Why home loan customers are happy this Gudi Padwa!

With banks offering competitive interest rates, no processing fees, EMI waive offs, cash backs and an additional deduction of Rs 1 lakh on interest amount announced in this budget for first time home buyers, home loan customers need to make merry, opines Bienu Verma Vaghela, chief editor, Apnapaisa.com

Celebrated as beginning of a new year, Gudi Padwa for Maharashtrians and Hindu Konkanis is considered to be auspicious not only for starting something new but also for buying a new home, new car, gold or any prized possession. Celebrated by different names but same spirit, it's also known as Chetti Chand for Sindhis, Ugadi for Kannadigas and Telugus, Navreh for Kashmiris! The day marks the beginning of month of Chaitra, heralding advent of spring.

On this auspicious occasion what could be better than buying a new home, if you have been looking for one. The spirits are high, the mood is upbeat, properties are available at attractive rates and home financing is very, very competitive. It seems everything is falling into place but hold on! Good preparation is needed before you synchronise all these to enable you to realise your dream.

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This Gudi Padwa has become special with the recent budget announcement of additional deduction of interest of Rs 1 lakh in assessment year 2014-15.

Though it is not without its share of ifs and buts like it should be your first loan and the amount should not exceed Rs 25 lakh and the value of property should be up to Rs 40 lakh. Moreover you should not own any residential house or property on the date of sanction of the loan. The loan should be sanctioned by the bank/ HFC between April 1, 2013 and March 31, 2014.

A separate section has been introduced under IT Act -- 80 EE which will allow first time home borrowers to claim deduction of Rs 1 lakh on the interest paid on the loan. If you haven't exhausted your Rs 1 lakh limit, the balance may be claimed in assessment year 2015-16. This deduction will be over and above the deduction of Rs 1.5 lakh allowed for self-occupied properties under section 24.

This is being viewed as big benefit for first time homebuyers.

So what are the initial steps a homebuyer should take for going in for home finance?

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To begin with, decide upon your budget for buying a particular property and how you will fund the purchase. Needless to mention, be clear in your head about the things you are looking in your property like locality, size, number of rooms and preferred amenities etc. If you are going to buy from a developer, please check his credentials and past record of projects delivered.

Now it is time to see what documents you need scan before finalising the property like title of the land, lease deed, license in favour of the developer from concerned authorities, approval or sanction of the project from the concerned authority, approval from other departments like water/ electricity permissions.

Don't forget to assess any hidden charges, which might become a pain later. And...and do not forget to take out your credit report from CIBIL for speedy processing of your home loan.

Now the most important part of your exercise: compare home loan interest rates offered by various banks and HFCs on any well-known price comparison engines. These engines also have various calculators on their site, which enable you to check your eligibility. Once you know your eligibility and other relevant details of the property, you are an informed customer for your bank. You are in a better position to negotiate with your bank.

Finally, it's time to evaluate best home finance offers available with various lenders.

State Bank of India takes the cake by offering lowest interest rates on its home loans and on top of it charging processing fee for of 0.125 per cent for loans upto Rs 25 lakh and minimum is Rs 1,000 whereas for loans above Rs 25 lakh and up to Rs 75 lakh, processing fee is Rs 3,250. Switching of loan is even more attractive with processing fee of just Rs 1,000 per account, irrespective of the loan amount.

Whereas Bank of Maharashtra does not charge any processing fee on their home loans.

Among private banks some attractive offers are by Axis Bank like its Happy Ending Loan where last 12 EMIs are waived off at no extra cost if a customer pays his/her EMIs regularly for 15 years for a 20 year loan. The processing fee charged is 1 per cent of the loan amount.

Going by the trend of cash back on offer, ICICI Bank is giving 1 per cent cash back after completion of first 36 months' EMIs. Subsequently, 1 per cent cash back will be credited after every 12 EMI months for the EMIs paid in the preceding 12 months. However, the benefit of cash back will be credited to your ICICI Bank account only.

As far as processing fee is concerned, ICICI Bank charges processing fee in the range of 0.5 per cent to 1 per cent of the loan amount or Rs 1,500 and Rs 2,000 for customers from Mumbai, Delhi and Bangalore, whichever is higher.

What? With new home, you are planning to buy a new car too? Then UCO Bank has some really attractive offers for you, which spell full waiver on processing fee on home loan if availed with car loan during the offer period.

But before considering your loan offer, lenders will closely scrutinise your repayment capacity, your financial strength by taking into account your income level, net income and liabilities etc. It is advised to be well prepared with all these figures and of course with the property you are aiming to buy.

It is anticipated that with competitive loan rates, stabilisation in property prices and additional tax deduction announced in recent budget, this Gudi Padwa would surely bring joy for home loan customers!