You are looking out for a housing loan and you earn only Rs 12,000 per month. Want to know the loan amount you are eligible for?
Wondering whether repaying your home loan at one go will be more rewarding than doing it over 10-15 years?
Home loan expert Harsh Roongta answered these and other home loan related queries in a chat with Get Ahead readers on January 30.
Part II: Confused about tax benefit for housing loan?
For those of you who missed the chat, here is the transcript.
prerana asked, Hello Sir, I draw Rs 12000/- to 13000/- salary per month. How much loan can be sanctioned by bank and at what interest rate? pls.guide us.
Harsh Roongta answers, Based on your salary, you should get a 20 year 9.75% loan for about Rs 5 - Rs 6 lakhs. For a detailed calculation, you can click on the following link: http://www.apnaloan.com/index.php?option=com_content&task=view&id=121&Itemid=2.
Gireesh asked, There is something known as a property mortgage stamp duty which is to be paid to the government at the time of registration. Can you please let me know whether this is a standard practice? I have gone in for SBI MAX gain floating rate loan at 10%
Harsh Roongta answers, There are two kinds of stamp duties.
First is the stamp duty you pay on the purchase document that you have with the buyer.
Second is the stamp duty that you pay on the loan agreement with the bank, since it creates a security on the house property in favour of your lending bank.
There are differential marketing practices with respect to this second stamp duty. Some banks charge it whereas the others do not pay this stamp duty on the basis of some kind of legal structuring which is too complicated to explain here. Suffice to say that, even for banks that do not charge this second stamp duty, the liability to pay this duty remains if and when the government charges this stamp duty to the bank.
raj28 asked, Hello Harsh, thnx for your constant help. My possession of home will be around March '07.I have submitted the documents (stamp duty,registration etc) to the company this month and the tax is deducted accordingly. Do i need to submit any Possession doc (any proof of possession) at the time of filing returns?
Harsh Roongta answers, Not required technically. Though you would do well to submit it to your employer if he requests for the proof. In any case, keep the proof handy if your return comes up for scrutiny.
singh asked, Harish, I have two houses, I pay an interest of about Rs 3.5 lakh per annum for both of them. Can I claim tax benefit for only one of them or both ?
Harsh Roongta answers, Contrary to popular opinion, there is no overall restriction of Rs 1, 50,000 on the interest payable on a loan taken to acquire/ construct a house property or in respect of more than one property. In fact, this deduction is available for any number of properties and is without any limit under specific circumstances.
The calculation of income from house property (which means the rent you earn) has to be done separately for each property owned by a person. The home loan repayments are eligible for deduction for each such property. The deduction for interest payable on a loan taken to buy/ construct house property /properties (if you have more than 1) is not subject to any overall limit.
As explained earlier, the limit of Rs 1,50,000 is applicable only while calculating the income from one self-occupied property. For a detailed response and a working example, you can click on http://www.apnaloan.com/index.php?option=com_content&task=view&id=125&Itemid=2&limit=1&limitstart=4
lilu asked, Hi Harsh, I have taken a Rs 20 lakh home loan. And paying around Rs 18K as EMI. Now I have Rs 10 lakh saving with me. I would like to know whether it is better to pay this Rs 10 lakh to reduce the duration of my home loan(as well as the EMI amount) or invest this saving for better returns. Please advice me.
Harsh Roongta answers, It is difficult to give a straight answer without seeing the individual facts and circumstances. However, as a rule of the thumb, it is always better to pay off your debt with your surplus cash as long as liquidity is not a constraint. The only possible exception is home loans tied up at good rates, in which case you might be able to get a better interest rate on investment outside such that the post tax return on your investment is higher than the post tax cost of the home loan.
shiv asked, Is it possible to obtain a loan for buying a Flat at some other places. I am presently in Mumbai & will be shifting to Calcutta after 2/3 years
Harsh Roongta answers, No sweat at all. You have to go to a bank that is active in both Mumbai and Calcutta.
vijay asked, Hi Good afternoon, I went for a composite home loan (plot purchase + construction) in November'06. Construction of the house has just started and I will be occupying the house in May or June 2007. November onwards I will start paying the full EMI towards loan. My question to you is 1. Am I eligible to claim tax benefit for this financial year on interest and principal paid towards the loan from Nov'06 to Mar'07. I am currently staying in a rented house
Harsh Roongta answers, No deductions are available for a property that is still under construction as on the last day of the financial year. Hence you will not get any deductions in respect of the year ending on March 31, 2007. Whether you pay EMI or pay Pre-EMI interest is immaterial for this purpose.
sujathag asked, When is it appropriate to repay in lump sum a 15 year tenure, without affecting tax benefit? This is one question nobody seems to answer! I have been trying to find out to no avail!
