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Easy steps to transfer your home loan

June 16, 2009 09:53 IST

'Prepaying home loan reduces your tenure'

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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 'Home loan query for Harsh Roongta'.

My elder brother and I have bought a house last year and we shared the tax benefits in the last financial year. In the coming financial year our total principal component of Home loan is Rs 37,566 and total interest component of home loan = Rs 1,29,546.

So the individual share in tax rebate is 37,566/2 = Rs 18,783 in principal component and 1,29,546/2 = Rs 64,773 in interest component. As per the rules the upper cap on the interest component is Rs 1,50,000. Is this Rs 1,50,000 cap for the overall loan or for each individual?
 
That is can I repay worth Rs 3,00,000 interest component and me and my elder brother share Rs 1.5L each? Our EMI is Rs 13,926. So if I make extra lump sum payments then the principal component of the loan will also go up which will be helpful in tax rebates under 80C. Please let me know your opinion on this.

Shubhadeep

Since both, your elder brother and you are co-owners to the said property and co-borrowers to the said loan, you both can claim tax deduction benefits to the extent of your respective shares in the loan. The tax benefit on the interest component under section 24 (b) is available separately to each one of you, i.e. a maximum of Rs 3 lakh pa for both of you. Yes, you can make partial prepayment towards home loan, which will be adjusted against the home loan principal; eligible for deduction under section 80 C. As far as the interest is concerned, there is no such thing as prepayment.

Let me confess that I'm not a person who can understand finical matter very well and that is how I feel like seeking advice from you. I'm working and staying outside India from quite some time. I have taken 30 lacs smart home loan from HSBC @ 12.5 per cent interest rate for 22yrs since October 2007. Since then I have been paying my EMI regularly. Now every month paying EMI is pinching me, so have decided to prepay my loan in 4 to 5 part payments. Below is my query.

If I made prepayment will it reduce my EMI or just it will be reduce principal amount.

Jaspal Singh

In your case, the money will lie in your linked current account and your interest burden will be reduced to that extent. Thus, in effect your EMI will remain the same but your overall tenure will reduce. Incidentally, the loan is available at single digit rates and you should consider switching your loan to another lender if your existing lender is not willing to give you a single digit loan rate.

I have taken a home loan from Bank of Baroda for an apartment in Kolkata. This apartment is still under construction and hence right now I am living in a rented apartment. However, I have started paying EMI for the home loan from September 2008. My question is am I eligible for tax benefit for my home loan for the current financial year 2008-2009?  Please advise.

Avijit Chakraborty

You can get tax benefit on home loan for under-construction property only from the financial year in which the construction is completed. So, whether you are paying the pre-EMI or the EMI, no tax deduction benefit is available till the construction is completed. All interest payable in respect of the year, which the construction is completed, is deductible under section 24. Capital repayments, on the loan, if any, made in years in which the property remained under construction is not eligible for any deduction.

Check the link for a detailed answer: http://www.apnaloan.com/home-loan-india/taximplicationonpreemi.html

I had taken a HL from BHW in 2006 at a floating interest of 7.5 per cent and ended paying up a high of 12.75 per cent now revised to 12.25 per cent WEF 1st March. I find that private banks are not affecting the floating rate revisions announced by nationalised banks. Why is this? Also do you think it is a good idea to do a balance transfer my existing principal to a nationalised bank offering lower interest rate? Do you suggest a fixed or floating home loan?

Prasad Prabhakar

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.

Apnaloan.com recommends a floating interest rate loan.


Image: Home loan comparator

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'Loan against property is available only against clear-title property'

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I have already a home loan at Thane Janata Sahakari Bank Ltd. Pune, Loan Amount Rs 2.25 Lakh from 2006 for 60 EMI. Now I have already paid 36 EMI & balance amount is 1.05 Lakh. At present the valuation of flat 7 Lakh (Approx.), I want a mortgage Loan 5 Lakh from Fullerton India for 10 Years.
Please give suitable bank reference & EMI.

Manas Mohanty

If you are planning to mortgage the property for which your loan is running with Thane Janata Sahakari Bank Ltd, Pune you will not be able to get a loan against property. LAP is available only against freehold, clear title property. So, if you are planning a loan against property from Fullerton, you will need to use a portion of the loan to repay the existing loan first. There is nothing like a best bank. Banks offer interest rates based on income and the title of the property. You can get 40 to 60 per cent of the market value of property as home loan.

You can check the LAP comparator for offers from various banks. Go to: http://www.apnaloan.com/loan-against-property-india/compare.html. You can check the EMI on the http://www.apnaloan.com/loan-advice-india/emi-rates-calculator.html.

I get a net salary of Rs 45K. What could be the max loan I can avail of approx? 

Ganesh

Based on the information provided by you, if calculated at an interest rate of 9 per cent for 240 months i.e. 20 years, you can get a loan of Rs 18-25 lakh. Check the home loan eligibility calculator on the link: http://www.apnaloan.com/loan-advice-india/home-loan-eligibility.html.

As you are aware, the banks were quick to increase the ROI when RBI increased lending rates, and are slow on reducing the same. As customers, do we have any legal option? Can we take the bank to court of law for this? I do not want to transfer the loan, as I have to incur some heavy charges now.

Vinod N

The bank is 'technically' correct, (though not entirely justified) when they do not reduce rates even though they do so for new customers. Your best bet is to vote with your feet, i.e. change your lender. As long as you have maintained a good track record of repayment, you can shift to a new lender who can fund the prepayment charges as well. This is the best you can do till regulations do come in to protect you on this.

