HT Estates - - HTESTATES - Harsh Roongta

I have taken a hous­ing loan from a pri­vate bank. My cur­rent in­ter­est rate is 11.5%. I came to know that the same bank is of­fer­ing new hous­ing loans at a lesser rate of in­ter­est. Banks like SBI are also of­fer­ing new hous­ing loans at lower rates. Is it pos­si­ble for me to take a new home loan at a lesser 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?

—Shah Nawaz It is ad­vis­able to trans­fer your ex­ist­ing loan to any other bank in case they of­fer you a bet­ter deal in terms of in­ter­est rate. There are two ma­jor charges which need to be taken into con­sid­er­a­tion while trans­fer­ring the loan. The first is pre­pay­ment charges, which are at present payable on fixed rate loans and on dual rate loans. And sec­ond is pro­cess­ing fees, which you will have to pay to the bank where you will trans­fer your loan. This will be in the range of 0-0.5% of the loan amount. Some of the lenders have waiver of­fers on pro­cess­ing fee pe­ri­od­i­cally for a cer­tain pe­riod or cap­ping it at a fixed sum ir­re­spec­tive of loan value. This decision also en­tails the modal­i­ties of hand­ing over the prop­erty doc­u­ments from your ex­ist­ing bank to the new bank. The ex­ist­ing lender typ­i­cally pro­vides a let­ter ad­dressed to the new lender pro­vid­ing a list of orig­i­nal doc­u­ments avail­able with them (in terms of se­cu­rity). In the same let­ter the ex­ist­ing lender also agrees to re­lease the doc­u­ments within a cer­tain num­ber of days after full pay­ment is re­ceived. The let­ter will also con­tain an amount on pay­ment of which the loan will be treated as fully paid off. You will need a track record of pay­ment of your EMIs in time to be able to get an of­fer from another bank to take over your ex­ist­ing loan at bet­ter rate of re­turns.Check with your ex­ist­ing lender if they are will­ing to drop the rate for you on pay­ment of a fee, which will save you a lot of has­sles. . What is a com­pos­ite loan and how is it cal­cu­lated. How does the bank dis­burse this loan? What doc­u­ments are re­quired to avail a com­pos­ite loan

—Shashi Goenka A com­pos­ite loan is a loan taken for self-con­struc­tion of a house. The loan is given to fi­nance cost of land as well as cost of con­struc­tion of prop­erty on the plot of land. The banks will re­quire doc­u­ments in re­spect of proof of in­come, iden­tity, res­i­dence for the home loans and doc­u­ments re­lat­ing to ti­tle of the prop­erty be­ing pur­chased. You will have to sub­mit an es­ti­mate of the to­tal cost of con­struc­tion, cer­ti­fied by an ar­chi­tect/civil en­gi­neer. The cost of the plot to you or the cur­rent mar­ket value, which­ever is lower, will be taken into ac­count to work out the to­tal cost of the project pro­vided you com­mence the con­struc­tion within a rea- son­able time after pur­chase of the plot.

The bank will de­ter­mine the home loan amount based on the to­tal cost com­prised of con­struc­tion cost and cost of the plot. The loan will be re­leased in parts, based on the progress of the con­struc­tion, and after you have brought in your full con­tri­bu­tion. Please keep in mind that some banks are not com­fort­able fund­ing self-con­structed prop­er­ties and hence, you will need to take that this into ac­count while fi­nal­is­ing your lender. Harsh Roongta is CEO, Apna Paisa. He can be reached at ceo@ap­na­

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