Problem with your home loan?

Your bank increased your home loan period (tenure) whas interest rates started moving up. Can the banks do this without your permission? For every one per cent increase in interest rates, by how much should your loan tenure increase?

What should you do if the bank increases the tenure even when the agreement you had signed with the bank does not allow it to do so?

In a chat with Get Ahead readers on July 31, home loan expert Harsh Roongta answered these and several other queries related to home loans.

sanjay asked, Hi I want to take a Rs 6 lakhs housing loan for 15 years. What will be my monthly installment?

Harsh Roongta answers, Based on an interest rate of 11 per cent, the EMI for a 15-year loan of Rs 6 lakhs will be Rs 6,820. You can use the EMI calculator on this link for this purpose: http://www.apnaloan.com/loan-advice-india/emi.html.

jacqueline asked, I am 34 years of age, unmarried, drawing around Rs 15K per month (net pay). From this I keep aside Rs 5,000 for my expenses. My liabilities as on date would be marriage and hence I need to set aside some amount for this. I am proposing to invest in real estate by borrowing Rs 12 lakhs loan and the rest Rs 4 lakhs (total property value = Rs 16 lakhs) will be in terms of the corpus built till date consisting of a part of PF and savings account. The tenure of my service could be of another 5 years. Keeping this in mind, is it wise for me to go in for such investment when everyone suggests that real estate will boom up? Should I invest in property?

Harsh Roongta answers, It is difficult to answer this question in a snap manner. You should consult a personal finance advisor for the same who will take into account all your requirements, risk taking ability and financial goals. On a broad level, investment in property for the purpose of a residential house for own stay should make sense anyway.

Amit asked, Sir, I have recently taken a home loan in April from ICICI bank and after a month's time interest rates were revised from 11 to 12 per cent floating. My loan amount is Rs 25 lakhs. The period after the rates moved to 12 per cent has increased to 346 months from 240 months. Is this calculation correct? Are there any chances for rates to reduce?

Harsh Roongta answers, If your EMI has remained the same, the calculation appears to be more or less correct given the fact that the interest rate has increased from 11 per cent to 12 per cent. The question is that, in the market, you should be able to get an interest rate of 11 per cent on a floating rate basis. So look around and switch lenders if your existing lender is not giving you a market rate for your home loan.

sekhar asked, Hi Harsh, I signed an agreement with a bank on home loan that it would or can revisit the interest/PLR rates if required and change/adjust the interest twice in a year in April and September. Now they are doing this at will. Whom should I approach?

Harsh Roongta answers, If you have an agreement like what you have mentioned, you should file an official complaint on the bank's website. If you do not receive any response or the response is not to your satisfaction, you should file a complaint with the banking ombudsman within 30 days. Details are available on www.rbi.org.in.

P.Ravindran asked, Hi Harsh, self & wife (joint name) have borrowed home loan of Rs 6.25 lakhs from SBI @ 9.25 per cent (floating rate) in August 2006. It increased to 9.75 per cent in Dec '06 and again the rate is hiked to 10.25 per cent in April. Now due to the RBI's hike of the CRR today, what is the impact of it to the existing home loan takers? Is there a chance of rates increasing now? Secondly is it allowable under the IT Act to share the principal & interest amount between the joint applicants even though for FY 2006-07 I have claimed the benefit? Can it be claimed by both of us in the future?

Harsh Roongta answers, Contrary to popular opinion, the RBI does not determine the interest rate on your home loan. Of course, the policies and action taken by the RBI has a significant impact on the interest rate fixed on your loan. There may not be an immediate impact of the increase in CRR within the next 7-10 days. The course after that will be determined by the liquidity position. As far as tax deduction on home loans is concerned, both of you can share the tax deductions based on your share in the loan. Changing such share from year to year can have some implications, however. See this link for a more detailed answer: http://www.apnaloan.com/primers/home-loan-india/clubincome.html.

suchit11 asked, Hi my present salary is Rs 30,000. How much loan can I get? Property value is Rs 30 lakhs. Also can I show my wife as a co-applicant? She was working earlier and recently she has left the job. Can I show her income also as her take home salary was Rs 18,000?

Harsh Roongta answers, Based on your salary, you should be eligible for a loan of around Rs 11 lakhs to Rs 14 lakhs at an interest rate of 11 per cent for 20 years. If your wife is currently not working, it is unlikely to increase your eligibility by taking her as a co-borrower.

venu asked, Is there any bank which will give a home loan to purchase a plot and start construction of house on the plot? What is the bank's procedure for giving loans to purchase a plot on a home loan?

Harsh Roongta answers, Most banks will provide a loan for purchase of a plot and construction of a house thereon. You will need to get the total cost estimated by an architect or a civil engineer and put in your portion of the total project cost first before the bank begins disbursing the home loan. The bank will charge you a pre-EMI interest during the construction period. 

vijay asked, Hi Harsh, I want to get a home loan for the construction of a house. The plot is registered in my wife's name. Can I get a home loan and if I get it can I claim tax benefit on this home loan?

Harsh Roongta answers, You will be able to get a home loan based on your income as long as the owner (your wife) is also a co-borrower but you will not be eligible for any tax benefits as you are not a owner or co-owner in the property.

vinc11 asked, Can we claim tax benefit on pre-payment? What is the proportion? 

Harsh Roongta answers, Pre-payment is equivalent to repayment of the principal portion of the loan and is eligible for deduction under section 80C.

vrushali asked, Hello Sir, I am 22 years old and I am earning Rs 2.75 lakhs/annum. I want to take a home loan. Can you tell me whether floating rate is good or fixed interest rate will be good for me? Am I eligible to apply for a home loan?

Harsh Roongta answers, Assuming that you have around 2 years of work experience you should be eligible for a home loan of around Rs 8 lakhs @ interest rate of 11.5 per cent for 20 years. You are eligible provided you have minimum experience of around 2 years though, if you are professionally qualified, some banks might agree to waive the minimum experience condition as well. Apnaloan.com recommends floating rate loans to its consumers though this decision needs to be reviewed every 6 months at least. 

vijay asked, Currently my father is having a home loan and the property is registered in his name. If I undertake the home loan can I get tax benefit?

Harsh Roongta answers, Not unless you are an owner or a co-owner of the property.

vinc11 asked, Is it beneficial to prepay loan or invest the amount in some other investments?

Harsh Roongta answers, I am a fan of prepaying loans to the extent it is possible. Without going into too many tax nuances as in my opinion a lay consumer normally does not have the time and energy to do the research necessary to figure out if the arithmetic of prepayment is better than investment. But if you need a detailed answer click on this link: http://www.apnaloan.com/articles/home-loan-india/Home_loan_prepayment.html.

Part II -- Why step-up home loans are ideal for young professionals

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.