My take-home salary is ₹ 51,000 a month and I am planning to buy a house worth ₹ 28 lakh (Including amenities). I’ve been told that I need to arrange 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. Are there alternatives to cover the down payment and registration. I believe financial companies provide a maximum of 80% on the cost of property (Including registration and stamp duty). Is this true? The maximum I can arrange now is ₹ 4 lakh. Please advise.
—Santosh Kumar Yes, you are right. The lenders can grant loan up to 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 atleast 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 paying for the margin money. In case you find arranging the funds for down payment difficult, 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. They are ready to give a loan @11.5%, but I am not sure of other charges levied by them from time to time. They are asking me to take a money back policy of ₹ 25,000 premium/year payable for five years ie a total payout of ₹ 1.25 lakh and an insurance policy for seven years whose premium is approximately ₹ 5lakh. Does the government or RBI have any control over them for charging interest rate and other charges.
—Sharmila Singh I fail to understand why you want to pay a 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% to 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 better interest rate.
There are several benefits of taking an insurance poli- cies when you take a home loan.
First, a term insurance policy will pay off the loan amount in case of an unfortunate death of the policyholder, thus saving the 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 policyholder 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.
Most banks only provide insurance facility as an add-on (for which the bor- rower needs to pay an extra amount) and if the borrower has not chosen the facility, then there is no insurance cover. Buying 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 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 an insurance policy from another insurance company. Harsh Roongta is CEO, Apna Paisa. He can be reached at firstname.lastname@example.org