What are 'offset' home loans? If you are a home loan borrower, then are these 'offset' loans better than other types of loans available in the market?
Do you know what the pros and cons of 'offset' loans are?
In a chat with Get Ahead readers on July 3, home loan expert Harsh Roongta answered these and several other queries related to home loans at a time when many of us are burdened with increasing EMIs.
For those of you who missed the chat, here is the transcript.
Part I: Should you prepay that expensive home loan?
atp123 asked, Hi Harsh, I'm earning Rs 20k per month and I want a home loan upto Rs 35 lakhs? Is it possible for me? If yes, how?
Harsh Roongta answers, I am afraid, based on this income, you will be eligible for a loan amount of around Rs 7.50 lakhs to around Rs 8 lakhs only. Unless you can get your parents or spouse with a higher income to act as a co-borrower, I am afraid you will not be eligible for this loan.
Maruthi asked, Hi Harsh, my take home salary is Rs 45,000. Already, I'm paying an EMI of Rs 13,130 for my housing loan. I'm planning to buy another house and need a housing loan Rs 17,00,000. Do you think my salary will permit this? I'm 30 years old.
Harsh Roongta answers, This kind of loan quantum will be difficult as your existing loan will cut into the loan eligibility. At most, you will be able to get an additional loan of around Rs 8-10 lakhs, unless you can add the income of your spouse/ parents also.
Venkat asked, Is it true that RBI is regulating the interest rates now? Is it also true that all the banks have to adhere to the rate that RBI sets?
Harsh Roongta answers, RBI does not regulate interest rates that are charged by banks on loans.
sweety asked, I am planning to purchase a land and then construct a house so iIjust want to know which bank and what tenure will be best for that? My loan amount will be approximately Rs 10-12 lakhs. Should I go for a fixed or floating rate of intrest?
Harsh Roongta answers, Fixed versus floating is already answered. Please read the transcript. There is no such thing as a best bank. If that was so, all other banks would have to close down. Depending on your need and profile, some banks will be more suitable for you from among all the banks.
ParryBrookes asked, Hello Sir, I have taken HSBC Smart Home Loan of Rs 23 lakhs for 25 years. What is your opinion about Smart Home scheme? Is it a good choice? I am happy that my EMI varies depending upon the savings I make with them. What are the disadvantages of Smart Home Loan? Can you elaborate? Paresh
Harsh Roongta answers, This kind of loan (smart home, home saver, etc.) is called an offset loan, where the balance in your linked current account is used to reduce the interest liability on your home loan. These kind of loans are normally more expensive than regular home loans by around 0.50 per cent and hence make sense only if you have temporary or permanent surplus of a minimum amount. For a detailed response on their pros and cons please click here http://www.apnaloan.com/primers/home-loan-india/homesavers.html.
Bhargav asked, Would you please answer few questions I have regarding home loan? Do banks give loan to build home on your own? I mean land + construction cost. If yes, does it hold the same benefit for income tax?
Harsh Roongta answers, The answer is yes to both, though not all banks provide home loans for self-constructed property.
ruchi_sinha29 asked, I took home loan from SBI at a fixed rate some 2 years back. So my concern is that will the rates remain the same throughout or can they change?
Harsh Roongta answers, You will need to read the loan agreement with the bank to find out if they have the right to change the 'fixed' rate of interest.
sundeep_79 asked, Hi Harsh! Can a sibling (brother/sister) become a co-borrower?
Harsh Roongta answers, Very few banks will actually allow this.The reason is the nature of our social relationships. After her/ his marriage, as per the generally assumed custom, the sister's income will stop getting clubbed with the brother and hence the repayment of the loan may suffer. However, this is not a totally insurmountable problem, though it is difficult.
Mounesh asked, Hi. I'm an NRI. Recently I purchased a house for Rs 13 lakhs which is under construction. Completion date given is October 2008. Builder adviced not to go for loans now and instead pay monthly directly to him and when the flat is ready then can go for a loan for the remaining amount. I've already paid Rs 1.75 lakhs down payment and now paying Rs 30k per month. Am I doing the right thing?
Harsh Roongta answers, Why not, as long as you can afford to pay for it form your existing sources? You can get a loan anytime (assuming your builder is reputed and is sticking to his delivery schedule). The only thing that worries me in all this is that the advice comes from the builder. I presume you have got the title to the property checked out thouroughly and that this is not a ruse by the builder simply to avoid scrutiny by the professional legal department of the banks.
chutrika asked, I have registered for ECS mode of payment for paying my EMIs. However due to some problem the amount gets debited and credited back to my account. Will I be held responsible for not paying my EMI on time?
Harsh Roongta answers, Logically, no. But ensure you pay up the amount directly to the bank as it is in your own interest to keep your account record clean. If the bank tries to brand you as a defaulter, you can complain to the banking ombudsman. Details on www.rbi.org.in.
suresh asked, Hello sir, I am a NRI, what is the present rate of home loan interest? Is there any benefit for NRI?
Harsh Roongta answers, The floating rate loans for around 10-15 years will be in the region of 11 per cent. There are no special benefits to NRIs for home purchases or for loan repayments.
Harsh Roongta says, Ok folks. It was a real pleasure chatting with all of you. I am sure you will find that the chat transcript has the answer to most of your questions.
Part I: Should you prepay that expensive home loan?
Harsh Roongta is the CEO of apnaloan.com, an online guide for retail loan seekers. Apnaloan also enables loan consumers get best rates by making banks compete for their loan.