I am 33 years of age and my monthly income is ₹ 75,000. I have taken a home loan of ₹ 25,00,000 and would like to make a prepayment of ₹ 2.5 lakh. How will doing this benefit me? My EMI is
₹ 32,500. The loan was taken six months back and I also want to know the savings.
— Nagbhushan When you make a prepayment of your loan, the amount is deductible under Section 80C (along with the other items mentioned in that section) up to the limit of ₹ 1,50,000 mentioned there- in. Also, your interest payment liability will reduce in the future, either by way of a reduced EMI amount or lesser number of EMIs. There will be no prepayment charge if the loan is a floating rate loan. However, if you have even more expensive loans (such as personal loan or credit card debts) please clear those before you prepay the home loan.
I would like to know if a co-applicant for home loan should also be one of the buyers mentioned in a buyers agreement.
— Sachin Gugale All buyers mentioned in the agreement compulsorily have to be co-applicants for the home loan, but it is not mandatory for all co-applicants to be buyers. For example, if a property is being bought in the sole name of the wife, the husband can be a co-applicant in the loan for better loan eligibility chances. You should also know that if you are not a co-owner you will not be eligible for any tax benefits on the loan repayments even though the loan is repaid from your funds.
I had taken a home loan of ₹ 7 lakh from a private bank at 10.75% floating rate. When I had talked to the bank regarding the interest rate it advised me to pay some amount. Please advise whether I should take this option. (Bank) RPLR minus applicable spread
I have received the following information from the bank:
The position of your loan account as on April 01, 2015 is as follows: 69 months 3 months June 1, 2015
Dec 2020 — Rakesh Dhingra In India, unfortunately, a floating rate loan means that the rate floats upwards when interest rates rise but they don’t float downwards when interest rates drop. Under pressure from the market and the regulators, however, the lenders “allow” you to shift to the new lower floating rate on payment of fees. So, by paying about 0.28% of the outstanding loan amount you should be able to shift to the new rate of 9.90% that is available to new borrowers. Given that the loan amount is not large enough to attract other banks, this might be the best course of action.
Please guide me on the process of shifting a home loan from a private to a public bank. What are the specific advantages? I also want to know how to avail floating and fixed interest rate for a home loan.
— Neeti Ahuja You should shift your loan only if the new bank is offering you lower rates of interest and the cost of shifting (in this case it is the 0.20% mortgage fees plus a small administrative charge) is low enough to justify the benefit. Some public banks have an overdraft facility which might be useful for you.
As far as floating or fixed rates are concerned, in the current environment when interest rates are expected to go down (notwithstanding the current uptrend in interest rates in may beginning ) it makes no sense to lock into a fixed rate.