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HT Estates - - HTESTATES - Harsh Roongta

I took a home loan at a float­ing rate of in­ter­est. But as is the com­mon prac­tice, banks in­crease the rate of in­ter­est im­me­di­ately af­ter the rate is in­creased but when rates go down they ask for con­ver­sion fees. Should we pay this fee? What are RBI’s guide­lines in this re­gard?

— Subroto Pan­dit First, changes in RBI pol­icy rates do not au­to­mat­i­cally mean changes in the lender’s ref­er­ence rates for lend­ing. But it is a com­mon prac­tice among lenders to in­crease their ref­er­ence rates more quickly by cit­ing RBI in­crease in pol­icy rates as an ex­cuse. It is a known fact that lenders are hes­i­tant to re­duce the base rate/PLR when in­ter­est rates fall and hence con­sumers rarely get the ben­e­fit of re­duced in­ter­est rates as quickly as they should get. So, the ben­e­fit of lower rate will ac­crue to you as and when the lenders re­duce their base rate/PLR and not oth­er­wise.

The cur­rent (March 2015) com­pet­i­tive rate in the mar­ket is around 10.10%to 10.25%. You can check with your bank if it is will­ing tore­duce the in­ter­est rate to 10.10% to 10.25% (their cur­rent float­ing rate) even if it means pay­ing a fee of 0.28% (in­clu­sive of ser­vice tax) on the dis­bursed amount. This will avoid the lo­gis­tics of trans­fer­ing doc­u­ments from one lender to an­other.

If your bank is not will­ing to re­duce the rate of in­ter­est to 10.10% to 10.25% pa, you can eval­u­ate the op­tion of switch­ing your loan to an­other lender.

Since the NHB has al­ready in­structed hous­ing fi­nance com­pa­nies not to levy pre­pay­ment charges in re­spect of float­ing loans, you will not have to pay any penalty for shift­ing such loans. How­ever, you may have to pay some pro­cess­ing fee to the prospec­tive lender. In fact, most lenders will agree to take over the loan from the ex­ist­ing lender with­out any sig­nif­i­cant pro­cess­ing fees. So ef­fec­tively there will be no charge for shift­ing the loan to an­other lender.

You need to have a good track record of pay­ing EMIs on time to be able to get an of­fer from an­other bank to take over your ex­ist­ing loan. I took a home loan from a bank for a 3BHK un­der con­struc­tion flat of area 1,310 sq ft. Bar­ring the fi­nal dis­burse­ment, the rest of the amount has been given. Now I want to change to a flat of size 1,450 sq ft in the same project and the builder has agreed to it and has given me an es­ti­mate of the ad­di­tional amount that I have to pay. But the bank has re­fused to give per­mis­sion for this shift. How can I make the bank agree to my terms?

— San­jiv Arora There is no such thing as a trans­fer of loan or change of prop­erty un­der the ex­ist­ing home loan. You will have to fore­close the loan that you had taken and ap­ply for a fresh loan. As for the new unit that you are tak­ing in ex­change for your old prop­erty, it will be eas­ier for the same bank to do this. But you can also get a loan from an­other bank on a doc­u­ment of ex­change which you will have to sign with the builder. The new bank will pay off the pre­vi­ous bank in that case and pro­vide you an ad­di­tional loan if you so de­sire. What is a com­pos­ite loan and how does a bank dis­burse such a loan. What doc­u­ments do we need to sub­mit to avail a com­pos­ite loan?

— Sanjit Sharma A com­pos­ite loan is a loan taken for self-con­struc­tion of a house. The loan is given to fi­nance the cost of land as well as cost of con­struc­tion of prop­erty. 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.

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