Photographs: Rediff Archives
In an online chat with readers on August 3, home loan expert Harsh Roongta provided answers to how home loan borrowers should cope with their rising equated monthly installments.
Here's the unedited transcript:
sand asked, I have taken Loan of Rs.25 lac last year and with interest rate increased to 11% I have pre paid 50% without penalty , my loan tenure reduced to 3 years from 10 years ,pl note I was sitting on cash balance , is this right decision or should I have placed the cash deposit in FD
Harsh Roongta answers, at 2011-08-03 16:09:22No bank fixed deposit could have given you a post tax interest rate that would be better than the post tax cost on the home loan. So you absolutely did the right thing if the alternative investment you were comfortable with was only a fixed deposit. The answer could have been different if you had been willing to take more risk with your investment and invest for the long term in equity related intruments. The other thing that people like you must keep in mind is that you should first pay off the costlier debt (if any) such as credit card,personal loan, car loan etc. before paying off the Home loan. Also please make sure that you have some amount of money available to you as contingency fund (around 3-4 moths of expenses).
bab asked, my salary is 50000rs/month and i want loan of amount 2000000 so how much extra amount i have to pay within 15 years
Harsh Roongta answers, You will be eligible for a 15 year loan of Rs. 20 lakhs based on your net take home salary of Rs. 50,000 per month assuming you have no other loans and have a good credit repayment history on any past loans and credit cards. The EMI for 15 year loan of rs. 20 lakhs for 15 years assuming interest rate of 10.75% will be around 22,400 per month. The total payment for 180 months will be Rs. 40 lakhs 35 thousand assuming interest rates stay at 10.75%. Actual interest may go up or down based on interest rate movements in the market.
piyush asked, I have taken a home loan last year and now my father has sold a property,so can i take money from him and close my home loan.will they charge me prepayment penalty.
Harsh Roongta answers, It will depend on your contract. If your home loan agreement provides that pre-payment made from own sources (and you can ask your father to gift you the money rather than take it as a loan from him - you can repay by gifting it back to him when you have the money) can be made without pre-payment charges than there will be no pre-payment charges else i am afraid there will be pre-payment charges as per your specific home loan agreement terms.
sdfsdf asked, Hello Sir, I am planning for a home loan .. My current CTC is 8 lakhs per annum and my dream home costs 32 L.. wats the right amt to take loan and wats the duration I should go for.. I dont have any debts till now..
Harsh Roongta answers, assuming you are less than 40 years old you can easily get the Rs. 32 lakhs loan sanctioned based on your income assuming interest rate of 10.75%. Off course the loan amount cannot exceed 80% of the property value. You should go in for a 20 year tenure but choose a lender that allows partial pre-payments without any charge (Axis,ICICI, SBI, etc. ) so that you get the flexibility of lower EMIs and at the same time you can pre-pay the loan without any chrage if you have a surplus left over.
Tips to cope with rising home loan EMIs
KRISHNA asked, My net in hand salary is 38000 p.m
Harsh Roongta answers, assuming you are less than 40 years old you will be able to get a 20 year home loan of around 19 lakhs assuming you have no othwer loans to pay.
ketan asked, Is it generally better to prepay your loan as soon as possible if you have the funds and there are no prepayment charges or penalty
Harsh Roongta answers, In most cases yes. In fact would say that it makes sense to prepay even with pre-payment charges. The only exception is can be if you do not have enough contingency funds left over. On a case to case basis if you have long term goals then it may make sense to invest the money in equity related intruments on a systamatic investment plan but do so only after taking professional advise. Otherwise just repay the loan.
vinay asked, How to calculate the percentage value to buy the "spread" to reduce the interest rate and by how much amount the ineterest rate will reduce?
Harsh Roongta answers, There is a simple answer to find this out. Go to another lender and ask him to fund the entire loan amount as also the prepayment charges except to the extent of the so called "spread buy" premium that the existing lender is charging you. If the new lenders EMI for the same tenure after that comes cheaper than that is a better deal or else just take the deal that your existing lender is offering.
kvk asked, Hi, I plan to take home loan to purchase a plot now and then additional home loan to construct house after 2 to 3 years. Pls let me know if this is possible.
Harsh Roongta answers, Right now you will only get a plot loan. Not every lender gives plot loans. even those who do restrict plot loans to plots bought from statutory authorities or developers pre-approved by the concerned lender. The loans are also more edxpensive (than a home loan) and also available for lower tenures of around 5-7 years only.
Tips to cope with rising home loan EMIs
awsed asked, hi.. when we say pre-payment of loan, does it prepay the interest of the loan OR the actual principal amt?
Harsh Roongta answers, Interest is a time related payment. You can only pre-pay principal portion. there is no such thing as pre-payment of interest.
Lankesh asked, Iam having a net take home salary of 94K. Currently my EMI's are for Carloan-8.5K and personal loan emi of Rs 5.5K. Can you please let me know how much home loan i can get, is there any alternative to increase the home loan amount?
