So your bank has suddenly increased the floating rate on your home loan, and you don't know what to do? You want to transfer your home loan account to another bank, but don't know how to go about it?

If you are a first-time home loan borrower, should you go for fixed rate or floating rate home loans? What is an excellent rate of interest in such a case?

Part II -- Is the time right for your first home loan? 

Rita asked, Hello Sir. My question is, I am a working woman and earning Rs 16,000/ month. Me and my husband are planning to buy a house. Can you know how much loan can I avail on my income. One more thing as we have seen a builder's flat in South Delhi but the owner of the home says that the bank doesn't provide loans for builders' flats. Can you please let us know how and how much we can apply for a loan and for how much period? Thanks.

Harsh Roongta answers,  As a general rule of thumb, you can get about 3 to 3.5 times your annual gross salary as a 20 year home loan. Of course, this assumes that you are less than 38-40 years old currently (and hence will not be older than the retirement age when the loan is still being paid off), and that you have no other outstanding loans.

As far as the specific property is concerned, we would strongly advise you to stay away from a property that the banks are not funding, as it clearly indicates legal issues with the property's title.

sathish asked, Hi, will home loan interest rates come down in near future? On investment basis, could you tell which is better whether house or mutual fund? Thanks.

Harsh Roongta answers, Interest rates moves in cycles. So surely over a long period they will both go down as well as up. The problem is you cannot predict when the trend will change, but you can definitely predict that the trend will change. As far as investment is concerned, a well-balanced portfolio will definitely need a mutual fund, and a large one should also have a real estate component.

Exactly what is suitable to you depends on a number of factors such as your age, income, savings, future requirements and risk-taking abilities.

asp_16 asked, Hi, this is Ashish. Could you clarify that holders of moneysaver account in additions to home loan would not be entitled to get IT certificate/statement?

Harsh Roongta answers, If I have understood your query correctly, you are referring to a current account that is linked to your regular home loan account (these are called off set loans). Click on this link for a greater explanation regarding off set loans -- http://www.apnaloan.com/primers/home-loan-india/homesavers.html.

In such a case, there is no question of any interest being charged or payable on the current account. The balance in that account just reduces the interest portion of your EMI in the home loan account. Hence there is no question of a certificate for the current account.

Balaji asked, Sir, I am from Chennai. Here the real estate is going good. For example, if you want to buy a flat or plot in any area it comes to around Rs 40-50 lakhs. Do you advise people to take loan of this amount with floating or fixed? Or are interest rates going high because of the real estate boom?

Harsh Roongta answers, www.apnaloan.com has been recommending that its consumers opt for floating rate loans only. The detailed reasons for this recommendation (and the disclaimers) are contained in this link: http://www.apnaloan.com/articles/home-loan-india/tostayputortofloathomeloanarticle.html.

babu1 asked, Harsh, can I take a top-up loan on my existing home loan & buy a plot from it?

Harsh Roongta answers, Yes you can, provided your income is enough to justify the top-up loan. You will not, however, get any tax benefits on the top-up loan, as it is not used to buy a housing property.

dev asked, Which bank is providing good service & cheap rate of interests in Delhi?

Harsh Roongta answers, Let me repeat what I have said several times in the past -- there is no such thing as a 'best bank' or a 'best rate'. Because if it was so, then all other banks would go out of business. Different banks have different strengths, and depending on who you are and what your need is, the banks that will give you a good deal will be different. Your best bet is to approach different banks and obtain competitive quotes.

baweza asked, Hi Harsh, I have taken a home loan (floating) of around Rs 17 lakhs, from ICICI [Get Quote] around 6 months back. They had offered me 9.25%, which was 0.50% lower than the then market price, because of the company I'm working for. The rates have increased since then. But now I'm being charged 11.75% while the bank is charging 11.50% in the market. Ideally my rate should now be 11.00%. I have interacted with the bank a lot, but they have not been able to justify their replies, and nor are they adjusting my rate to 11.00%.

Harsh Roongta answers, If the bank is giving you a raw deal versus what it gives to its new consumers, you should opt for transferring your loan. Having said that, a rate of 11.75 percent in the current scenario is not unduly high (if you work for a very high-profile company, you may possibly get 11.50 percent, or if you are lucky about 11.25 percent), plus if you switch banks, you will need to pay prepayment charges. 

sri asked, Sir, I have purchased a land in 2004, now when I construct, BDA acquired the land. I have taken loan from ICICI. Finally I have closed the loan. Question is I have Insurance on that property is it possible to claim? Please help.

Harsh Roongta answers, All non-life insurance products (and property insurance is a non-life product) are cancellable at the option of the insurer, with refund on pro-rata fees. Since you have already disposed of the property (or it has been taken over), you can try and request the insurer to cancel the policy and refund you the pro-rata insurance premium.

ADITYA asked, I had taken a home loan on 9.25% floating but now it has increased to 10.25% as told by my bank. Is this true or are they cheating with us? If it is true then why this is increasing like this and let us know is there any chance of reducing the rate of interest in near future?

Harsh Roongta answers, In the current scenario, 10.25 percent is an excellent rate, so please stick with the loan.

 vikas9211 asked, Hi Harsh, I have taken a home loan of Rs 21 lakhs for 20 years last year at 8% from ICICI. Now ICICI is charging 11.5%. They have not only increased the EMI but also the tenure and IDBI and UTI are charging 11%.

At that time, my friend had taken loan from IDBI and today IDBI is charging him 10.75%. Is it advisable to change my bank? And if yes, what do we need to keep in mind? Your advise would be very much appreciated.

Harsh Roongta answers, In a home loan with at least a 5-year tenure left, it makes sense to shift to a new lender only if he is providing a benefit of at least 0.25 percent. If there is a prepayment charge payable to your existing lender, then as a rule of thumb you should get a benefit of at least 0.50 percent to shift to a new lender.

Part II -- Is the time right for your first home loan?