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Old 30th June 2017, 10:14   #541
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Default Re: Help with a home loan!

Quote:
Originally Posted by vinit.merchant View Post
I have never come to understand this logic, which quite a few people apply.
Out of the interest expense, only the 30% (max) is borne by government in terms of deduction of taxable income. So I usually ask people why would they want to incur the 70% additional expense when it can be avoided by repayment.
So your suggestion is to repay as much/soon as possible?

Quote:
Originally Posted by vinit.merchant View Post
In any case, the decision to repay the home loan should not be based on the interest tax deduction. It should be based on the expired tenure of the loan.
Eg: If the loan tenure is 20 years, then one can benefit from repayment of principal up to 7-8 years max. Beyond this, there is no point in making any repayment whatsoever. Because major portion of the interest component of 20 years is recovered in these first 7-8 years. After that, there will be hardly any benefit of repaying. One might as well enjoy the credit and park the funds in hand in some other investments. Even a bank FD @ 7 p.c.p.a. will prove more beneficial than repayment of home loan after the initial 7-8 years.
But here it seems you are suggesting after 7-8 years tenure one should rather park the money in deposits rather than repayment?

Sorry I couldn't understand your suggestion. I have already paid EMIs for 6 years now and my projected interest for this year is around 2L. Am planning to go for some repayment this year (around 10% of outstanding amount). Is it advisable to do so or should i rather park the money in PPF or likes?
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Old 30th June 2017, 15:18   #542
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Default Re: Help with a home loan!

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Originally Posted by SoumenD View Post
So your suggestion is to repay as much/soon as possible?


But here it seems you are suggesting after 7-8 years tenure one should rather park the money in deposits rather than repayment?

Sorry I couldn't understand your suggestion. I have already paid EMIs for 6 years now and my projected interest for this year is around 2L. Am planning to go for some repayment this year (around 10% of outstanding amount). Is it advisable to do so or should i rather park the money in PPF or likes?
If your loan is 20 years, of which 6 years you have already paid up, it still makes sense to repay, lets say up to 8 years.

What you need to calculate is, with the amount being repaid, how much interest will it reduce. It gets a little complicated.

The easier calculation (just to understand whether it is of any advantage to repay) is to just take the entire o/s amount, use the FD Rate of interest (7 or 8%) and check how much interest you will earn on that amount for the remainder of the tenure (which in this case is 14 years I presume). Do not forget to compound the interest.

If this interest income (notional) is lesser than the total o/s interest outgo on the loan for the entire pending duration (EMI x pending months less o/s principal), then it is OK to repay.
If it is equal or more, you might as well enjoy the safety of the liquidity you have at your disposal and earn interest or even better, earn even more in mutual funds.

EDIT: Also consider the fact that whatever repayment you made today, you will only get to enjoy the benefits of that after 12-13 years. Your current outgo of EMI's will continue, they will reduce x number of EMI's from the end of the tenure. Now you can very well guess how minuscule the value of EMI will be after a decade. 20k today will not feel like 20k 12 years down the line.

Last edited by vinit.merchant : 30th June 2017 at 15:32.
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Old 1st July 2017, 21:59   #543
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Quote:
Originally Posted by SoumenD View Post
So your suggestion is to repay as much/soon as possible?


But here it seems you are suggesting after 7-8 years tenure one should rather park the money in deposits rather than repayment?

Sorry I couldn't understand your suggestion. I have already paid EMIs for 6 years now and my projected interest for this year is around 2L. Am planning to go for some repayment this year (around 10% of outstanding amount). Is it advisable to do so or should i rather park the money in PPF or likes?
1.) Any payment in excess of EMI is always applied to the Principal.
2.) Amortisation - interest component is higher in the first half of the tenure.
Eg- EMI is Rs. 100. Interest will be Rs. 95 and Principal Rs. 5. In the first year, till it reverses by the end of the tenure.
3.) If you pay in excess of the EMI, then do it in the first 7-8 years.
4.) This way you will not only prepay before the tenure, but also reduce your interest burden.

This is a USD calculation.
Don't convert the currency, just input numbers
http://m.free-online-calculator-use....alculator.html

This should give you a clarity on savings.
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Old 5th July 2017, 08:56   #544
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Default Re: Help with a home loan!