Harsh Roongta answers, assuming you are less than 40 years old the home loan eligibility will be around Rs. 33-35 lakhs (subject to a maximum of 80% of the property cost) provided you have a good track record on repayment of the car loan and personal loan. You can get better eligibility by pre-paying the car loan or personal loan , if possible or including the income of your earning spouse or earning parents.
Jatinder asked, Sir, I have availed Home loan of Rs. 11 lac in March 2011 with EMI of Rs. 13800/- for a tenure of appox 11 years. In view of escalating interest, I started my instalment as Rs. 15000 P.M. Now as the interest rates are reaching higher and higher, I am planning to deposit approx Rs. 2500/- on every 1st Apr so that my tenure remain more or less. Is it viable option to over come inrcreasing interest. Please guide.
Harsh Roongta answers, Not a bad idea. But if you are paying interest rate above 11% first consider switching your loan to a lender who will provide you an interest rate that will be around 10.75% (he will also provide the pre-payment charge as a loan) and for the same EMI you will get a lower tenure than what you are getting today from your existing lender. If so the value of your extra payments is more valuable.
Renny asked, Sir, i am having a home loan of 11L from UCO bank. my EMI per month of 11000/-. now i got a offer from Citi Bank for a loan of 2L with EMI of 5668/- per month for 48 Months. rate of interest of almost Flat 9%. my net salary is 30k per month. now i can afford paying both EMIs. Should i go ahead with this loan? if, I am taking this loan, should I pay off my existing home loan or should i invest? in home loan i am getting income tax benefits. please suggest
Harsh Roongta answers, Flat rates are meaning less rates quoted only because the lender is not able to sell the higher interest rate to customer. In your case the interest rate will work out to between 16-17%. does not make any sense to take that loan either to repay the home or to invest in any other option.
Tips to cope with rising home loan EMIs
pravin asked, I have sold my property recently, The loan for the same was taken from HDFC, 3 years back, i regularly made pre-payments and there was no charge levied on that by HDFC, out of 15 L loan only 4.5 L was balance, the person whom i sold the property also opted loan from HDFC , and HDFC done the internal adjustment with my balance amonuth and then issued the cheque for balance amount to me, But they charged 2% pre-payment charges and they never communicated it to me. Can i ask them to revert it?
Harsh Roongta answers, You will need to check your home loan agreement for the necessary provisions. The lender has every right to charge you the pre-payment charges if the loan agreement provides for it.
rsrirams asked, bank lost my House Document. What to do. Should i continue to pay my EMI
Harsh Roongta answers, The bank will have to make good the loss caused to you. The banking ombudsman recently decided a similiar case. Whatever happens please do not stop the payment of EMI as it will affect your credit history. Take up the complaint in writing and if the bank does not respond properly you can complain to the banking ombudsman.
gramesh asked, I am 56 yrs old I have taken loan from HDFC in Jan 2010 of 30L for 10 yrs with premium of 36796/-PM. Fixed Interest of 8.25% for two yrs. What will be change in monthly premium ?
Harsh Roongta answers, change will happen only after january 2012
Jag asked, Hi Mr.Harsh, Is it better to take a housing loan with a term of 10 years or to go for 20 years and invest EMI difference in equities?
Harsh Roongta answers, These and similiar questions. Please take professional advise from a certified financial planner (sure they will charge you a fee but give you a customised answer). It is impossible to answer this and similiar questions without looking at your overall financial position and your goals and other invetsments and liabilities
Tips to cope with rising home loan EMIs
sachin m asked, I have loan from HDFC for my home wherein I am leaving in this house in Mumbai. I want to build another house at Nasik for which land cost is 40 lacs. My monthly take home salary is 66K and all EMI total is 31K. I am 34yrs of age. What is my eligibility??
Harsh Roongta answers, Very very small (around 5 -7 lakhs fresh loan). If you are completely convinced that you just have to invest in another property than try and get the EMI reduced (either through interest rate reduction - see some earlier answers- or the tenure increased - or both) to get better eligibility for loan for the new property.
vinay asked, while doing the part payment of the loan, is ti necessary to show the source of the money to bank?
Harsh Roongta answers, If pre-payment charges are waived if the source of payment is your own then yes the bank has every right to ask for the source of funds that are used for pre-payment.
vinay asked, while doing the part payment of the loan, is ti necessary to show the source of the money to bank?
Harsh Roongta answers, Just to add to the earlier answer if bank also has prevention of money laundering responsibilities and hence can ask for these details in any case. But you have a right to find out why the bank is asking for tehse details
sanjeev asked, which is the best bank to apply for home loan. I m working in Infosys and have been offered 9.75 floating from ICICI bank. Pls advice.
Harsh Roongta answers, If the offer is recent and continues to remain valid even now(effectively it is 0.25% above their current base rate of 9.50%) it is an excellent rate. Grab it before it goes away.
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