With Finance Minister P Chidambaram announcing recently that rates are going to stabilise in the near term there is lot of expectation that housing loan rates will fall further.
A few months back, banks and housing finance companies, cut rates on loans under Rs 20 lakh (Rs 2 million).
Some experts also feel that real estate prices in most cities would come down as supply far exceeds demand.
So, is it the right time to go hunting for that dream house? With loan rates likely to come down or at least stabilise, should you go for a second house?
In an hour-long chat on rediff.com on Friday, personal finance expert Harsh Vardhan Roongta answered to many such readers' queries.He is the co-author of a popular guide to home loans, Complete Home Loan Guide.
Here is the transcript:
Harsh Roongta says, Good Afternoon everyone. It is always a pleasure to be on these chats as the users are very active and aks some excellent questions. Since i have loged in a little early let's start. I will try and answer as many queries as i can but i eranestly request everyone to read the transcripts as a question similiar to theirs may already have been answered. So let's get started.
Veenuch asked, Hello Mr. Roongta, I borrowed a home loan of Rs 1052000 for 15 years. But, due to increased interest rates, the tenure has become more than 20 years. I take tax rebate on my loan. What I want to know is will it be better to foreclose the loan?
Harsh Roongta answers, at 2008-01-25 14:55:53As a general rule if your finances allow you to pre-pay you should pre-pay the loan. There are some important exceptions to this rule. Read a detailed response on this link. http://www.apnaloan.com/articles/home-loan-india/Home_loan_Article_how_to_prepay_homeloan.html
sadanand asked, I have a loan for 4.5 LAKHS with ICICI the property is more than 35 lakhs at present value, i am planning for a second house/flat around 20 lakhs my monthly income put together rents is aprox 50k, my expenses around 30k including savings, pls advc if i need to go fr a nother purchase or invest in equity
Harsh Roongta answers, You have not stated your age but based on your income details you should be eligible for an additional loan of Rs. 20 lacs if your current age is less than 40 years. As to a good mode of investment (equity or real estate) it is not possible to answer these type of questions in a forum like this. It depends on a number of factors such as your existing investments, your risk taking abilities, your liquidity requirements, your financial goals, etc. You should consult a independent financial planner for this purpose.
sh asked, Hello Mr. Roongta. With talks about cutting REPO rate are making news due to FED rate cut by US, due you think RBI will be cutting the REPO rates which inturn might force banks to reduce rates for existing home loans?
Harsh Roongta answers, There are 2 reasons i cannot answer that question. First it is very difficult to read RBIs mind on interest rates though they seem to be under a lot of pressure to cut rates. Secondly even if RBI cuts any of its signalling rates (Bank rate, Repo rate, reverse repo rate) it doies not automatically translate into a reduction for existing or even future home loan borrowers. RBI's stance on interest rate is a very important determinant of the interst rates paid by the final consumer but not the only determinant. Contrary to what DSAs tell you the home loan rates are not decided by RBI and are fixed individually by each bank.
jairam asked, house reconstruction can be a home lone and comes under tax benift
Harsh Roongta answers, Interest payable for a loan taken to re-contruct a house is eligible for tax benefit. The tax benefit under section 80C on the principal portion of the loan repaid is available only where the loan is taken for acquisition or construction of the property. It is probably possible to argue that reconstruction of the property is same as contruction but it may be a doubtful issue.
jaddu asked, Axis Bank is charging me 25000 towards mortgage for Home loan for 50Lakhs. They said as per new RBI rules, all banks are doing this. How far this true. Thanks Krishna Jaddu
Harsh Roongta answers, It is not clear from your question as to the nature of the charges. If it is towards stamp duty that it is as per the rules of the concerned state government that tjis stamp duty is payable. RBI has no rules requiring cumpolsory payment of any fees to a lending bank.
Vishal asked, Hi... Mr. Roongta... I taken 15L for 20 years from Axis Bank (Property valus is 40L and have to make payment within 3 years)... Can i apply for another loan / increment the loan amount, after 2 years for the same property as my IT returns will surely grow up by 2 times by that time....
Harsh Roongta answers, Yes you definitely can request it at that time. Though at the urent moment the bank will insist that you bring in the entire downpayment portion first before it will disburse any amount itself. Thus in yoru case you will need to bring in the entire down payment amount of Rs. 25 lacs first from your own sources (Proeprty value Rs. 40 lacs minus loan sanctioned value Rs. 15 lacs). Therefore it would be imprudent for you to depend on the increease in the sanction value of the loan to pay for the downpayment of Rs. 25 lacs. However if you have made satisfcatory arrangement for this downpayment than the option of getting a higher loan amount based on your increased income always remains with you.
vt asked, Good Afternoon Mr.Roongta, I took loan of 32 lacs for 20 years. Due to increase in interest rate tenure is increased to 25 years. Shall I increase my EMI to decrease the tenure or pay lump sump every year and keep EMI as it is to reduce the tenure? Please advice me.