Harsh Roongta answers, That is a rather simple answer, isn't it? Whenever you have the money to repay it and can afford to do that without the liquidity that savings give you. If you are looking at financial considerations, if your home loan is at an interest rate of around 9% and you are getting all tax deductions, then you might be better off investing the money somewhere else to earn a higher rate of interest.
anand asked, What is the most competitive rate in floating home rates and of which bank for a loan of Rs.13 lac
Harsh Roongta answers, There is no one answer to this question. Contrary to popular opinion, there is no rate chart that each bank has which can be collated and used for finding out the best rate available. Rates can be and are customised for each consumer depending on who she is, what her/ his requirement is and how good a negotiator s/he is.
Chirag asked, Hi, Considering high and ever rising interest rates, I am not able to decide which option should I choose out of floating and fixed interest rates. What factors should I consider while deciding type of interest rates? What would you suggest considering current market scenario?
Harsh Roongta answers, This is one question that bothers all buyers.
Fixed gives a sense of security even while you wonder am I paying too much all the time. Our recommendation on this million dollar question is given below.
Firstly, this is not a one time decision and needs to be reviewed periodically.
Secondly understand what exactly 'Fixed rate' and 'Floating rate' mean before you take a decision.
Fixed Interest Rate loans: These loans are normally priced higher than a variable rate loan for a similar tenure. That is, in the present market scenario while you would be able to get a floating rate loan for 20 years at 9.5 per cent interest rate, the fixed rate would be somewhere around 10.5 to 11 per cent.
The other option is variable/ floating rate loans. This kind of loan is also called 'adjustable rate' home loans. Here, the interest rate is linked to a benchmark rate. Some banks use their 'prime lending rate' (PLR) as the benchmark rate. Some banks have a specific benchmark rate that they use for home loan purposes. Typically, the interest rate applicable to your loan tends to be a certain percentage below this benchmark rate and ideally the benchmark rate should vary exactly as per the market conditions (though it rarely does -- it is quick to go up but rarely shows the same alacrity while going down).
roongu asked, Harish, I have two houses. I pay an interest of about Rs 3.5 lakh per annum for both of them. Can I claim tax benefit for only one of them or both ?
Harsh Roongta answers, Contrary to popular opinion, there is no overall restriction of Rs 1,50,000 on the interest payable on a loan taken to acquire/ construct a house property or in respect of more than one property. In fact, this deduction is available for any number of properties and is without any limit under specific circumstances.
The calculation of income from house property (which means the rent you earn) has to be done separately for each property owned by a person and the home loan repayments are eligible for deduction for each such property. The deduction for interest payable on a loan taken to buy/ construct house property/ properties (if you have more than one) is not subject to any overall limit. As explained earlier, the limit of Rs 1,50,000 is applicable only while calculating the income from one self-occupied property.
Surrender asked, Hi Sir, I want to take a home loan. Can you suggest me which bank is best for home loan?
Harsh Roongta answers, On a lighter note, that is like asking which political party is the best. But more seriously there is no such creature as the best bank. If there ever were, every other bank would be out of business. Each bank has its own strengths and weaknesses.
Vinod Bhat asked, hello sir, My question is, can i claim tax benefit if I and my wife are co-applicant for a loan and the house is registered on my wife's name? My wife is not working. If not can i get my name also added in the registry so that I can claim the benefit next year. Thanks
Harsh Roongta answers, Only owners or co-owners are eligible for the deduction in respect of repayment of principal and interest on a loan taken to acquire/ construct a house property. Since you are neither, you will not get a deduction. The only way available is to try and make a claim under section 64 (only if the entire down payment as well as home loan repayments have been made from your income).