Quote:
Originally Posted by SoumenD View Post
So your suggestion is to repay as much/soon as possible?

But here it seems you are suggesting after 7-8 years tenure one should rather park the money in deposits rather than repayment?

Sorry I couldn't understand your suggestion. I have already paid EMIs for 6 years now and my projected interest for this year is around 2L. Am planning to go for some repayment this year (around 10% of outstanding amount). Is it advisable to do so or should i rather park the money in PPF or likes?
I read your original query and the above response. Here's my 2 cents on this.

1. Unless you fall in the 30% Tax Bracket, I would suggest not to look at Tax Savings only.
2. I am not sure what is the Tenure of your loan. You said you have paid 6 Years of EMI. If the Tenure is 20 Years or more, I would suggest make a prepayment. Will reduce the tenure to a considerable extent per Lakh of Prepayment you do.
3. Interest Rates falling for Home Loans means, Interest Rates on Savings too fall. Your pick of the lesser devil.

Here's my history with my home loan.

I started with a home loan of 42 Lakhs in November-2011 with LICHFL @ almost 10%, prepaid 1 lakh with a year. Interest rates started falling but LICHFL did not budge. Decided to Switch. August 2013, switched remaining amount to a nationalised bank (Approx. 40L) for 20 Years Tenure.

Prepaid 3 Lakhs in 2014, Switched to MCLR last Year and now prepaid anothe 2 Lakhs.

Current Tenure balance is approx. 9 and Half Years with Princpal Balance 30.4L.

So tenure in August 2013 was 20 Years. 4 Years Laters, with the above prepayment and switching to MCLR, tenure is 9.5. So, mathematically, I saved 25.6 Lacs of Interest by all this over the tenure of 20 Years. (EMIs of 6.5 Years - Prepayment of 5 Lacs)

If you want to know the exact numbers on how much prepayment will affect your tenure at current stage, you could use some calculators available on internet or if unsure PM me. I can work it out for you and let you know.
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Old 5th July 2017, 10:14   #545
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Default Re: Help with a home loan!

Quote:
Originally Posted by vinit.merchant View Post
What you need to calculate is, with the amount being repaid, how much interest will it reduce. It gets a little complicated...


If this interest income (notional) is lesser than the total o/s interest outgo on the loan for the entire pending duration (EMI x pending months less o/s principal), then it is OK to repay.
Thanks for the inputs. Appreciate it
Quote:
Originally Posted by neofromcapone View Post
1.) Any payment in excess of EMI is always applied to the Principal.
2.) Amortisation - interest component is higher in the first half of the tenure.
Eg- EMI is Rs. 100. Interest will be Rs. 95 and Principal Rs. 5. In the first year, till it reverses by the end of the tenure.
Thanks for your inputs. Yeah, this part I am aware of.
Quote:
Originally Posted by neofromcapone View Post
3.) If you pay in excess of the EMI, then do it in the first 7-8 years.
4.) This way you will not only prepay before the tenure, but also reduce your interest burden.
This is where the confusion is. I did do some pre-payment last year post which my projected Interest for current year shows 1.8L and I am only in my 6th year of tenure(53 months completed this month). So for the rest 20k(2L - 1.8L) I cant save tax anymore. I have further prepayment planned in a couple of months and that will lead to further reduction in Interest and eventually I will have to shell out more Income-tax.

Hence, the query to the experts to understand if the move is financially advisable. Ofcourse for a layman(like me) nothing beats the peace of being loan-free

Quote:
Originally Posted by neofromcapone View Post
This is a USD calculation.
Don't convert the currency, just input numbers
http://m.free-online-calculator-use....alculator.html

This should give you a clarity on savings.
The tool is good but it doesn't consider one very important feature for us Indians and thats the Income tax benefit on Home-Loan interest. If not for that part its a no-brainer to repay ASAP.

Quote:
Originally Posted by tejas08 View Post
... PM me. I can work it out for you and let you know.
PMed you.

Last edited by SoumenD : 5th July 2017 at 10:17.
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Old 20th July 2017, 09:27   #546
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Default Re: Help with a home loan!

Guys, please bear with me as this is going to be a long post. Apologies in advance if you find some of my queries very basic since i am a novice in Real Estate and Loans Department.

Finally the Home Loan Bug has bit me and i have a situation on which i need some expert advice.

