My monthly take-home salary is
₹ 51,000. I plan to buy a home worth ₹ 28 lakh. I understand that I need to arrange for 20% of the property value as down payment, which is ₹ 5.6 lakh, and another ₹ 2 lakh for registration. I do not have this money. Do we have any alternatives to cover the down payment and registration? Also, is it true that HFCs provide a maximum of 80% on the cost of property (including registration and stamp duty)? The maximum I can arrange now is ₹ 4 lakh. How do I proceed?
—Shridhar V Lenders can grant loan up to a maximum limit of 80% of the agreement value of the property as a home loan. This means that your down payment will have to be at least 20% of the agreement value of the property plus 100% of other costs such as stamp duty, registration charges, etc.
Practically, you can use the balance from your savings bank account or proceeds of the investments sold for the purpose of pay- ing for the margin money. Alternatively, you can look for friendly loans from your family members / friends. If that is not possible, then you can look for secured loans against tangible movable security such as jewellery, NSC, bonds, shares, units of mutual funds, or life insurance policy with high surrender value.
I want to take a home loan from an NBFC (non-banking financial company). They are ready to give me a loan at an interest of 11.5%, but I am not sure of other charges levied by them. The NBFC is asking me to take a money-back policy of
₹ 25,000 premium/year payable for five years, ie, total payout of ₹ 1.25 lakh and an insurance policy for seven years for a total premium of ₹ 50,000 approximately. Is there any control by government authorities or RBI on them for changing their interest rate or other charges?
—Ravi Khullar I fail to understand why you want to pay higher interest rate when the current (July 2014) competitive rate in the market for a home loan amount of up to ₹ 75 lakh (assuming it is below
₹ 75 lakh) is around 10.15% - 10.25%. If your credit history is good, you should evaluate the option of taking a loan from a lender who can provide you a more competitive interest rate.
There are several benefits of taking appropriate insurance policies when you take a home loan.
Firstly, a term insurance policy will pay off the loan amount in case of the unfortunate death of the policyholder, thus saving dependents from the burden of paying off the home loan.
A critical illness plan and accidental disability plan for the loan amount value will also ensure that the loan amount is paid off, should the policy holder be disabled due to a severe illness such as organ failure, etc or due to an accident. Thus buying these kind of policies make sense and you should make sure you buy them all.
Most banks only provide insurance facility as an addon (for which the borrower needs to pay extra) and if the borrower has not chosen the facility, then there is no insurance cover. Buying of such insurance from the insurance company, which has a tie-up with the lender is not compulsory. If the bank insists on an insurance policy, you can always buy insurance from any other insurance company and assign the same to the lender. If your lender does not agree, there are plenty of other lenders in the market who will agree to accept insurance policy from another insurance company.
Harsh Roongta is CEO, Apna Paisa. He can be reached at email@example.com