I have availed a housing loan (dual rate with a monthly rest) for ` 45 lakh for a period of 15 years. The interest rate history so far has been as follows:
April 2010 – March 2012 – 8.75% On expiry of two years, (teaser loan) the interest rate was hiked to floating rates as follows:
April 2012 – Sep 2013 – 11.65% Oct 2013 – Dec 2013 – 11.90 Jan 2014 – Present – 12% In January 2013, I had an option to switch over from a retail prime lending rate (RPLR) of 4.75% to 6% on payment of ` 11,553. But I did not exercise it. Now the term for the loan, which was initially 180 installments, has increased to 226 installments (balance term). On payment of the one-time fee of
` 11,397, the balance term will be reduced to 170 installments. How do I rectify the situation and prevent such heavy losses?
- Anand Malhotra If your loan is availed from the bank, you should ask your bank to get your loan migrated from the PLR system to the base rate system, at no additional cost. Once that is done, you will be automatically shifted to the base rate regime, where the rate
of interest will be better linked with the current interest rates.
Yes, you have been paying an exorbitantly higher rate of interest (when the average rate of interest was around 10.50%– 10.75%) for the last couple of years after the end of your teaser rate period. The current ( January 2014) competitive rate in the market for a loan amount of ` 40 lakh to ` 45 lakh is around 10.25%. So, you should immediately exercise the option of switching your loan to a lower rate of interest, ie, 10.25% if your current lender is offering you to do the same at a small fee of ` 11,397.
You will quickly gain back this amount in a few months and then enjoy the benefit of lower rates for the balance ten-
ure of the loan.
If your current lender is not willing to reduce the rate of interest to 10.25% pa, you can evaluate the option of switching your loan to another lender.
Since t he RBI and NHB h ave a l r e a dy i n s t r u c t e d banks and housing finance companies not to charge the foreclosure fee in respect of floating loans, you will not have to pay any penalty for shifting such loans. In fact, most lenders will agree to take over your loan without any significant processing fees.
You will need a good track record of payment of EMIs to be able to get an offer from another lender to take over your existing loan.
My wife and I are salaried employ-
ees. We recently purchased a house in Mumbai. My wife is the main applicant and I am a co-applicant. The EMI is paid from my wife’s account (single holding account), and she will be claiming income tax deduction on account of interest and principal. Can I also claim deduction on account of interest and principal (ratio 50:50)? I already own a flat in my name and I am claiming deduction on interest and principal payment. If I rent out this flat, can I show the rental income as my income from housing?
- Sudhir Misra In order to claim tax benefits on home loans, you should either be an owner or a joint owner of the property. While owning the property, you should also be servicing the loan so as to entitle you to the
tax benefits. Since your wife is servicing the loan, you cannot claim the tax benefits in respect of this home loan. The tax benefits on home loan can be claimed only in your share of the home loan and not in the ratio of your ownership of the home.
In case you want to claim the tax benefits in the ratio of 50%, you can pay 50% of the EMI to your wife and also execute a MoU mentioning all the facts about the property ownership and servicing of the loan. In case you decide to let out the property, you will be able to claim full interest against your rental income.
Harsh Roongta is CEO, Apna Paisa. He can be reached at email@example.com