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HT Estates - - NEWS - Harsh Roongta

I am plan­ning to take a home loan from a pri­vate bank. The loan amount is R10 lakh for a ten­ure of 10 years. Can I opt for a fixed rate of in­ter­est? I am plan­ning to close the loan within five years.

—AB This is never a one-time de­ci­sion. Any de­ci­sion you take needs to be re-eval­u­ated at least once ev­ery six months. A true ‘fixed’ in­ter­est rate is one which re­mains fixed dur­ing the en­tire ten­ure of the loan. Very few len­ders ac­tu­ally of­fer true fixed in­ter­est rates. Some of­fer a fixed home loan in­ter­est rate with re­set clause of two to 10 years. A fixed/dual rate of home loans is gen­er­ally given at a rate higher than the pre­vail­ing float­ing rate loan.

In to­day’s sce­nario (Fe­bru­ary 2013), it makes very lit­tle sense to go for fixed/dual rate schemes of any lender since in­ter­est rates are widely ex­pected to fall in the com­ing months.

You can opt for a longer ten­ure, float­ing-rate loan. This way you re­tain the flex­i­bil­ity of low EMIs and at the same time, you can pre-pay the loan with­out any penalty when­ever you have sur­plus funds as prepayment penalty is waived off on all home loans given un­der a float­ing rate whether by a bank or a hous­ing fi­nance com­pany. I took a hous­ing loan from a pri­vate bank. My cur­rent in­ter­est rate is 11.5% af­ter re­cent changes. I came to know that the same bank it­self is of­fer­ing new hous­ing loans at a lower rate than this. Also, there are other banks like State Bank of In­dia that are of­fer­ing new hous­ing loans at rates lower than this. Is it pos­si­ble for me to take a new home loan at a lower in­ter­est rate and pre­pay the old loan? If yes, what is the pro­ce­dure? How much will it cost me in terms of pro­cess­ing, penalty etc?

It is ad­vis­able to trans­fer

—AN your ex­ist­ing loan to any other bank in case they of­fer you a bet­ter deal in terms of in­ter­est rate. You will need to have a good track record of pay­ing your EMIs so as to be able to get an of­fer from an­other bank to take over your ex­ist­ing loan. No prepayment charges are payable on trans­fer of a float­ing rate home loan. You will need to con­sider the pro­cess­ing fees, which you may have to pay to the new lender, which will be in the range of 0-0.50% of the loan amount.

Cur­rently SBI is of­fer­ing a float­ing in­ter­est rate of 9.95% per an­num for a loan amount be­low R30 lakh with a pro­cess­ing fee be­tween R1000 and R3250 (ex­clud­ing ser­vice tax) plus other charges like ad­vo­cate’s fee for prop­erty search and the ti­tle in­ves­ti­ga­tion re­port, val­uer’s fee for val­u­a­tion re­port, stamp duty payable for loan agree­ment and mort­gage, prop­erty in­surance pre­mium, etc. This also in­volves the modal­i­ties of hand­ing over the prop­erty doc­u­ments from your ex­ist­ing bank to the new lender.

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