Hello there,

Just thought to post something related to RE but not yet discussed on this forum. Hope you all find this info useful.


What are the types of home loans available?
There are a variety of home loans available. They are:


    HOME PURCHASE LOAN
    This is the common loan for purchasing a home.
    HOME IMPROVEMENT LOAN
    This loan is given for implementing repair works and renovations to your home.
    HOME CONSTRUCTION LOAN
    This loan is available for the construction of a new home.
    HOME EXTENSION LOAN
    Home extension loans are given for expanding or extending an existing home. For example, addition of an extra room, etc.
    HOME CONVERSION LOAN
    Available for those who have financed the present home with a Home Loan and wish to purchase and move to another home for which some additional funds are required. Through a Home Conversion Loan, the existing loan is transferred to the new home, including the additional amount required, eliminating the need for pre-payment of the previous loan.
    LAND PURCHASE LOAN
    This type of loan is sanctioned for purchase of land, for both home construction or investment purposes.
    BRIDGE LOAN
    The Bridge Loan is designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home.
    BALANCE TRANSFER LOAN
    Balance Transfer loans help you pay off an existing home loan with a higher interest rate, and avail of a loan with a lower rate of interest.
    REFINANCE LOAN
    This loan helps you pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present home.
    STAMP DUTY LOAN
    This loan is sanctioned to pay the stamp duty amount that needs to be paid on the purchase of a property.
    LOANS TO NRIs
    This loan is tailored for the requirements of NRIs wishing to build or buy a home in India

    What is an EMI?
    EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal.
    How is an EMI calculated?
    EMI Formula: l x r x 1/12
    l = loan amount
    r = rate of interest
    n = term of the loan
    What are the incentives offered by lending institutions?
    a) Some of the lending institutions sanction the loan without requiring you to identify property as a prerequisite for eligibility
    b) Free accident insurance
    c) Discounts
    d) Waiving of pre payment penalty
    e) Waiving of processing fee
    f) Free property insurance
    What are the eligibility conditions for a home loan?
    To qualify for a home loan, most of the lending institutions in India require you to be:
    a) An Indian resident or NRI
    b) Above 21 years of age at the commencement of the loan
    c) Below 65 when the loan matures
    d) Either salaried or self employed
    What are the interest rates offered for home loans? What are: Daily Reducing, Monthly Reducing and Yearly Reducing?
    Interest rates are different from institution to institution and generally range from about 9.25% to around 12 %. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing basis is also adopted.
    Annual reducing:
    In this system, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. This means the EMI for the monthly reducing system is effectively less than the annual reducing system.
    Monthly reducing:
    In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.
    Daily Reducing:
    In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system.
    What is the best way to select the cheapest home loan?
    Keep the loan period constant and calculate the total amount paid for the home through the different loan options available.
    What is a fixed rate of interest?
    Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.
    What is a floating rate?
    This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up.

    What are the other costs that usually accompany a home loan?
    Home loans are usually accompanied by the following extra costs:
    a) Processing Charge: It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required by you cannot be less than the processing fee.
    b) Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre-paid.
    c) Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.
    d) Miscellaneous Costs: It is quite possible that some lenders may levy a documentation or consultant charges.
    e) Registration of mortgage deed.

    What are the repayment period options?
    Repayment period options range generally from 5 to 15 years.
    How do HFCs decide on the loan amount?
    Usually, most companies give up to a maximum of 85% of the cost of the house. The 15%, sometimes called 'seed money', will have to be provided by the loan applicant. The amount, for which the applicant is eligible, is determined by the age, income, no. of dependents, monthly outgoing and repayment capacity. This varies from case to case.

    Are securities required for home loans?
    In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates.
    Do I require a guarantor to get a home loan?
    Some institutions ask for 1 or 2 guarantors, others require no guarantor at all.
    What is the time required for loan application approval?
    About 10-15 days.
    What is the time required for loan disbursement?
    On an average, loans are disbursed within 3-15 days after satisfactory and complete documentation and completion of all relevant procedures, including proof that 15% of the cost has been paid upfront to the seller of the property.
    Can I make joint applications for home loans?
    Most institutions are willing to consider the joint incomes of the applicants for deciding the loan amount. Some institutions do not require the co-applicants to be co-owners of the property to be purchased.

    What are the tax benefits of home loans?
    Both principal as well as interest of home loans attract tax benefits. With effect from 1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965:
    Principal amount of repayment of loan along with other savings such as PF, PPF, Life Insurance premium etc up to a maximum of Rs 1,00,000/- will be eligible for deduction from gross income.
    Interest paid on loan after completion of construction will be deductible from income from property
    For self occupied - Income will be treated as nil and interest payment will be treated as minus income which will be adjusted against other income.
    For rental property - It will be adjusted against rental income.

    contd....
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  • HDFC Home loan

    i request to give feedback on HDFC home loans. i have heard that Home loan approval period is comparatively less, rate of interest is 0.25 to 0.5 % compared to PSU banks.

    do they charge heavily for cheque bounce like ICICI.

    ho is customer service?


    Thanks in advance.
    CommentQuote
  • Banks like HDFC & ICICI don't go much into details about the project like PSU banks or Axis Bank (in case of private) does as the former are interested only in having large customer base & vvant faster profits. Hence, if the project is appproved by ICICI & HDFC & not any PSU, avoid it. In some cases, the builder has good relations ith particlular bank too!! So, even if you vvant to go ith HDFC, make sure that the project has been approved by banks like BoB & SBI too.
    CommentQuote
  • Hovv is the Punjab National Bank for Home loan? Is it good compared to other PSU banks?
    CommentQuote
  • Dont know why people say avoid private banks. My experience with ICICI has been good so far. SBI was also offering loans for the project I had booked in, so guessed that the builders paperwork must be Ok. And I wanted a faster turnaround so went with ICICI. Its not that something is hidden from you when you take a loan from private bank. So why this reluctance for private banks. Not trying to promote private banks here but want to understand the rationale.
    CommentQuote
  • Originally Posted by amit3011
    Hovv is the Punjab National Bank for Home loan? Is it good compared to other PSU banks?

