Your floating home loan rate has suddenly jumped from 7.25 per cent to 11.75 per cent. Your EMI too, has increased. But has your bank calculated the loan amortisation (split between the interest amount and principal) correctly?
Will floating rates come down? Even if they did, will your bank be quick enough to reduce rates on your existing home loan?
Is it desirable to get your loan agreement documents checked by a good lawyer? Should you protect your family by taking critical illness insurance if you have a home loan?
Get Ahead Money expert Harsh Roongta answered home loan related queries in a chat with Get Ahead readers on April 9.
For those of you who missed the chat, here is the transcript.
Part I -- How to cope with rising home loan EMIs
mahantesh asked, I have bought a flat in Bangalore. My Owner has coordination with Citi Financial for home loan. My loan processing will be quite easy there. Citi Financial is ready to give me loan. Since Citi Financial is already giving the loan, do I still need to check the document of my apartment from a lawyer?
Harsh Roongta answers, ultimately the flat belongs to you and irrespective of whether all documents are proper or not your liability to pay off your loan is absolute. So whilst it is a hugely comforting thing that a reputed bank is willing to provide a loan for your property it is in your own interest to have the documents reviewed by a good lawyer. Remember any economising at this time may prove very expensive in the long run.
varadarajan asked, Please offer your comments on going for a loan protector insurance policies offered by the insurance companies for housing loan. Varadharajan.
Harsh Roongta answers, You should definitely take term and critical illness insurance to insure your family and yourself against any default in the event of something happening to you. It is not only prudent but also very very advisable.
However, do not go by the name of the policy alone. Check around in the market for a term insurance with a critical illness rider and compare that with whatever your lender is offering before taking the policy offered by the lender.
ajit asked, hi, I'm an NRI settled in gulf. Would like to construct a home back in Kerala. What I would like to know is what is the maximum period for which a home loan would be available and minimum EMI.
Harsh Roongta answers, most banks restrict loan tenures to NRIs to a maximum of 10-15 years.
amitpreety asked, When we prepay a certain amount is this deducted from the principal amount?
Harsh Roongta answers, yes
naveen asked, Hi Sir, my salary is Rs 10,000 plus Rs 5,000 as conveyance allowance and my younger brother's salary is Rs 6,000 plus conveyance Rs 4,000. The total amount comes to Rs 27,000. We both are in search of a flat; can we both apply for one flat?
Harsh Roongta answers, Yes you can though not all banks allow 2 brothers to be co-owners and co-borrowers.
subhayandutta asked, Hi Harsh, best wishes and thanks in giving us the opportunity of asking you a few queries. My question is, suppose I have Rs 150,000 as the interest component to be paid for the financial year in lieu of the home loan. Now if I prepay some amount I will bring down my liability, but I will not get the maximum benefit out of the income tax calculations, right as the interest will also go down? So shall I prepay or not? I assume that there are no changes in the interest of the loan during the financial year.
Harsh Roongta answers, whilst the point raised by you has merit unless you are a tax consultant or otherwise very tax savvy I would still strongly advise partial prepayment as long as you have the funds to make the partial prepayment. If you are breaking some fixed investments to make this prepayment than you should consult a personal finance advisor to take this decision.
sunverma asked, Hello Harsh, I took a home loan from HDFC for house construction. I am the main applicant and my father is a co-applicant. However, plot/property is in my Dad's name. Is there any way I can get IT benefits on home loan. Banks said that they will provide me a letter through which I can get the IT benefit... Pls advice?
Harsh Roongta answers, sorry you can't get any tax benefits unless you are an owner or a co-owner. Just being a co-borrower is not good enough.
neeraj asked, I had taken home loan of Rs 10 lakhs from ICICI @ 7.25 per cent three years back and now they are charging 11.75 per cent and now they had increased the EMI as well as period. In amoritsation schedule I had checked that they are taking more that 90 % amount of EMI as an intrest and rest 4-5% as principal. Can we do something on this?
Harsh Roongta answers, please see the loan amortisation calculator on www.apnaloan.com to see if the loan amortisation done by your bank is correct.
Gaja asked, Hi Harsh Roongta, Greetings! Me and my wife have a home loan with which we have claimed income tax benefit too.. Now we are planning to buy another Flat. So how do we claim tax benefit for this year? Can we include both the loans or one only? Please suggest.
Harsh Roongta answers, you can get tax benefits on both properties.
Vipul asked, When will the floating rates go down and will the banks really reduce rates?
Harsh Roongta answers, Yes the absence of regulatory requirements mean that we can never be sure whether the banks will reduce interest rates when rates start reducing. The only solution to that is to be vigilant and keep looking round in the market and shift lenders if your existing lender is not giving you the rate that the market is offering. You can do that provided you have maintained an impeccable track record of payment with your existing lender.
Harsh Roongta says, Okay folks. My hands just gave way with all that furious typing that I did over the last 60 minutes. I see a lot of similar questions asked by many people. Urge you to read the chat transcript to get the answer. You could also logon to www.apnaloan.com for any further information or queries. See you next fortnight. Bye and take care