HT Estates - - HTESTATES - Harsh Roongta

As of now, I have a (float­ing rate) home loan out­stand­ing worth ₹ 5.85 lakh (₹OI 10.5%). The out­stand­ing ten­ure is 145 months. Does it make sense to pay off the loan by tak­ing a per­sonal loan for five years?

—Sh­a­gun Bedi Please note that an un­se­cured per­sonal loan is very ex­pen­sive in com­par­i­son to a home loan. If you wish to pay off your home loan in the next five years, you can re­quest your lender to re­duce the ten­ure of your loan by in­creas­ing the EMI. Al­ter­na­tively, you can part pre­pay your loan (as­sum­ing it is float­ing rate) when­ever you have ex­tra funds. Pre­pay­ment penalty is waived off by banks and hous­ing fi­nance com­pa­nies on all home loans given un­der float­ing rate. Which is a bet­ter op­tion for hous­ing loan re­pay­ment? Re­duced EMI or a re­duced ten­ure?

—Sa­mant Gokhale If loan el­i­gi­bil­ity is a con­straint, go for the long­est pos­si­ble ten­ure. You should ide­ally opt for a longer ten­ure (float­ing rate) loan. This way you man­age the flex­i­bil­ity of low EMIs and at the same time you can pre­pay the loan with­out any penalty when­ever you have sur­plus funds. There is no ad­di­tional cost in­volved if you opt for a longer ten­ure. The in­ter­est which you will pay is de­pen­dent on the time for which you use the money.

If you are get­ting the loan amount you re­quire at the lower ten­ure and are also con­fi­dent about pay­ing off the higher EMI then you should opt for a shorter ten­ure. Are there any pre­pay­ment charges ap­pli­ca­ble in case a loan is re­paid by another bank ?

—Har­ish Goel As far as the loan taken from hous­ing fi­nance com­pa­nies is con­cerned, NHB has is­sued in­struc­tions not to levy any pre­pay­ment penalty if the loan is un­der float­ing rate, what­ever be the source of re­pay­ment.

For HDFC if the loan is taken un­der fixed rate, pre­pay­ment penalty can­not be levied if the loan is re­paid from the bor­rower’s own sources (which means any source other than takeover by another hous­ing fi­nance company/bank).

As far as banks are con­cerned RBI has in­structed them not to levy any pre­pay­ment penalty on loans un­der float­ing rate. There are no such sim­i­lar in­struc­tions as hous­ing fi­nance com­pa­nies in re­spect of re­pay­ment of home loans un­der fixed rates. Could you please com­ment on tax im­pli­ca­tion on 100% loan dis­burse­ment for an un­der con­struc­tion prop­erty which would take 2-3 years for com­ple­tion.

—Akash De­sai What this means is that for in­ter­est paid on a loan taken for an un­der con­struc­tion prop­erty, you can­not get in­come tax ben­e­fits in re­spect of in­ter­est paid dur­ing the year in which the prop­erty is un­der con­struc­tion. How­ever, you can claim all the in­ter­est payable for the con­struc­tion pe­riod ex­clud­ing the year in which it is com­pleted, in five equal in­stall­ments be­gin­ning from the year in which you take pos­ses­sion of the prop­erty. This way the over­all claim of in­ter­est will be within the limit of R1,50,000 in case the prop­erty is self-oc­cu­pied. How­ever, the ben­e­fits un­der sec­tion 80C for prin­ci­pal re­pay­ment is lost for the con­struc­tion pe­riod and can­not be claimed later. If a mi­nor and an adult are men­tioned in a will, can they get a loan?

—Ran­jit Kapoor No loan is given on a prop­erty in which a mi­nor has own­er­ship in­tent as such a prop­erty can­not be mort­gaged.

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