I have bought a property in 2004 which is in the joint name of my wife and me. I stay in the same house. For this I had taken home loan. My wife being a housewife, I (salaried) repay the loan and get the tax benefit on the interest (24B) and principal repayment (80C). Now my question is that in the financial year 2009-10, my expected interest on house loan will be about Rs 60,000 to Rs 70,000. I am not interested in principal repayment under 80C as my investments exceed Rs 1,00,000. However I am eligible for HRA exemption u/s 10 for Rs. 1,80,000. Now should I stop claiming house loan interest benefit and start paying rent in the name of my wife and file a separate return for her as she has tax exemption up to Rs 1,80,000. By doing so I stand to save Rs 30 to 40 K per annum. Pls advise. 

You cannot get HRA exemption if you are paying rent for a house that is partly owned by you. Also any change in your share in the loan needs to be backed by documentation that may have stamp duty costs.


Image: Uttam Ghosh

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Easy steps to transfer your home loan

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Just read about Home loan and your advice. We are 3 in the family: wife, one daughter and myself. I am 65 years old and my daughter is living in US on an H1B visa since the last nine years and working in one single company since she is in USA. Her gross annual income is to the tune of US $1,25,000.

I want to buy a flat and want it to be financed. I want to take a loan of only Rs 15,00000 on her name for 15 years tenure to start with, and may pre-pay it as and when convenient. The flat will be in her name only and she will give me the necessary power of attorney on her behalf. After studying a few offers I have narrowed down to either Bank of Baroda or HDFC. I want your advice as to what would be best for me or is there any third option more attractive or better?

Can you please advise me sir and I am staying in Indore and the flat also is in Indore and is about 6 to 7 years old only.

Shailesh Mehta

There is nothing like a better or an attractive option for home loans. Banks will offer home loans based on customer profile and loan requirement.

I have a Power Home Loan from Axis bank since August-2007. The loan was for the amount of Rs. 15,30,000 at the rate of 11 per cent for 15 years and monthly EMI is 17390/-. Currently most of the bank has reduced the rate of interest for number of times however AXIS has only reduced 0.25 per cent. Since the difference is too high considering the Nationalised banks, I am willing to transfer my loan to another bank. What points needs to be considered for this. Again I am having problem with my salary as since January I am not getting salary on time, however I have paid all my EMIs on time. In case of transfer of loan, how this can adversely affect my application.

Roopesh Shah

Since you are transferring a home loan from one bank to another because your existing lender is not giving you the current market rate, you will of course need to check the interest rate being offered by the bank. You will also need to check the processing fee payable to the new lender and prepayment fee payable to the existing lender. Check for any other upfront or administrative charges that may be charged extra. It is also important that you check the terms and conditions regarding home loan prepayment. Slight delays in salary payments will not adversely affect your chances with a new lender as long as the EMI has been paid on time.

I have a loan of Rs 430000 taken from HDFC Ltd. 7-8 years back for construction of house in my own land. Due to much higher rate of interest in HDFC compared to other nationalised banks, I wish to take over the loan to other bank. In this regard, I had consulted Corporation Bank and they agreed to take over the residual portion of loan, which is now around Rs 3,50,000 from HDFC Ltd. They are processing the loan matter and informed me that they will issue either draft, cheque or pay order in favour of HDFC Ltd.

Now, my question is when I will approach HDFC for finalising the matter, will there be any problem? Is there any scope of creating problem by HDFC? Please advice me. I shall be grateful for the suggestions. I look forward for your reply.

Nemai Chandra Dey

There should not be any issue in loan transfer if you have maintained a good repayment track record. There are several steps in the loan transfer process.

First follow the round of negotiations with the current lender. You can take the opportunity to make the lender aware of your reasons of wanting to switch the bank. If you decide to switch, your lender will give you a consent letter. This simply means that the existing lender has given a 'go' to the transfer process.

This letter will have mention of the details regarding loan like total loan amount taken, the loan amount outstanding as well as the prepayment charges, if any. The amount mentioned will be calculated as on a future date, to enable time for the buyer to arrange the payment.

Once you get the consent letter, you can approach Corporation Bank for balance transfer.

From hereon, the process largely resembles to that of taking a home loan.

But remember, that Corporation Bank will require all the originals documents relating to the property and other documents such as NOC's from the relevant regulatory bodies before the loan is disbursed. Normally, the existing lender will not release the property document before the loan is prepaid.

Similarly, the new lender may not be ready to disburse the loan before it gets the original papers. Do not distress!

Once can obtain a letter from the current lender giving details of the legal papers held by them as security against the home loan and indicating the number of days it will take to release the documents to the borrower/applicant, once the payment is received.

If you have photocopies of the documents held by the existing lender, it will be of help when applying for a loan transfer.

I live in a good locality named as Somajiguda at Hyderabad. The flat is built in 1988. It is 21-year-old but in good condition .The owner has quoted price of Rs 30 lakh for the flat. It is difficult to get finance for this flat, as the bankers do not give loans for property, which is more than five years old.

I have a monthly take home salary of Rs 36000. My service is upto 55 years and at present, I am 41 years old. Please advice me for purchasing the flat. At present, I am paying rent of Rs 10000 for this flat. Also suggest the name of bankers their website address and the other charges for registration of flat in my name.

Shailesh Jha

Banks offer home loans for resale property based on the loan borrower's income and the condition as well as the title of the property. Most banks do offer loans for properties up to 50 years old. Most private banks will be willing to do this based on the information provided by you.

If calculated at an interest rate of 9 per cent for 14 years, you can get a loan of Rs 12-17 lakh. You can get a loan of up to 85 per cent of the cost of property as a loan. Consult a local lawyer specialsing in property matters to get details on the registration charges as a comment on this issue is based on certain facts and data.


Image: Uttam Ghosh

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