebate on entire loan / EMI paid by me?

Roopa

You can avail 100 per cent tax benefit on the joint home loan if you are the owner of the property as well as a co-borrower to the said loan. You can enter into a share agreement with your husband.

I am having outstanding loan of Rs 5,32,000, now I am paying EMI of Rs 5,700 tenure (balance) for 16 year at 10.25 per cent. Now SBI is offering 8 per cent for first year, 8.5 per cent for next 2 years and 2.75 per cent less than the existing PLR after 3 years. I have done so many calculations I cannot come to a conclusion whether to switch over or not. Now switch over expenditure is exactly Rs 28,000. Kindly guide us. How much I can save money. whether switch over or not.

srinivasakumar

The effective cost of the SBI Home Loan deal works out to 8.76 per cent if it's a floating rate. This is cheaper compared to your current interest 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 may want to consider the prepayment charges payable to the existing lender and the processing fee to the new lender.

I would like to take a home improvement loan. Am I eligible for tax benefits for the principal and interest paid on the home improvement loan? Can I combine the repayment with my present home loan repayment?

V Gururajan

If the loan is used for repair, renewal or reconstruction of the house property, the interest rate payable on such a loan is eligible for deduction. You will have to prove that the loan was used for repair, renewal or reconstruction. Principal payment on such a loan is not eligible for deductions.

I have been reading your replies to different queries.

I have a question:

I have inherited a property at my native place from my mother through a will. But the original document of purchase is lost, and I have obtained a copy of the document from the registrar's office.

I am in the process of obtaining local authority approval, and name change in Patta of the land

My question to you is:

(1) Can I apply for a home loan using the copy of the document?

(2) Further what is to be done to get the original document?

(3) What are the other documents that are required to apply for a home loan using copy of Original purchase document?

Thank you in advance for your reply.,

Regards

V Gururajan

Very intricate question that needs to be answered by a legal person familiar with the local land laws since the laws and records keeping systems vary very widely across state to state and even within the state.
 
But here is a broad general answer which needs to be rechecked with a local lawyer and lenders operating in that specific area.
 
1) You need to get a certified copy of the document registered with the concerned registering authority which along with an certified extract of the property register (called by different names in different states such as 7/12 or Index II etc...). Post that you might have to follow some procedure such as issuing advertisement and providing indemnities etc. 
 
2) See answer above
 
3) Standard documentation apart from the above. In this case since it will be for self construction he will need architects estimate for cost as well as plan approval from local authorities.