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I took a loan to purchase a plot of land. The loan was sanctioned at a fixed rate of 7.75% per annum and this interest is to be reviewed only after three years. This sanction letter is valid for six months.

I am yet to avail of the loan.

A month after the sanction, I got a call saying that my rate of interest has been revised upwards.

Can they revise the fixed rate of interest within the period mentioned?

Is it possible to get back my processing fee?

- Ram Rao

If you read the sanction letter carefully, you will notice it mentions the interest rate will be 'as applicable on the date of disbursement', not on the date of sanction. Disbursement is when the actual cheque payment is handed over by the home finance company.

The product that you are asking for is called a 'rate lock' where a guaranteed rate is applicable for a fixed period of time. This product is currently not available in India.

Even internationally, where it is available, the 'rate lock' typically operates for short periods like 15-30 days. The consumer has to pay an extra charge for getting a 'rate locked' product even for this short period.

However, I agree with you that the home finance company could have highlighted this fact while sanctioning the loan (instead of leaving it in fine print in the sanction letter). To that extent, your outrage is justifiable.

On the matter of the processing fee, typically most sanction letters clearly mention they are non-refundable; you are again at the mercy of the home finance officials for obtaining a refund.  

If you take up the matter with the senior officials of home finance company, they may agree to refund a portion of the processing fee paid by you.

• Can the interest on my fixed home loan increase?

A year ago, we purchased a plot by taking a loan from a private sector bank. Only part disbursement was availed so as to buy the plot. We opted for floating rate loan subject, to changes in the MIBOR*. 

The bank stated that the pre-EMI would be based on a fixed interest rate and only when the final and full disbursement is done, would they convert it to a floating interest rate EMI.

However, when the MIBOR rate decreases, we find that our pre-EMI increases! Which is ridiculous! What can I do?

- Raman Selvamurugan

It is indeed unfortunate that this is happening to you. Please approach the senior officials of the bank. If that fails to yield results, you may approach the banking ombudsman.

The Banking Ombudsman Scheme was formed by the Reserve Bank of India [Get Quote] to provide a forum where banking customers can air their complaints relating to banking services.

You will find information about it in on the Reserve Bank of India Web site.

• Can furniture cost be part of the home loan?

I took a bank loan of Rs 10 lakh (Rs 1 million) to purchase a constructed home.

The bank disbursed 75% of total amount sanctioned and am paying pre-EMIs. I was interested in post-EMIs but the bank refused. Can I do anything about it?

The rate of interest is fixed at 8% per annum. But the bank is charging 8.5% as pre-EMI.

I scratched the clause in the agreement on weighted average and wanted the rate of interest to be 8% throughout the 20 year tenure. It was discussed and agreed by the bank.

- B Subhas

I have not fully understood your query so let me attempt to reframe it.

You want to pay EMIs and not pre-EMIs as you think that will affect your tax benefits. As far as your loan up to Rs 10 lakh is concerned, it can clearly be said to be for a 'house property' (since it is ready to move into as per your e-mail).

So the interest paid on the loan to the extent of Rs 10 lakh is clearly deductible from the first day, irrespective of whether the interest is paid as part of the EMI or as part of the pre-EMI.

In what manner is the bank 'deducting' interest? I presume you must be paying it separately. If the agreement does not allow the bank to charge interest at 8.50%, it obviously cannot charge that.

Take up the matter with senior officials of the bank. If that does not yield results, you can take up the matter with the banking ombudsman (see answer above for details).

* The Mumbai Inter Bank Offer Rate is often used as a benchmark for interest rates. It is the rate charged by banks when lending to each other for very short-term purposes.

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