Prepaying your home loan? Read this

Have a query regarding your home loan? Maybe we can help.

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My age is 68 years. I want to apply for a home loan of Rs 2,25,000 to purchase a flat in Kolkata. I am a retired person, with no pension. My monthly income is Rs 7,000 per month. Can I receive any home loan under senior citizen scheme from any bank? What will be my monthly EMI?

Arun Kr Roy

For facts of your case, a loan to purchase a house is unlikely to be available at any bank.

Basically I have negligible knowledge about home loans; my salary is close to Rs 50,000 month. I have my car loan running at an EMI of Rs 5,700 month. I have spotted an apartment in Ahmedabad of 144 yards at Rs 13,000 per yard equivalent to Rs 18,72,000 and have to pay additionally the stamp duty, registration charges as well and 12 months maintenance charges. I have approached banks and they have said that they will pay for 85 per cent as loan and the rest I have to pay as down payment. The down payment charge is huge nearly Rs 3.5 lakh. Is there anyway I can get the full amount as home loan. Can you please help me in this respect?

Dibyendu Basu

1. No, most banks will offer only up to 85 per cent of the cost of property as a home loan. Some banks may increase it to 90 per cent on an exceptional basis. This will reduce the amount of down payment required by you. There are various alternatives of funding home loan down payment. You seem to be buying a ready to move in flat. If you can get the seller to do any of the renovation work or furniture that you would need to do and get him to include that in the price of the apartment, that may reduce your requirement of funds for moving in thus freeing up some money for downpayent. 
 2.You could also take a loan from your Employees Provident Fund account if you have had an employee provident fund account for more than 5 years.
3. You can obtain a loan against the surrender value of your life insurance policy from the life insurance company or from a bank (http://www.apnaloan.com/primers/home-loan-india/documentsforloan.html).
4. You can provide adequate additional security by pledging liquid financial assets such as shares, securities, fixed deposits, insurance policies with existing high surrender values, etc. in lieu of the 10-15 per cent margin money expected from you.
5. You can take a personal loan along with your home loan. This will have an impact on your home loan eligibility. Also, interest rates on a personal loan are comparatively higher and tenure is lower. This is the least preferred option.

I was 29 years old when I bought a property of 1,368 sq ft. in December 2006. I took a loan of Rs 27 lakh and paid Rs 5 lakh upfront i.e. total Rs 32 lakh.  I had EMI of Rs 27,805 going on it since then. Present value of property is Rs 45 lakh. I will get the possession in June 2009. I will have to pay another Rs 3 lakh for registration and other charges.

I got married in 2007 and my wife's and my income at present is Rs 20 lakh per annum. We had no liability or kids as of now but though we plan to have one in one year. Since we had good disposable income and we wanted larger square feet area house and while recession had not hit that time we purchased another house for Rs 48 lakh where in we took loan of Rs 43 lakh in February 2008. The price of this property was Rs 2,400 per sq ft and immediately in May 2009 it reached Rs 3.000 per sq ft. But once the recession hit the price is now Rs 2650 per sq ft for it. The possession for this would be in 2010 December. At this point of recession we are confused. My questions are:
 
1) Should we hold on to both the houses, or we should exit from one?
2) My home loan with IDBI is at 10.75 per cent (Rs 28 lakh) 11 per cent (HDFC Rs 43 lakh). Is there any bank who can do balance transfer at a better rate. What rate would be better rate to transfer considering prepayment charges?
 
My present total EMI for both houses is Rs 75,000. We are left with Rs 60,000. Our monthly expense is Rs 50,000 so saving is just Rs 10,000 to Rs 15,000.

Abhishek
 
It is not possible to provide any advice of the nature as this would require a detailed financial goals and risk analysis. You should consult a personal financial planner.
 
The current market rates for loans are around 9.25-9.75 per cent. 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 compare home loan quotes (http://www.apnaloan.com/home-loan-india/compare.html) to compare offers.

I have taken a home loan for a self-occupied property and I am paying EMI for it. Since the property is still under construction I stay in a rented apartment. Now my question is am I eligible to take the income tax benefit for both HRA and housing loan (interest + principal) when I will be filing the tax returns this year. The loan is in my name.

Venkat
 
Contrary to popular opinion, there is no restriction under the I-Tax Act with respect to claims for both. The exemption of HRA is covered under Section 10 (13A). In fact, Section 23(4) clearly recognizes the fact that more than one house property can be occupied and used by the assessee at the same time for the purposes of his own residence. You can claim tax deduction benefit on home loan for an under-construction property only from the financial year in which the construction is completed. For a more detailed answer, click on the link: http://www.apnaloan.com/home-loan-india/taximplicationonpreemi.html

I had received a Home Loan from Citi Financial Home Loan Services last Year in March 2008. At that time the interest rate was 14.5 per cent later increased to 15.5 per cent. The pre-closure time is 2 years. What is the procedure to change the Bank in this scenario? Is it possible to sue the company for higher interest rates even after the RBI announces to reduce the home loan?  The other important thing is I had change the organisation whereas I am receiving the salary by cash. Kindly advice.
 
Dilip
 
You can opt for loan transfer provided you have documented proof of income. If your salary is in cash, you may have problem getting a loan sanctioned from a new lender.  There are several steps in the home loan transfer process. The basic premise of taking such a step is to be benefited by way of lower interest rates on loans. Inform the current or the existing lender or the bank about your intent to transfer the loan. Submitting a letter to them can do this. The intent is to be communicated in writing to them. You will get a letter from your existing lender that will have mention of the details regarding the 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 you to arrange the payment. From hereon, the process largely resembles to that of taking a home loan.
 
The interest rate on home loan are usually linked to a bank's benchmark for home loans. It is not directly linked to any rates announced by the Reserve Bank of India. If you are unable to shift to a new lender due to non-availability of proof of income, your best bet is to try and get the existing lender to reduce the rates by threatening to switch rather than actually shifting.

I am having 20 years home loan from SBI. I got loan in 2004 at rate of 8.25-fixed rate and now it increased to 8.75. Monthly EMI is Rs 10,524. Now what should I do? Do I need to repay loan? I am also planning to buy second home on wife's name. So for second home I may not get tax benefits. New loan will have new interest rate. Now past one year and next 1/2 year I will be in USA [NRI]. So in India I am not getting tax benefits too. Need guidance to make decision of loan prepayment.
 
Yashvant
 
You are not required to pay off the first loan before getting the second loan. But, if you have surplus funds and you can also pre-pay a part of the home loan as it will reduce the monthly EMI burden. Quite a few banks do not charge pre-payment penalty if the loan is prepaid partially. The definition of what constitutes partial pre-payment varies from bank to bank. This will ensure savings in pre-payment penalty and at the same time help you to save on high interest costs on a substantial portion of the loan. However, before you decide to pre-pay a home loan, it is in your interest to first clear off all unsecured dues like credit card dues and personal loans. Also, make sure that you have some money set aside to meet emergency expenses. Tax calculation can change the view on pre-payment. You can also check the Should I PrePay my loan calculator on the link: