Team-BHP - Help with a home loan!

last saturday, i went to SBI bank to get provisional certificate for financial year 2013-14.
i came to know that my home loan interest rate was reduced from 10.75 to 10.45%
Now, bank manager told me about the scheme where i can reduce this interest rate further to 10.10% by paying fee which is a particular % of my loan amount. this fee amount comes as 23k INR as my loan amount was 42 lakhs.
now i am confused, is it really worth?
if there is any margin like this, why dont they just pass it on to customer without charges.
it somehow indicates that they are not passing complete benefit of interest rate reduction to customers, which they are getting from RBI.

any suggestions?

No they are not. But even they are in business and have to make money.
Before you sign up and pay any money for availing 10.10%, ask them why the rate change was not communicated to you, and how much of the difference, from 10.75% to 10.45%, made to your loan in terms of EMI and /or tenure.

Based on this info, evaluate the impact from 10.45% (as that is what you rate of interest is) to 10.10%

Since you are at it, inquire about making additional payments, prepayment penalties. as whatever you pay over an above your EMI is applied to your principal balance and due to reducing balance method your outstanding keeps get chipped away.

All the best.

Quote:

Originally Posted by S_U_N (Post 3061708)

I am hearing this 1 acre restriction for the first time. To buy an agricultural plot, collector approval can be obtained by a non-farmer. So that is the option I can select in my case.
For Private Plantation Zone, I was told that I have to leave 70% area for plantation. I can build house on 30% area. FSI is 1.

Do you have some credible source with whom you can check?

S_U_N, we did have a mini discussion on this via PMs sometime back. Not sure if you have progressed on this front.

Regarding info on Real Estate IREF is one source that could be referred. Not all information on that forum is reliable but you still get good bits of information there.

I'll put down here whatever I know. The minimum agricultural plot is above 10 gunthas only. There cannot be a agri/farmhouse plot that is smaller than this. Earlier it was allowed to have multiple owner names even for one agri plot of 10 gunthas. So many people could join together to buy one agri plot. But since last 2 years, this practice has been barred. So now there can be only one owner of a 10 guntha agri/farmhouse plot.

The FSI available to construct on farmhouse plot is 3.xx%. This effectively means you can construct a 350 sq. ft. carpet area house on the 10,000 sq. ft. farmhouse plot. This is quite less but this is what law permits.

One can buy farmhouse plots or agricultural land in Maharashtra only if he himself or his father or grand father was a farmer i.e. owned farm land. Many people do not qualify for this but this is where the agents come in picture. The Maharashtra law allows out-state farmers to buy land here. So what people do is, they first buy a piece of agri land in Andhra Pradesh or any other state where it is possible to buy for a first time farmer. And then they buy land in Maharashtra.

Quote:

In my case two years back when all lenders were revising the rates up every two months thanks to the then RBI top brass desire to strengthen the Indian Economy on their own- never mind the impact on the salaried tax payer and the suffering middle class ,I was given a similar option by my insitution (not SBI) to reset the rate. The % was more than in your case and the amount to regularise also something like which you mentioned - % of your outstanding. I gladly took it up. The reason told to me was my prompt payment record but like you said they didnt publicise it .

It was worth it in my case.

Quote:

Originally Posted by Nicky (Post 3121683)

Now, bank manager told me about the scheme where i can reduce this interest rate further to 10.10% by paying fee which is a particular % of my loan amount. this fee amount comes as 23k INR as my loan amount was 42 lakhs.
now i am confused, is it really worth?

HDFC bank also has a similar scheme where you can make a payment which brings down the interest rate percentage. The calculator on the home loan website login shows the difference this payment makes, either on the tenure, or the EMI amount.

I took this option, and was able to lower the interest percentage by a few decimal points, which brought down the final tenure by a lot many months, opting to continue paying the same EMI as present.

Quote:

Originally Posted by mayankjha1806 (Post 2948405)

So you are rightly placed to answer my query.