    PNB is also good, has less ROIs in many cases as well but BoB is the best.
    Originally Posted by gsa177
    Dont know why people say avoid private banks. My experience with ICICI has been good so far. SBI was also offering loans for the project I had booked in, so guessed that the builders paperwork must be Ok. And I wanted a faster turnaround so went with ICICI. Its not that something is hidden from you when you take a loan from private bank. So why this reluctance for private banks. Not trying to promote private banks here but want to understand the rationale.

    Hidden charges, pre-closure charges, loan transfer charges, penalties etc. are far higher. Also, in case of ROI hike, PSU are the ones who do the last & the least as well. But again it depends on your relatonship as well. If your co. has company a/c, then you are entitiled for lesser ROIs too! Hence, need to check all in totality but for a layman, PSUs are better as they offer more peace of mind & are not hand in glove with builders as well.
    CommentQuote
  • hi ..
    For a loan amount of 20 lac.. if I have two options :
    1. BoB - ROI 8.75 but no processing fees (saving of around 8k)
    2. Axis - RoI 8.5 fixed for 1 year .. will convert to floating later.

    Which will be better choice ?
    CommentQuote
  • Originally Posted by thatsnick001
    hi ..
    For a loan amount of 20 lac.. if I have two options :
    1. BoB - ROI 8.75 but no processing fees (saving of around 8k)
    2. Axis - RoI 8.5 fixed for 1 year .. will convert to floating later.

    Which will be better choice ?


    What is Axis banks' current PLR and what spread they are offering after one year?
    CommentQuote
  • Originally Posted by amjamirs2
    What is Axis banks' current PLR and what spread they are offering after one year?


    The current the Mortgage Reference Rate (MRR) of Axis Bank is 12.25.
    For Spread I will get the details by afternoon ..will update here.
    CommentQuote
  • Originally Posted by thatsnick001
    The current the Mortgage Reference Rate (MRR) of Axis Bank is 12.25.
    For Spread I will get the details by afternoon ..will update here.


    I would suggest not just compare the 8.75% of BoB with 1 year fixed 8.5% of Axis. Compare what is the rate Axis bank offering after 1 year with BoB's 8.75%
    CommentQuote
  • Guys

    Majority of us think the PSU banks (SBI, BOB etc) are better for home loans and I agree. If we can survive the application formalities, I believe its good luck.

    Main Differentiators are
    - Processing Fee: Waived off in most PSUs
    - PRocessing Time: Short in most Private banks
    - Prepayment Penalty and ability to reduce EMI
    I need advice on this one.

    Banks like Kotak offer "no penalties for upto 25% (annually) of outstanding principle" on their loans. I believe this brings them close to the public sector witht he advantage of quick processing time.

    However, when one prepays, does the princicple reduce immediately and hence the EMI. Is there any difference how a private sector (like Kotak or HDFC) treats pre-payment versus public sector.

    Appreciate your views/suggestions and concerns.

    Thanks
    CommentQuote
  • Guys

    Majority of us think the PSU banks (SBI, BOB etc) are better for home loans and I agree. If we can survive the application formalities, I believe its good luck.

    Main Differentiators are
    - Processing Fee: Waived off in most PSUs
    - PRocessing Time: Short in most Private banks
    - Prepayment Penalty and ability to reduce EMI
    I need advice on this one.

    Banks like Kotak offer "no penalties for upto 25% (annually) of outstanding principle" on their loans. I believe this brings them close to the public sector witht he advantage of quick processing time.

    However, when one prepays, does the princicple reduce immediately and hence the EMI. Is there any difference how a private sector (like Kotak or HDFC) treats pre-payment versus public sector.

    Appreciate your views/suggestions and concerns.

    Thanks
    CommentQuote
  • In most cases, the pre-payment charges in private banks are much higher than PSUs. Also, if RBI brings in new norms which is good for the market, the PSUs are the first to implement them. However, except for ICICI & HDFC, I don't think there is major issue with other private banks like Axis Bank. Just make sure to calculate 2 major things:-

      Pre-payment charges,
      The total amount you will pay at the end of the tenure.
    CommentQuote
  • Just enquired loan details of Axis bank.
    Found it pretty much similar to BoB scheme.
    Both have same rate of interest 8.75
    Both have no prepayment charges
    Both provide free Insurance
    Both offered me nearly the same loan amount and tenure
    Processing charges : Axis.25%, BoB:.4%
    Infact Axis has benefit of faster processing being private.
    Axis also offered no charges for loan transfer to another bank, the guy confidently saying that "Our Customers dont transfer loans elsewhere" :P
    Seems like axis is a better choice...
    CommentQuote
  • axis vs BoB

    Just enquired loan details of Axis bank.
    Found it pretty much similar to BoB scheme.
    Both have same rate of interest 8.75
    Both have no prepayment charges
    Both provide free Insurance
    Both offered me nearly the same loan amount and tenure
    Processing charges : Axis.25%, BoB:.4%
    Infact Axis has benefit of faster processing being private.
    Axis also offered no charges for loan transfer to another bank, the guy confidently saying that "Our Customers dont transfer loans elsewhere" :P
    Seems like axis is a better choice...
    CommentQuote
  • And if you are prefered customer of Axis, you get additional discount of 0.25% as well:).
    CommentQuote