Harsh Roongta answers, if you ahve the financial ability you should look at using the lump sum option. You could also have other options such as shifting your loan to a lender who is charging a lower rate of interest. For a detailed response please see this link. http://www.apnaloan.com/articles/home-loan-india/homeloaninterestratehike.html
ray asked, Sir I want to ask whether a person who has taken a homeloan and in between he decides to seloff his house will he be able to do so?Coz all agreements are with bank will the bank allow to selloff his property and prepay the loan?
Harsh Roongta answers, Off course you can sell it off. You will need to pay back teh entire loan amount ot the bank first with pre-payment charges if any.
asoam asked, Hello Mr. Roongta, I just want to know if still i am able to decide the place where i want to take the house. Can I still apply for home loan?
Harsh Roongta answers, Yes you can get a sanction but the disbursement will still be dependent on the satisfactory legal validation of the proeprty title and valuation. Getting such a sanction will hardly serve any purpose as you will be required to pay a fee for it and also are unlikely to get the best deal for your loan as most banks recerve their best deal for loans that are to be disbursed immediately.
aspeet asked, Sir, I have taken a loan of 18.5 Lakhs at the ROI 11.75%. The Bank reduced ROI as 11.5%. But they are not reeducing further. When can we expect a downward reduction. Is it wise to change Banks within 6 months of loan tenure
Harsh Roongta answers, If your property papers are clear and your income justifies the loan and you ahve paid all the installments on your eixtsing loan on time you should be eligible for a floating rate home loan at around 10.25%. that is a big difference from what you are being charged and you should consider shifting your loan immeidately to another lender.
vs asked, can my wife and brother take a home loan together
Harsh Roongta answers, Most banks are unlikely to sanction a loan where your brother and your wife are co-owners in a property.
anismohd asked, Sir, I have just taken a Home Loan from PNBHFL of Rs. 18L for 15 yrs. EMI is approx Rs. 19908/- I have opt for Insurance of mine as well as home. Pls suggest any thing more I should consider. Also put some flow on the point should I start my EMI or just pay Interest till Full Disbursment.
Harsh Roongta answers, Please also consider Critical Illness policy. This will insure that should a critical illness (such as stroke, organ failure, heart ailment, etc.) strike you affecting your earning capability than you at least dont have to bother about your home loan liability. Please remember that life insurance policy will payout only in the event of your death. hence the importance of the Criticl illness policy. As far as payment of EMI is concerned that depends on your finacial position. But in any case please remember that there is no tax benefit on loan repayments made during a year in which the property is still under construction as at the end of that year.
arvind asked, hello sir, I am buying a property for 25 lakhs. Out of that I have applied for a loan from a bank for 16 lakhs which got sanctioned. Now I wanted to know whether I can register the house for 17 Lakhs in documents only (Just to reduce the registration costs). Will it be a problem later on? Is there any legal issues attached to it? Please advice.
Harsh Roongta answers, Off course there are legal issues attached to it. Apart from penalties for violation of the law if yoyr under valuation is discovered your loan eligibility will also be reduced as the bank will only provide you a loan of around 85% of the the registered cost of your flat (even if the loan sanction is for a higher amount).
ravi999 asked, what is the email or mail address of banking ombudsman where i can complain for wrong doing by some bank.
Harsh Roongta answers, for dteails see www.bankingombudsman.rbi.org.in
ajays asked, hello sir, my flat is due for registration on 15 Feb 2008. i have been paying pre emi interest for the past 1 year. is form 12 C and interest certificate from the bank documents enough for claiming interest benefit or i have to submit the registration documents also.
Harsh Roongta answers, Unless the construction of the property is completed as at March 31st fo a year no tax benefits will be available for any loan repayment made during that year. see this link for details. http://www.apnaloan.com/taxtips/home-loan-india/taximplicationonpreemi.html
Santanu asked, Hi Mr.Roongta, Am a salaried individual, earning a net pay of apprx 65 k a month. Recently I finilaized a property(apt) for 26 lacs, EMI wud work out to 25 k a month for 20 yrs @10.25% floating from HDFC. They have agreed to reduce rates when the same gets reduced. They have agreed for no pre payment penalty & 2 bulk payments a year. Is there anything else which I need to take care or clear with the bank b4 making the final disbursement? Does my income justify an EMI of 25 k a month. currently I saty on rent in noida 10k. Plz advice.
Harsh Roongta answers, You could probably get in writing the mechanism on the reduction of interest rates if the general interest rates reduce.
saxin asked, Hello Sir, I am planning to buy a flat in Dombivili, Thane. The person who the Builders are proposing is claiming that roi in 10.50% whereas I have heard it 10.25%.He says that if I go for 10.25% I would miss on many things like part disbursement, pre EMI and other things. Can you please suggest which BANK should I consider for opting a loan, and what percentage of my gross is eligible for loan is 50% or 60% on my annual income.
Harsh Roongta answers, If your income profile is good and the loan is justified by the income you should be able to get a loan at 10.25% by using the services of market places like www.apnaloan.com which makes the banks compete for your home loan.
