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Old 21st July 2008, 20:57   #1
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Default Help with a home loan!

Need some help on a home loan from experience members, I am a complete noob in terms of money matters, and finance issues are piling up, need to take care of it before it gets out of hand.

Here are the bare facts.

I am presently working in Delhi, I am not yet married, however I and my fiancée decided to buy an apartment together since we can afford the EMI together. So we didn’t waste much time searching for the perfect home, rather took the plunge and booked an apartment in RPS Savana, Sector 88, Faridabad.

:: RPS Group :: - Projects (Real Estate Residential ) ::

Now lets not discuss why Faridabad of all the places in NCR, but one of the main reason is, that’s one place where we can afford right now, its connected to Delhi, Noida and Gurgaon, and I am sure its going to develop very soon. We had booked the apartment in Oct 2006 when the project was launched at a basic price of 23.5L for a 2+1 BHK, now the prices have gone up to 30+ for the same apartment. The society is under construction right now and is scheduled to be completed in mid 2010.

We decided to apply for the home loan under my fiancée name, and at that time only Axis and HDFC bank were providing loans on that project. Axis bank approved the home loan, but it was approved for only 16.5 lakhs as that was the max they could do based on my fiancée documents. We decided to go ahead with the loan, as we thought that after we get married I will apply as a co-applicant for a loan top-up to cover the balance. Initially for the first 18 months, EMI would only be the interest on the amount disbursed by the bank and the actual EMI would start after 18 months.

We chose the construction linked payment plan from the builder, they would send out a demand letter based on the construction completed.
  • Now the problem arising is, suppose Axis bank has disbursed 3 lakhs to the builder, and the builder has sent out the next demand letter for 1.5 lakhs, the bank expects us to make that payment as they say that they need to maintain the bank-customer payment ratio.
  • Now this has got us in a fix as we were under the impressions that bank would release payment to the builder as in when they receive the demand letter, and we would keep paying the EMI’s to the bank. Because it will be difficult to arrange a large sum of money periodically.
  • Also the customer service for Axis bank is pathetic, it takes several phone calls to get a small piece of information and that too is vague.
So I have been thinking to switch to HDFC along with top-up and apply as a co-applicant. I had a very pleasant experience with HDFC with my car loan, so have decided to apply for a balance transfer and top-up.

Hope I have been able to make sense, and I need suggestions and guidance please.
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Old 21st July 2008, 21:38   #2
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I too have a housing loan running with Axis bank presently and my experiences with them are so far good. My plan was also construction linked where in the builder would request me for the amount and in turn i send a requisition mail to the bank to release the amount to the builder. I took a loan of 23 lakhs and started paying the EMI immediately. The loan was sanctioned on October, my EMI started on November. I think the process in your case will be same unless you start paying your EMI from the start. Anyway you can check it with HDFC on this.

Are you sure the co-applicant part works? I tried to add my bro-in-law as a co-applicant to my loan and Axis and few other banks said it can't be done as the property is registered only in my name . So please check on this too.
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Old 21st July 2008, 22:46   #3
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From your post i'am not sure that you are still paying Pre-EMI or EMI's do elaborate on this.

Have you checked what is the % of amount you will be charged for foreclosng the loan? If this is adding up to more amount than the current home loan rate, then stick on to this. Parallely, you can also work with other banks for personal loan from your side i.e., you need to apply for the loan. That way the burden on your fiancee's will come down.

Work out the modalities with HDFC also i.e., what loan they are offering at what percentage. Inform them about your situation clearly so that they may help you reduce some % on your loan if you want to switch over. But IMO, this may not be the right time for going in for new loans as the interest rates are peaking.
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Old 21st July 2008, 23:07   #4
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Now the problem arising is, suppose Axis bank has disbursed 3 lakhs to the builder, and the builder has sent out the next demand letter for 1.5 lakhs, the bank expects us to make that payment as they say that they need to maintain the bank-customer payment ratio.
There's nothing unusual about it. In any mortgages the financial institutions expects the borrower to pay a certain percentage (typically 10-15%) of the total property value and i believe Axis bank is asking you to maintain that percentage for the amount disbursed to builder so far.

