I am a government employee drawing a net salary R20,000 per month. What’s the maximum loan amount I am eligible for and what are the tax benefits I’ll get?
—Rajan Malhotra Assuming you are not servicing any existing loan currently and have had a good repayment track record in the past (if any), you will be eligible for about R9 lakh at an interest rate of 10% per annum for a loan tenure of 20 years. This is assuming you are younger than 40 years and that the agreement value of the property is at least R10 lakh.
You can get tax deduction for repayment of the principal amount of loan under section 80C of up to a maximum limit of R1 lakh. Moreover, you can also claim deduction for interest on loan to the extent of R1.5 lakh if the property is selfoccupied under Section 24. Please note that the full interest can be claimed if the property is let out. However, the overall deduction under Section 80C can only be claimed up to R1 lakh in aggregate with other items of investments irrespective of the number of home loans. If I become a guarantor for a friend’s home loan ( R16 lakh- R18 lakh), would it affect my home loan eligibility as I, too, plan to apply for a home loan ( R20 lakh) in the near future?
—R Kamal Becoming a loan guarantor is for all practical purposes borrowing the money yourself and thus will affect your loan eligibility directly. So your eligibility will be calcu- lated after taking this loan (the guaranteed one) as already outstanding.
Besides, if your friend defaults on payment of his/her EMI repeatedly, the lender can always initiate proceedings to recover the outstanding loan amount from you and your credit report will also be affected adversely for what your friend did. How should I choose the tenure of a floating rate home loan?
—Mita Rajput If loan eligibility is a constraint, go for the longest possible tenure. Some banks allow 25 to 30 years though most banks allow only up to 20 years. The maximum tenure is also restricted by your age at the end of the tenure so as to ensure that your loan repayment ends on or before your retirement age.
Even if loan eligibility is not a constraint, you should opt for as long a tenure as possible. This way you retain the flexibility of low EMIs and at the same time, you can pre-pay the loan whenever you have surplus funds. Since there are no prepayment payments currently on floating interest loans, the part payment will not have any cost implications. I took a home loan of R6 lakh in 2005. Is it possible to transfer the loan to my brother? My brother is a salaried employee and is eligible for a home loan.
—Ravneesh Chaurasia A home loan cannot be transferred. You will have to close the loan to be able to sell the property to your brother. He can get a loan based on his income.
There is no such thing as a transfer of a loan. The previous owner (you) will have to foreclose the loan and your brother will be given a fresh loan. If the bank is the same, the overall process is likely to be easier than otherwise.