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Should I buy a new house or Should I prepay my existing Home loans on monthly basis

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Should I buy a new house or Should I prepay my existing Home loans on monthly basis

Last updated: March 24 2014
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  • #21

    #21

    Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

    Hi,

    There is nothing to stop you from putting 25K per month extra into your loan account.
    You can add you loan account just like any other 'savings account' and even do a NEFT transfer to it also. Thus no need to cut cheques or ask bank to increase EMI ECS debit etc. Add your loan account as a beneficiary and do transfer when ever you have money. Test the NEFT transfer once with a token amount (Ex: 500)

    Regards
    ~Phani

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    • #22

      #22

      Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

      Originally posted by lonedesi View Post
      I see conflicting information from a different thread regarding exiting from an apartment in case of necessity. Some say, there are a lot of second hand apartments available in the market and people are not able to sell them as buyers prefer to buy newer apartments if they are going to buy at market price (as second hand apartment owners expect to book profit on their investments+interest paid to bank and price their properties at market rate). Nobody wants to buy 5-6 years old apartment at market rate when they can get a new apartment at the same price.
      It may be difficult to exit from an apartment making a profit, but it would be possible to sell if they can sell it at breakeven price or lose money on their investments.

      Anyone with more knowledge regarding this issue, please advise.

      @Ravikanth may have more insightful knowledge and can probably clarify.
      Lonedesi

      here is one of the post im copying of mr SWAMI

      That depends on individuals capacity, find out the total outflow for the unit from the date of booking, base cost+amenities+car park+Bwssb and Kptcl+VAT and ST+ Registration+ Maintenance Deposit + PRE EMI to the whole period of construction and the monthly maintenance ( Always Prestige charges are high in compare with others ) if you are able to manage go for it
      end of the day your total cost will come huge same time if you expect 6600 as return after the construction you will not get because same builder will launch 3300 in the same locality,

      swami

      as you said its very difficult to sell and get market price for the old apartments, for example one of my friend bought an apartment @16 lahks about 8 years back and after 4 years he wanted to sell and he got offer of 33 lakhs where as new apartments in that locality for 50 to 60 lakhs but even today the max offer he is getting is 35 lakhs

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      • #23

        #23

        Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

        Hi arkrangarao,
        On the pre-part payment options, the reason i go with the option of RD is only because banks dont apply the additional 25K every month directly to the principal. They just revise the EMI and the repayment schedule. Whereas the annual/one-off prepayments that i had mentioned earlier will be applied directly to the principal. If your outstanding principal/balance comes down, so does your interest and your tenure.

        Hence, i recommended option 2. Also because there's no such fixed committment to increase EMI....you might need the funds for some contingencies, new mouthwatering investment , more useful utilization of funds etc...in such circumstances, you would rather pay interest on your home loan than going for say a personal/new home loan.

        However, going by what pkr1308 says, if your banker gives such an option and not an obligation, and also assures that the additional amount will be applied to reduce the principal only...not only you should go for it, but also please share with everyone the details of the bank...i will take an immediate flight to blore and change my banker!

        pkr1308 - no offence meant ...the advantages of loan account/NEFT you mentioned is only of convenience. And Banks have a cap on number of times you can part prepay in a year....so, even if you transfer amount whenever you can, it will not be automatically adjusted to your principal.
        One has to give clear written instructions to the bank to appropriate/apply the funds to the principal, everytime.

        I would love to be wrong on these aspects. If yes, please let me know...
        Though RBI has given guidelines on not to charge penalty for prepayments/foreclosure...i am not aware of other changes relevant to the topic.

        Comment

        • #24

          #24

          Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

          Hi,

          My second loan that I was talking about (SBI Maxgain) is the best one. I spoke with SBI and I am sure, if you have some amount (even 5K or 1L) , you can put this amount in the account. And that is considered towards principal. It is like an overdraft account. So whenever you have any requirement, you can very well take the amount and use it. There is even online banking facility. It is as good as your savings bank account, with as high ROI as 10% or so...

          Please talk to SBI for more details...