Ex. For the bank to disburse 4.5 laks you should have paid your share of about 70k @15% bank-customer payment ratio. Have you paid it?
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Old 22nd July 2008, 01:00   #5
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Thanks for all your responses.

Quote:
Originally Posted by Mission_Safari View Post
I too have a housing loan running with Axis bank presently and my experiences with them are so far good. My plan was also construction linked where in the builder would request me for the amount and in turn i send a requisition mail to the bank to release the amount to the builder. I took a loan of 23 lakhs and started paying the EMI immediately. The loan was sanctioned on October, my EMI started on November. I think the process in your case will be same unless you start paying your EMI from the start. Anyway you can check it with HDFC on this.

Are you sure the co-applicant part works? I tried to add my bro-in-law as a co-applicant to my loan and Axis and few other banks said it can't be done as the property is registered only in my name . So please check on this too.
The last time I checked with axis and hdfc bank, they said that husband-wife can apply as a co-aplicant. However I plan to sit with them again and discuss the issue again. I will confirm in a couple of days.

I guess only husband-wife, blood relatives can apply as a co-applicant.

Who can be a co-applicant?- Financial Times-Features-The Economic Times

Have you been paying the fixed EMI since November, or has the bank asked you to pay a lumpsum amount in between?

Quote:
Originally Posted by snaronikar View Post
From your post i'am not sure that you are still paying Pre-EMI or EMI's do elaborate on this.

Have you checked what is the % of amount you will be charged for foreclosng the loan? If this is adding up to more amount than the current home loan rate, then stick on to this. Parallely, you can also work with other banks for personal loan from your side i.e., you need to apply for the loan. That way the burden on your fiancee's will come down.

Work out the modalities with HDFC also i.e., what loan they are offering at what percentage. Inform them about your situation clearly so that they may help you reduce some % on your loan if you want to switch over. But IMO, this may not be the right time for going in for new loans as the interest rates are peaking.
For 18 months, we were paying pre-EMI, i.e., only the interest on the principle amount disbursed by the bank to the builder. Now since May, we are paying the full EMI. Axis bank charges 2% for foreclosing the loan.

Quote:
Originally Posted by nemo View Post
There's nothing unusual about it. In any mortgages the financial institutions expects the borrower to pay a certain percentage (typically 10-15%) of the total property value and i believe Axis bank is asking you to maintain that percentage for the amount disbursed to builder so far.

Ex. For the bank to disburse 4.5 laks you should have paid your share of about 70k @15% bank-customer payment ratio. Have you paid it?
I understand that banks finance only upto 80-85% of the total property value. So if a property value is 24L, banks will finance about 20.5L. Along with the downpayment , we have already paid the difference.

As per my understanding, banks will keep on paying the builder and we keep paying the fixed EMI to the bank. I am confused since the bank has asked me to pay the complete amount as per the demand letter.

Pardon my ignorance, but I'm kinda lost.

The reason I am inclined towards HDFC bank even if that means paying a slightly more premium now, coz peace of mind for the next 10-15 years

Last edited by Shakensoul : 22nd July 2008 at 01:12.
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Old 22nd July 2008, 08:24   #6
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Quote:
Originally Posted by Shakensoul View Post

Have you been paying the fixed EMI since November, or has the bank asked you to pay a lumpsum amount in between?
I have only been paying the fixed EMI since November and the bank had never requested for a lumpsum payment.
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Old 22nd July 2008, 09:37   #7
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Quote:
Originally Posted by Shakensoul View Post
I guess only husband-wife, blood relatives can apply as a co-applicant.
Any co-owner can be co-applicant. Is agreement in fiancee's name? Or can it be changed so that you become co-owner? Bank/Builder would have to be party of such agreement change.

Quote:
Originally Posted by Shakensoul View Post
Along with the downpayment , we have already paid the difference.
That means you already paid 4L to builder right? Then this demand does not make sense.

By any chance, is your loan on floating rate? That might have lead to increase in total payout and bank might hae asked you to pay up. Another option can be increasing the tenure in such case.

Quote:
Originally Posted by Shakensoul View Post
The reason I am inclined towards HDFC bank even if that means paying a slightly more premium now, coz peace of mind for the next 10-15 years
Do NOT go with HDFC Bank. They just resell HDFC Ltd loans.