How was your experience with LIC?
Did they followed habit of increasing rates immediately but not bringing down immediately, like some other banks do.
How supportive were they over the loan tenure in terms of cheque bounces or other problems which do happen sometimes over a 20 year loan?

Oh yes they did.. my interest rate with LIC when i took the home loan in 2009 was at 10.25% and it currently stands at 11.65%:deadhorse. Every other financial institution offers a refinancing option where you pay certain amount towards reducing your interest rate, however LIC does not have that facility and nor are they going to reduce the interest rate anytime in the future. Someone has apty said it elsewhere, it is a typical government establishment with no scope for customer service.

I thought there was a govt diktat to nationalised banks not to charge different rates of interest for new and old customers. This practice of differential pricing was initiated by the major crooks in the business - icici and hdfc ltd. Instead of lowering the base rate, they lower the spread from the base rate by which only new customers are benefitted. If RBI raises the CRR, they will hike they base rate so everyone has to pay more. They found a way to circumvent the floating rate of interest and provide the benefit only to new customers. This is a major bubble waiting to burst the repercussions of which would be far reaching.

Quote:

Originally Posted by ani_meher (Post 3123189)

I have bank of india housing loan, and am currently being charged at 11.25, when the new customer rate is 10.25! They are not willing to shift me to 'base rate' system, saying they don't know how to do it. How can I get them to shift me to base rate?

If my understanding is correct, its the customer who decides whether he wants to shift to the base rate system or not. The bank cannot decide. By the way this is applicable only for banks and not HFC's. Hence HDFC Ltd, LICHFL etc are not impacted by this. Ask the bank why they refuse to shift you to the base rate system. If they act smart, well there exists a banking ombudsman and also there is a certain RTI act which can help you get the job done.

My cousin has a HL from HDFC at 10.4 % ROI. I just saw HSBC advertising 9.75 % for balance transfer. I asked him to speak to them.

HSBC says its a win win situation
HDFC tells him that tomorrow if interest rates rise, then HSBC may have a higher interest rate than HDFC

HSBC's current base rate is 9.75% and they are offering a spread of 0%, i.e their interest rate will always be equal to base rate.

Can anyone throw some light on pros and cons of this balance transfer ?

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Originally Posted by yogeshnagpal (Post 3125295)

Can anyone throw some light on pros and cons of this balance transfer ?

It all depends on the costs involved in balance transfer and outstanding prinicpal amount. Here he would save around 0.65 % on the interest rate so I'm not sure if it would be of much help.

You need to work out the total savings on interest over the remaining period of the loan due to this switch and setoff the costs involved in such transfer(foreclosure penalty, processing fee of new loan etc) against the savings. I'd say atleast 1% difference in rate of interest is required at the bare minimum. Else it might not be worth the effort.

Use an Early Mortgage Payoff Calc to confirm the same - Link

This is a US site so ignore the Dollar sign and DO NOT convert your loan from Indian Rupees into Dollars, just input the numbers and see how much you might end up saving.

Once you have the numbers minus the fees they would be charging you to migrate to a lower rate, that will be close to an accurate number.

Hope this helps.

Gentlemen, I have a sanction from both HDFC @ 10.4% and IDBI @ 10.5%.
Almost all T&C are same.

Notwithstanding the almost inconsequential difference between the interest rates of the two banks, I'm more inclined to go with IDBI. Reasons:
- The servicing / home branch for IDBI is 1 km from my house and the one from HDFC is almost 30 km.
- IDBI gave me far better customer service between Loan Application and Sanction than HDFC.
- I've been trying to speak to HDFC loans via Telephone and they don't pick the phone easily. I've found it easier to reach my IDBI guys.

So, should I go ahead with IDBI or choose HDFC for some reasons, that I'm missing.

I haven't had any major customer service related issues with HDFC so far. However HDFC is a housing finance company and IDBI is a bank. In case the govt decides enough is enough and put their foot down and say that you can't charge different interest rates for new and old customers - in that scenario you would be better off with IDBI. Moreover since banks have to follow the base rate system(not required for HFC's) I guess you would get better transparency with IDBI.