          Also even if you take the loan from LIC, you can pay any amount towards your principal. every month you can do it. But pre-paying LIC loan is a bit difficult as you dont have online facility

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          • #25

            #25

            Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

            wow, thats cool about SBI Maxgain...i wasn't aware of this.
            I kinda knew about LIC, but as i had mentioned earlier, its tedious and cumbersome. I have a home loan with PNB and a site/plot loan with FirstBlue Home Finance....Anyways, thanks for sharing.
            If you have multiple loans outstanding, try to clear the one with the higher rate of borrowing.

            Now, I am curious to know your final decision.

            Comment

            • #26

              #26

              Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

              Originally posted by ragprasad View Post

              pkr1308 - no offence meant ...the advantages of loan account/NEFT you mentioned is only of convenience. And Banks have a cap on number of times you can part prepay in a year....so, even if you transfer amount whenever you can, it will not be automatically adjusted to your principal.
              One has to give clear written instructions to the bank to appropriate/apply the funds to the principal, everytime.

              I would love to be wrong on these aspects. If yes, please let me know...
              Though RBI has given guidelines on not to charge penalty for prepayments/foreclosure...i am not aware of other changes relevant to the topic.

              1. Any amount you pay to your loan account in addition to your monthly EMI contribution directly knocks of the principal. No questions/doubts about it. I am doing this for last 1.5 years in my SBH home loan. I can see the outstanding principal decreased online. And the beauty of daily reducing balance reduces my interest amount for the next month. State Bank group adds the interest calculated at the end of the month to the loan outstanding and we can see this clearly.

              2. No need to give any instructions to bank. My friend did payments like this for his OBC home loan also. So definitely this works for PSU banks. Private banks - No idea.

              3. When i took home loan 1.5 years back from SBH, the only condition they have is i cannot pay more than 25% of principal as pre-payment in a year. No cap on the number of times i can prepay. Anyhow at max i guess people prepay once per month. Now after RBI guidelines even there's no limit on 25% principal per year also.

              4. Finally the point of overdraft - In State Bank group, we can opt for a house loan of two types - Term Loan or Overdraft. The default loan given is Term Loan. The loan type will be like TL - BELOW 30 L etc (at least in my case). I was told that the overdraft facility on home loan is not easily given. But if there's no difference in interest rate charged b/w term & overdraft loan - overdraft is a winner any day.

              Now i guess you need to check with your banker for these points!

              Comment

              • #27

                #27

                Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

                Hi Pkr1308,
                in the point no.1 below, you said "And the beauty of daily reducing balance reduces my interest amount for the next month. State Bank group adds the interest calculated at the end of the month to the loan outstanding and we can see this clearly." - Do you mean to say that, for the State Bank group, it is monthly reducing balance?
                if it is monthly reducing balance, the part payment amount paid is considered towards the principal at the end of the month only? until then the interest will be calculated on the original principal only ... Here is an example to explain my question in detail..
                ex: I have a loan of 20L from AXIS, and it is monthly reducing balance, say. I have, lets say 50K on 5th of this month - what should I do now. Should I prepay that 50K immediately ? or use it for some purpose and pay it in the end of the month? If I pay today will I have any advantage - will it result in more reduction of interest?

                Comment

                • #28

                  #28

                  Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

                  Hi,

                  What i meant is they calculate interest once per month (at the end), but the calculation is based on daily reducing. If your loan is 'X' lakh on 01st of a month and you prepay 1Lak on 5th of a month , then they calculate interest on 'X' for 5 days and interest on (X-1) lakh for 25 days.

                  If in case bank follows monthly reducing, then no advantage in prepaying on 5th in above example.

                  Regards

                  Comment

                  • #29

                    #29

                    Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

                    So is SBI Maxgain the best way of taking housing loan?

                    Comment

                    • #30

                      #30

                      Re : Should I buy a new house or Should I prepay my existing Home loans on monthly basis

                      Aadiash,

                      Yes, thats right. SBI max gain is the best way of taking a loan. It is used as an overdraft account as well. U can get more details on this features, by contacting their branch or search on the net.

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