Deal directly with HDFC Ltd. That ways you get a better chances at negotiations for rates.
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Old 22nd July 2008, 12:09   #8
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Quote:
Shakensoul;911132 Need some help on a home loan from experience members, I am a complete noob in terms of money matters, and finance issues are piling up, need to take care of it before it gets out of hand.

Here are the bare facts.

I am presently working in Delhi, I am not yet married, however I and my fiancée decided to buy an apartment together since we can afford the EMI together. So we didn’t waste much time searching for the perfect home, rather took the plunge and booked an apartment in RPS Savana, Sector 88, Faridabad.

:: RPS Group :: - Projects (Real Estate Residential ) ::

Now lets not discuss why Faridabad of all the places in NCR, but one of the main reason is, that’s one place where we can afford right now, its connected to Delhi, Noida and Gurgaon, and I am sure its going to develop very soon. We had booked the apartment in Oct 2006 when the project was launched at a basic price of 23.5L for a 2+1 BHK, now the prices have gone up to 30+ for the same apartment. The society is under construction right now and is scheduled to be completed in mid 2010.

We decided to apply for the home loan under my fiancée name, and at that time only Axis and HDFC bank were providing loans on that project. Axis bank approved the home loan, but it was approved for only 16.5 lakhs as that was the max they could do based on my fiancée documents. We decided to go ahead with the loan, as we thought that after we get married I will apply as a co-applicant for a loan top-up to cover the balance. Initially for the first 18 months, EMI would only be the interest on the amount disbursed by the bank and the actual EMI would start after 18 months.

We chose the construction linked payment plan from the builder, they would send out a demand letter based on the construction completed.
  • Now the problem arising is, suppose Axis bank has disbursed 3 lakhs to the builder, and the builder has sent out the next demand letter for 1.5 lakhs, the bank expects us to make that payment as they say that they need to maintain the bank-customer payment ratio.
  • Now this has got us in a fix as we were under the impressions that bank would release payment to the builder as in when they receive the demand letter, and we would keep paying the EMI’s to the bank. Because it will be difficult to arrange a large sum of money periodically.
  • Also the customer service for Axis bank is pathetic, it takes several phone calls to get a small piece of information and that too is vague.
So I have been thinking to switch to HDFC along with top-up and apply as a co-applicant. I had a very pleasant experience with HDFC with my car loan, so have decided to apply for a balance transfer and top-up.

Hope I have been able to make sense, and I need suggestions and guidance please.
Congratulations on your new house. It's a great achievement especially considering the age that you are at.

How the construction link plan FOR ANY BANK works is that
1. You have to pay an interest on the amount that is being disbursed by the bank to the builder till the time the EMI doesn't start, which normally starts after the possesion. This is something, I believe you are currently doing.
2. You have to pay the margin money to the builder simultaneously along with your loan disbursal and keep showing the receipts to the bank. Even if you move to HDFC bank and except them to disburse the loan without you showing them your payment receipts, chances are that they will too not disburse the loan. You can't expect the bank to disburse the loan first and then you would pay the rest of the money. Normally, the bank wants to ensure that you have paid your share of money before the bank disburses 50% of the loan amount.
3. Also, take into consideration the registeration amount of the house. Before taking possesion from the builder, your builder will demand an NOC from your bank and this NOC is not given by ICICI untill and unless you get the house registered first and is mortaged to them. However, HDFC bank does not have any such issues. For AXIS bank, please check.
4. Transfer of loan is not easy as it sounds. There are a lot of hidden charges and sometime, they may turn out to be expensive than your existing bank.
5. Check with HDFC if you can be a co-applicant with your fiance'. AFAIK, only blood relations can be co-applicants or spouse.

Hope this helps
Cheers!
m2S

Last edited by married2speed : 22nd July 2008 at 12:10.
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Old 22nd July 2008, 15:05   #9
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Thanks married2speed. I am realizing its a huge investment, but we have to get through all the hurdles no matter what.

Its on a floating ROI, and the loan was sanctioned for 16.5L and the value of the property is 23L + other charges. So I was under the impression that bank would disburse the 16L and we would keep paying the EMI to the bank. The property is in the name of my fiancee.

