Can we continue to get income tax benefit on pre-EMI interest (last two installments of total five) even if we have prepaid all the home loan. Kindly clarify.
—Rishi Sharma In respect of interest paid on loan taken for underconstruction property, you cannot get the income tax benefits in respect of interest paid during the year if the property is under construction during that year. I have a query regarding top floor construction on existing house. We have a house, which is in my mother’s and brother’s name. This house is under construction loan from a bank. Can I construct one floor above this house by taking a loan on my name for this top floor? Kindly suggest what I should do.
—Aquil Khan It is a very complex situation. You will need to apply for a home extension loan based on your income. However, your mother and brother will have to be coborrowers to the loan as they are the owners of the property. (An extension to a prop- erty is automatically a part of the property). Secondly, only the existing lender may grant you a loan on a property, which is already mortgaged to them, provided they allow brothers as coborrowers.
Moreover, since you are not co-owner of the property, you will not be able to claim tax benefits, which are available for repayment of home loans. So approach the existing lender as no other bank will lend as the property subject matter of construction is already mortgaged with them. Another option for you is to enter into an agreement with your mother and brother and get legal rights to a part of the plot or to the second floor. This agreement will need to be stamped and registered. It will also have to be approved by the existing lender. I want to take a loan on a house that I own, and have decided on a private bank. Up to how much amount can I borrow on this property? Can I borrow a higher percentage of the value of the property from any other bank at similar rates?
—Gauri Patel The loan is given as a certain percentage of the property’s market value, which is usually around 40% to 60%. Please note that most banks get the property valued independently and they will provide the loan based on their valuation. In most cases the valuation as determined by the banker’s valuer is significantly lower than the market value you perceive. If you are salaried /self-employed, banks takes into account the number of years you have left for your retirement.
The lender evaluates your repayment capacity based on your income, savings, and debt obligations, other than household expenses to determine the amount of loan you are eligible for.
There may be some variation from bank to bank as to the amount of loan, which you can get against your property. I have taken home loan from a prominent lender in 2012 with 10.70% fixed rate of interest for three years. Now I want to transfer the loan to a national bank. In September 2015, my current home loan changes to floating rate. Shifting my loan means I have to bear prepayment charge. Is this the right time to transfer my home loan or I should wait till September 2015?
– OP Tripathi You are paying a high rate of interest. The current interest rate on home loans for customers with good track record in the national bank you mention is 9.90% and there is no reason for you to pay more. It is advisable to transfer your existing loan or any other lender where you will get around 9.90% to 9.95%.