Currently, i am living in a 2 BHK peacefully free of any Home Loan burdens. However, plan of the missus is to upgrade to a better 3 BHK Home nearby my Daughter's School.
I have finalized a property and the total amount comes to 1 Cr. Booking Amount paid.
Me n my Wife both are 33, working and our total gross comes to around 1.4 L p.m.

Here's the quandary:

1) The total amount i can accumulate for DP is about 20L. Checked with SBI HL Person and the Loan Eligibility he says is 75 - 80L. Taking this much high HL will have EMI of more than 60k p.m., which i am not too keen. I would like to restrict it to under 50K.

2) Since the plan is to sell of my existing 2 BHK and that might take some time, i heard Bridge Loans are exactly for this same purpose. My Question is, is it possible to take a Normal Home Loan of say 60L and also a Bridge Loan of say 20L and when i am able to sell off my home, then pay out the Bridge Loan. Is this Ideal or too much of a risk?

3) In case of type of Loan, is Normal HL or Max Gain beneficial? In my case, being a normal Salaried person, i do not think i will be in a situation to add surplus finds every year in the OD Account. Also, i read that in MaxGain, even though you add Surplus Funds, neither the EMI Amount or the Tenure reduces.

4) Any other recommended Banks to approach for Home Loan, even though SBI seems most favored.

5) I already have a Term Plan of 1 Cr. Hence, i do not think there is a need to take Self Insurance while taking the HL. Am i right? Also, is Property Insurance needed and recommended?

6) Is it advisable to take a HL Tenure of 30 Yrs. to lower the Monthly EMI?

Thank you.
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Old 29th July 2017, 11:44   #547
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What can be the reason for EMI getting deducted twice?

It happened with my home loan with Axis Bank. Monthly ECS debit happens from my HDFC bank account. Few days back I got a call from Axis bank and also got an SMS about saying loan payment has returned unpaid. Obviously I see a debit from my bank like every other month on same date, so I shared details of my bank's debit transaction to Axis Bank home loan support. That ticket is still open, and now today there is another debit for the same EMI. I don't know who is at fault here. What can I expect Axis bank to do in this case?
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Old 14th August 2017, 15:48   #548
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Default Re: Help with a home loan!

I am looking at home loan, and considering SBI Maxgain or Citibank home credit which is similar to SBI Maxgain. I have salary account with Citibank. What would be the pros and cons of both banks?
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Old 14th August 2017, 17:20   #549
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Default Re: Help with a home loan!

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Originally Posted by AkMar View Post
I am looking at home loan, and considering SBI Maxgain or Citibank home credit which is similar to SBI Maxgain. I have salary account with Citibank. What would be the pros and cons of both banks?
The obvious difference would be the quality of service offered by both banks. I have a salary account with Citibank for the last 15 years and find the services above average compared to the large private banks. In case of home loans, I think the interest rates and other associated cost would be the key factor. Bargain hard with citi bank for better interest rates and processing fees waived off. SBI would definitely be offering better rates. If the rate difference is more than 25 basis points, go with SBI. The hassle you go through will be more than paid for, by the money you save in the long run.
Hope to have helped.
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Old 14th August 2017, 17:31   #550
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Default Re: Help with a home loan!

Quote:
Originally Posted by AkMar View Post
I am looking at home loan, and considering SBI Maxgain or Citibank home credit which is similar to SBI Maxgain. I have salary account with Citibank. What would be the pros and cons of both banks?
I too have a Citibank Salary account for the past 10 years but I went for SBI Maxgain. Below are pros and cons of SBI home loan.

Pros:
1. Legal verification of the builder and land by SBI is very strict, SBI will not approve of a project which has any legal issue.
2. The changes in interest rates are reflected immediately in SBI.
3. Most trusted/recommended bank.
4. Lowest interest rates (others are catching up now)
5. SBI Maxgain (Citi home credit was not there when I took a Home Loan).
6. Peace of mind as there are no hidden charges.

Cons:
1. SBI Home loan approval takes a long time, strict verification is done for the borrower as well. Took me more than a month for approval.
2. Lot of documentation is required.
3. They may try to upsell their other products like insurance, investment schemes etc.
4. You may find the staff behavior not very friendly compared to private banks. One of the senior staff at SBI actually scolded me for not having proper documentation
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