We plan to go down to the branch in a day or two and personally talk with the manager to resolve the isssue. Then I would get a clear picture.

And keep the suggestions coming please.
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Old 22nd July 2008, 15:19   #10
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Do you have investments in NSC / Life Insurance (with assured returns) / Govt Bonds / Mutual Funds?

You can give them to bank as either :

1. Collateral (security) so that banks sanctions more then 16L

Or

2. Use it to balloon the payment after 5 - 10 years
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Old 22nd July 2008, 15:28   #11
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Quote:
Originally Posted by NetfreakBombay View Post
Do you have investments in NSC / Life Insurance (with assured returns) / Govt Bonds / Mutual Funds?

You can give them to bank as either :

1. Collateral (security) so that banks sanctions more then 16L

Or

2. Use it to balloon the payment after 5 - 10 years
We do have NSC's, LICs. However I plan to apply as a co-applicant and the combined salary should be more than enough to bump up the loan amount to cover the complete cost of the property.
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Old 22nd July 2008, 15:39   #12
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my 2 cents:

Why not with SBI ? In the industry, they have low interest rate and that too on daily reducing balance. If your property papers are clear, then you can approach them. Also about co-applicant, only blood-relatives or person who has share in the apartment i.e co-owner.

Why I reccomend SBI is that, they have a plan called "HomeLoan-MaxGain", which gives you the flexibility of putting bonuses, savings in the account which will reduce the interest on your home loan and also you can withdraw that surplus money from this account whenever you need. This will provide great flexibility than the normal housing loan, where in once you paid the principal amount back to housing company/bank, and if you need any money, then you have to get a personal loan with a higher interest. So save as much as you can, and put it in Maxgain account, which you can withdraw as and when needed.

Recently ( 4 months ago) I switched my home loan from ICICI who was charging 11.5% to SBI which charges 9.6%. Now my tenure with ICICI was around 25 years, automatically came down to 15 years, with more or less same EMI.
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Old 22nd July 2008, 15:47   #13
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Originally Posted by mahadev_kc View Post

Recently ( 4 months ago) I switched my home loan from ICICI who was charging 11.5% to SBI which charges 9.6%. Now my tenure with ICICI was around 25 years, automatically came down to 15 years, with more or less same EMI.
Was the loan transfer process a big hassle ? How much did you pay ICICI for foreclosing the loan and other expenses ?
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Old 22nd July 2008, 15:51   #14
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Quote:
Originally Posted by Shakensoul View Post
I plan to apply as a co-applicant and the combined salary should be more than enough to bump up the loan amount to cover the complete cost of the property.
Then it would be good idea to talk to bank if they can consider you as co-applicant.

You might have to alter sales agreement (to include your name in that). But that will require co-ordination with bank as well as builder.
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Old 22nd July 2008, 17:35   #15
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Shakensoul;911950 Thanks married2speed. I am realizing its a huge investment, but we have to get through all the hurdles no matter what.
No problems there buddy. I'm sure you will overcome all your hurdles. Actually, these aren't hurdles. These are a Pain in the back side

Quote:
Its on a floating ROI, and the loan was sanctioned for 16.5L and the value of the property is 23L + other charges. So I was under the impression that bank would disburse the 16L and we would keep paying the EMI to the bank. The property is in the name of my fiancee.
Floating ROI, with the inflation figures going up each week, might not be a good idea. Have you tried thinking of a fixed rate of interest?
If you happen to know the bank manager personally, then he might have the entire 16L disbursed and then allow you to pay yours but as far as I know, before the last demand notice is cleared, the bank does ask for all the receipts of payment you have made to the builder. You have to understand that the bank has no "proof" that your house will be mortgaged to them after they disburse the whole amount. You might even stop paying them the installement for both the interest and or the EMI post that. That is why they ask for the reciepts and keep them for their security without which the NOC is not issued.

Quote:
We plan to go down to the branch in a day or two and personally talk with the manager to resolve the isssue. Then I would get a clear picture.

And keep the suggestions coming please.
All the best. However, Do hurry up with whatever you decide as both the builder and the bank charge a HUGE amount as "late payment" or "interest" or any other form of penalty in case of delay in payment.

Cheers!
M2S
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