Tejas asked, I have home loan with citibank since 2004 of Rs.1200000/- @ 7.5% p.a. And the bank is very prompt in increasing the rates from time to time. As on today the rate is 11.75%. Recently there is a reduction in rate of interest by RBI. What prevents banks to give benefits to their customers of such reductions.
Harsh Roongta answers, What prevents banks from reducing interst rates is the general apathy of the consumers like us. Rather than whine about why RBI does not take ensure this or that why cant we as consumers vote with our feet. If your eixsting lender is not reducing the interest rate for you you should shift your loan to another lender. If all consumers became pro-active in doing this this issue will get resolved.
Charuhas asked, Good Afternoon sir,I have taken loan from icici bank 5yrs ago. 10yrs remaining. existing rate 12.50% for 13.50lac And 14.75% for Rs 36 lac (hospital loan) as on today. Shall I shift to lower rate option? Levy is 2%. Minimum how much rate differrance should be there for shifting?
Harsh Roongta answers, If your track record on payment has been excellent you should get a cheaper rate. You can get the best rates by making the banks compete for your loan by using market places like www.apnaloan.com
zipzapzoom asked, HDFC in its documentary requirements asks for proof of the orgin of own contribution (eg. 15% of the flat value, if loan request for 85% max). Is this an accepted norm in the industry? As this sounds rediculous...
Harsh Roongta answers, The bank definitely is intersted in knowing how you got the down payment contribution. If you ahve borrowed for the purpose of making the down payment it is likely to put pressure on you in the future. Having said that most banks dont really check this point in great detail so there must be a reason why HDFC is wanting to know this in your case.
sesh asked, when the rate of interest is reduced normally what do the banks do? do they reduce the EMI amount or they reduce number of EMIs? Is an option normally made available to the loanees?
Harsh Roongta answers, reduce tenure
ujjwal asked, Hi, How can i avail both Home loan and HRA rebate together? Please advice.
Harsh Roongta answers, see this link. http://www.apnaloan.com/taxtips/home-loan-india/taxdeductionbenefitsforhlhra.html
jairam asked, can i take home loan for construction of home which is owned by me and my brother
Harsh Roongta answers, Yes you can though all banks will not be interested in funding such a transaction.
kitta asked, Hello Sir, good afternoon. i want to apply for home loan and my net salary is 35,000 p.m. Please tell me whether i can manage a loan of 25 laks. The cost of the flat is 30 laks. also tell me which bank would be better. Thank you
Harsh Roongta answers, The rough EMI for a 20 year home loan @ 10.25% for 25 lacs will be in excess of 25000 pm. So unless you have some other provable sources of income you will not get this loan amount.
divyansh asked, Hi Harsh, Do i need to pay a penalty incase I shift my homeloan from one bank to other, would my credit rating take a hit.
Harsh Roongta answers, Your credit rating will obviously not take a hit unless you ahve defaulted on any installment. There is likely to be a pre-payment charge payable to yoru existing lender.
JD asked, hello Mr. hasrsh. i am self employed and am planning to buy a house in Mumbai suburbs a 1BHK in descent Locality my annual income is around 3 Lacs how much amount of home loan can i avail
Harsh Roongta answers, If you file an Income tax return of around Rs. 3 lacs and are under 40 years you should be eligible for a loan of around Rs. 10-Rs 12 lacs.
swara asked, Hi Harsh, HDFC has taken our LIC policies as security for home loan. We both 2 gether earn around 80k a month. Our EMI is 30k. I asked the bank to give them back after an year as our 1 year EMI record was good. They hav responed like, it will be kept for min of 3 years as a security. Wht shall i do ? Also, they took 15k as a charge to reduce our floating rate from 11.25 to 10.75. is this ok?
Harsh Roongta answers, New loans are currently being given at 10.25%. You should look at shifting your loain to another lender who may also not require the LIC policies as additional security.
Karishma asked, i am unmarried of 26 yrs, female. Can i take my mother as co-borrower and co-owner for home loan?
Harsh Roongta answers, Yes
manoj_kesarkar asked, Dear Sir, I have purchased one flat in 2004 & availing the IT benefit on the Principal & Interest amount...........Can I purchase another flat and get the IT benefit on the Interest & principal amount for the second house as well..........
Harsh Roongta answers, Yes you can. see this link for a detailed response. http://www.apnaloan.com/taxtips/home-loan-india/deductiononmorethanoneproperty.html
Shweta asked, Dear Mr. Roongta, my father has a house on a 300 sq yard plot but with only one storey. SInce he is now retired, i want to take a loan for it's renovation...will the bank extend such loan to me and can i get a tax benefit on such loan?
Harsh Roongta answers, You can definitely get a loan on it but unless you are a co-owner you will not get any tax benefits on the loan repayment.
Harsh Roongta says, Ok Folks My typing finger just gave way. So good bye till next time. Most questiobns have been answered in some form or the other so please see the transcript. You can also ask questions on www.apnaloan.com by using this link.http://www.apnaloan.com/home-loan-query/query.html
Apnaloan.com is a guide to home loans in India. Apnaloan also enables consumers get best home loan rates by making banks compete for their loan.