Are you planning on purchasing your first home? If so, what are the important points you need to keep in mind?
Should you buy a property under construction, or go for a completely ready project?
Is it the right time for you to buy property? Should you go for a floating rate home loan or a fixed rate home loan?
In a chat with Get Ahead readers on June 6, home loan expert Harsh Roongta answered these and several other queries related to home loans.
For those of you who missed the chat, here is Part II of the transcript.
Part I -- Is your home loan burning a hole in your pocket?
csuresh001 asked, Hi Harsh, I've a home loan running for the last 3 years. I'd like to go for a second home loan. Is it possible if my salary permits? Is it right to preclose the existing EMI and go for a fresh loan?
Harsh Roongta answers, If your income permits it, you can have both loans running simultaneously.
ramprasad1211 asked, Hi sir, I am planning to buy a flat, but the developer claims that it is his first project, and he doesn't have a completed project to verify, so how can I trust him whether he will deceive us? Is there any possibility that he can do so? We got couple of mails saying the developers did so.
Harsh Roongta answers, Be very careful while investing in an under-construction property. The kind of banks which have pre-approved loans towards the project are a good indicator (though not a fool-proof indicator) of the builder's standing. If no leading bank has pre-approved the project, I would recommend that you drop this property.
babu1 asked, Harsh, I plan to buy a car of about Rs 7 lakhs in about 6 months. I also wish to prepay my outstanding home loan of about Rs 10 lakhs (EMI = Rs 12,500 and tenure = 15 years). I am having about Rs 8 lakhs now and earn Rs 65,000 per month. Which way to go ?
Harsh Roongta answers, Car loans are more expensive than home loans, plus if you are salaried it will not get you any tax deductions. So it will make sense to use your surplus funds to buy the car (without taking any loan) and only use the leftover funds, if any, to repay the home loan.
arun asked, I am doing MBA and after 1 year I will start working. I want to buy a home for which I need to take a home loan. My parents will be the guarantors for the home loan and I can pay the initial 10-20 per cent amount required. Can I get a home loan now?
Harsh Roongta answers, Very interesting question. The loan will be sanctioned purely based on the income of your parents, and for a tenure such that it ends before their retirement date. The loan eligibility will be worked out accordingly.
sauravdas asked, Sir my wife and I have a home loan from ICICI Bank under a floating rate. We took it at 7.5 per cent and now we pay the current rate of interest. Our EMI used to be Rs 9,113 then and now it is Rs 11.5K per month and the tenure also has gone up after being restructured. Can we do something about it so as not to be burdened by the emi as well as pre-pay it fast.
Harsh Roongta answers, See this interesting link on how to cope with interst rate hikes: http://www.apnaloan.com/articles/home-loan-india/homeloaninterestratehike.html.
adengre asked, Dear Harsh, after looking at the increasing interest rates I have decided to go for floating rates for my home loan ( my first home ). Is this a right time to take first home loan ( am planning 15 or 20 years)? I have presumed that after a couple of years, rates will come down in a cyclic manner and then I will convert into fixed.
How many years from now do you see rates start coming down? I have factored in another 2-3 years of continous increase in rates.
Harsh Roongta answers, Very well planned, sir. The only thing is, keep reviewing your decision every 6 months. You should do fine. Predictions on interest rates are extremely difficult, and hence I will not make them. I can only say that your planning seems to be quite in order.
manjunath asked, Sir, please answer my question. I have taken a fixed loan from ICICI Bank in August 2006 at the rate of 11.25 per cent. Some of my friends say that it is never fixed. Banks can change it if they want in the future. Is it true?
Harsh Roongta answers, Not necessarily true. Please check your agreement -- if you do not have a copy, request the bank to provide you with one. The bank in question does have what www.apnaloan.com calls a 'genuine fixed rate loan', where the interest rate will not change no matter what happens. So check your agreement -- it is most likely that you have actually signed for a genuine fixed rate loan.
Rajeev asked, Good afternoon Mr. Roongta. Rather than migrating to fixed or look for part-prepayment of home loan, do you advice to sell the property, repay the loan, invest money as per risk appetite and pick up another property in future when real estate market experiences southward direction. This is the thought process due to regular feedback from market about correction in realty in the near future.Please advice.
Harsh Roongta answers, There is nothing economically wrong with your argument, although I can point out two flaws:
1. If it is your home you are speaking about (and not just an investment property), then I am sure you cannot be so clinical on decisions to buy and sell such proiperties.
2. The transaction costs of stamp duty and registration that you will need to pay when you buy again, will ensure that you do not exercise this option -- unless the market really drops like a stone.
kuldeep asked, Is it advisable to prepay the home loan even after considering the income tax benefits?
Harsh Roongta answers, The rule of thumb that I can provide to people who have no access to professional tax advice is this -- if your deduction under Section 80C for principal repaid on a loan is not fully utilised without claiming the principal portion of the loan prepaid, then do not pre-pay. Else pre-pay your home loan.
prince asked, I have two home loans running simultaneously. Apart from availing tax benefits to both the house loans, is there any tax that I have to pay like the wealth tax?
Harsh Roongta answers, Yes you will need to pay wealth tax on one of the houses. But do not worry, there is an exemption limit of Rs 15,00,000, and the value of the house will be determined after deducting the loan amount outstanding on that house.
Razeen asked, Good afternoon Mr. Roongta, is there any bank which provides a loan to purchase a flat which is 17 years old. I'm a salaried individual. Thank you.
Harsh Roongta answers, Most banks will do so, especially if the flat and the building are in good condition. At the most, some banks might restrict the loan tenure to 13 years (total construction period at the end of the loan tenure minus 30 years). But if the building is in good condition, a regular loan should not be a problem at all.
Harsh Roongta says, It was a real pleasure interacting with all of you on this chat (though my fingers are a little sore from all the typing!). You are also welcome to log onto www.apnaloan.com, where there is a comprehensive library of such questions and answers. See you at the next chat.