HT Estates - - HTESTATES - Harsh Roongta

I’ve taken home loan from a prom­i­nent bank (10.25%) for a prop­erty in Au­gust last year. I’ve opted for a bal­ance trans­fer with an­other bank in Jan­uary for lower in­ter­est rate (10.1%). When I asked the bank for a fore­clo­sure let­ter, they in­cluded loan orig­i­na­tion charges of around

₹ 35,000 in fi­nal pay­ment. When asked, they re­verted that since you are clos­ing the loan in less than a year of sanc­tion, th­ese charges are manda­tory as it’s on pro-rata ba­sis of in­ter­est mak­ing up to a year. Is there a way to can­cel/nul­lify those pre-penalty charges?

— Rakesh Ku­mar Ask­ing for any charges un­der any pre­text (whether as re­im­burse­ment of so called orig­i­na­tion charges or other­wise) is not al­lowed if you have taken a float­ing rate loan. It is quite pos­si­ble that your loan is from the hous­ing fi­nance arm of the bank and not the bank per se. If so, you should go to their web­site and file a griev­ance on the email marked therein for griev­ances. In your griev­ance, pro­vide full de­tails of your loan and make it clear that charg­ing of this amount is tan­ta­mount to charg­ing pre-pay­ment charges which is not al­lowed un­der NHB reg­u­la­tions. If the is­sue is not re­solved within 30 days to your sat­is­fac­tion, you should file a griev­ance with NHB at the ad­dress in­di­cated at the web­site. You are sure to get re­lief so go ahead and send out th­ese emails.

I have a fixed home loan rate of 11%, should I switch to float­ing rate? There is a con­ver­sion fee of ₹ 70,000. I have com­pleted 36 months so far.

—Swati Nath Cur­rent (Jan­uary 2015) com­pet­i­tive float­ing rate in the mar­ket for home loan amount of up to ₹ 75 lakh is around 10.15%-10.25% per an­num and is ex­pected to go down fur­ther. It would make sense to switch your loan to a lower float­ing rate of in­ter­est if the lender is of­fer­ing to do the same at a fee. The cost and ben­e­fit anal­y­sis of sav­ings in EMI and the switch­ing charges will help you in de­cid­ing whether it is worth switch­ing to the new in­ter­est rate slab.

If the lender is not will­ing to re­duce the rate of in­ter­est to 10.15%-10.25% per an­num, you can eval­u­ate the op­tion of switch­ing your loan to other lender.

There are two ma­jor charges, which need to be taken into con­sid­er­a­tion while trans­fer­ring the loan. The first is prepayment charges, which are presently payable on fixed rate loans and on dual rate loans only. And sec­ond one 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 cer­tain pe­riod or cap­ping it at a fixed sum ir­re­spec­tive of loan value. Th­ese two costs viza-viz sav­ing in the in­ter­est over the bal­ance loan ten­ure will help you de­cide if you want to switch your loan.

More­over, this in­volves 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 as a se­cu­rity and also agree­ing 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 EMI’s in time to be able to get an of­fer from an­other bank to take over your ex­ist­ing loan at bet­ter rate of re­turns.

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