[dailydriver]

Originally Posted by digitalnirvana

The flats are 52 years old and have been renovated approx 10 years back.

A five decade old flat - unless it is a heritage property - is unlikely to get the nod from a PSU bank's in-house valuer (civil engineer) or the legal advisor. With depreciation factored in, the flat's actual evaluation in physical terms will be close to zero and hence any loan would have to be sanctioned basis the perceived value; location and guidance value being the main considerations.

Not sure whether any banker will take the risk though. Also, would it be possible for you to procure/provide all the documents that the lendor may require? A lot of water has flown under the bridge since 1966!

[sumeethaldankar]

How does one go about purchasing another house after paying off the home loan on existing one? For instance one has a balance of just 2-3 lakhs remaining on the home loan, and one wants to move to a different locality from the existing place where the loan is going on. So does one start looking for a new house first and then try and sell the existing one or does it makes sense to sell off the existing property first, foreclose the loan and then search for a new property. In the first case will the property seller wait (Builder) ie give some time to arrange for finances which will come from the sale of existing home? In the second case selling it off first would attract a larger share of income tax since a person would be receiving proceeds from the sale of his home.
Which is the better method?

Thanks.

[vinit.merchant]

Originally Posted by sumeethaldankar

How does one go about purchasing another house after paying off the home loan on existing one? For instance one has a balance of just 2-3 lakhs remaining on the home loan, and one wants to move to a different locality from the existing place where the loan is going on. So does one start looking for a new house first and then try and sell the existing one or does it makes sense to sell off the existing property first, foreclose the loan and then search for a new property. In the first case will the property seller wait (Builder) ie give some time to arrange for finances which will come from the sale of existing home?

Since buying a home requires huge capital, the builders are quite used to payments in multiple installments from the buyer. He will hand over the possession of the property only after receiving the total amount.
Just be careful with the paperwork.

In the second case selling it off first would attract a larger share of income tax since a person would be receiving proceeds from the sale of his home.
Which is the better method?

Thanks.

Income tax wont be charged if the Long term capital gain arising from the sale is utilized in buying a new home within 2 years of selling the old one.


PS: Just FYI, even though only 2-3 lakh of loan is outstanding, your eligibility for the loan will be calculated as follows (assuming you are a salaried person)

(Your monthly gross salary minus the outgoing EMI's) multiplied by 50.

Hence your current EMI's, even though the loan is nearing completion, will have quite a big impact on your new loan amount eligibility.

[condor]

Does Home Loan Transfer make sense at all ?


A person taking a HL is paying the installments. In the initial years, the interest component is far more than the principal component. So after about 5 years if the HL is transfered, the transfered/balance amount is still a large part of the HL. And to add, the balance tenure is still the same (like with age of the borrower).

[Engine_Roars]

Hi Guys,

I have availed a home loan on subvention sceheme & the EMI will start from December 2020. Now, I have some spare fund and I am not sure if I should prepay the home loan or invest the money some where else till my EMI starts? Is it even possible to reduce the principal loan amount by prepaying before the EMI starts?

Any help would be much appreciated.

Thanks,

[KL01toKA03]

Originally Posted by Engine_Roars

Hi Guys,

I have availed a home loan on subvention sceheme & the EMI will start from December 2020. Now, I have some spare fund and I am not sure if I should prepay the home loan or invest the money some where else till my EMI starts? Is it even possible to reduce the principal loan amount by prepaying before the EMI starts?

Any help would be much appreciated.

Thanks,

Doesn't the builder pay the interest till possession in the subvention scheme? If yes, it might be better to invest the spare funds somewhere (say an FD or NCD) till December 2020.

[.sushilkumar]

I have a Home loan with HDFC. While they are alway first to increase the interest rate when RBI increases the repo rate but they never reduce it. I got mine interest rate reduced once after paying some 2300+ odd rs but i am wondering what do the rule says in such scenario. Is HDFC taking me for a ride. Why do i have to pay since variable rate itself means that interest rate will move with the RBI's repo rate.

Curiously, While govt of the day is busy boosting the growth with such initiatives, IMO they are null & void if they are for new consumers only.

[longhorn]

Originally Posted by .sushilkumar

I have a Home loan with HDFC. While they are alway first to increase the interest rate when RBI increases the repo rate but they never reduce it. I got mine interest rate reduced once after paying some 2300+ odd rs but i am wondering what do the rule says in such scenario. Is HDFC taking me for a ride. Why do i have to pay since variable rate itself means that interest rate will move with the RBI's repo rate.

Curiously, While govt of the day is busy boosting the growth with such initiatives, IMO they are null & void if they are for new consumers only.

My home loan is with HDFC too. Variable rate home loan is only a trick to get new customers. As you rightly pointed out, if RBI raises rates, they do the same in a fraction of a second, but when RBI reduces rates, they sleep on it. I had sent an email to HDFC on this very issue and the reply was "HDFC is not a bank, it is a NBFC so repo rate is not applicable to us."

I was contemplating shifting the loan to some bank like SBI but since more than half the loan amount was already repaid by then, it didn't make financial sense to shift to another bank at that point in time.

It is this very fraud that Raghuram Rajan tried to fix by asking banks to peg their internal rate to RBI's prime lending rate. The banks' internal rate could be equal to or a certain no of basis points higher than the rate set by RBI, depending on their cost of funds. Once this rate is pegged, floating rate home loans would move up or down automatically in tandem with RBI rates. Unfortunately he was shunted out before he could implement this.

[.sushilkumar]

Originally Posted by longhorn

I had sent an email to HDFC on this very issue and the reply was "HDFC is not a bank, it is a NBFC so repo rate is not applicable to us."

Thanks for the revert. Are we saying that NBFC do not follow RBI guidelines wrt to lending.

Originally Posted by longhorn

I was contemplating shifting the loan to some bank like SBI

I am assuming that SBI too will have similar Modus operandi when it comes to home loans.

Is there a way that we can fix this loophole. I always thought that my loan is from HDFC Bank not HDFC NBFC. I am thinking of filling a RTI to RBI with the original question and see what their response is. My assumption is that any lender borrowing from RBI must benchmark against Decided Repo rate. Thinking back, It's Unethical business practice IMO

[Aditya_Bhp]

Well these issues are there in all the financial institutions whether its a bank or NBFC. SBI was charging me 11.5% for a loan and HDFC Home loans at 12.0% before demonetization. After demonetization, when interest rates went down, both of them did not change it. I had to manually go to the branch and request them to reduce the rates.

If my memory is correct, I had paid 3000Rs in SBI and 5000Rs in HDFC to reduce the rates to 8.8 and 9.0 respectively. I was able to save around 4Lakhs of interest by doing this as per their calculation, which meant both home loans had a reduction of around 2 and 3 years respectively. So I did not mind paying the processing fee, even though I knew I could have forced them to cancel it.

On the other hand they kept on increasing interest rates whenever they liked, close to 13 percent in 2013, they just sent a letter home telling they are going to increase the rates, they don't even bother asking for permission to do so. Ever since they stopped foreclosure charges on home loans, I try to clear home loans as soon as possible, as I do not like to live on credit.

[longhorn]

Originally Posted by .sushilkumar

Is there a way that we can fix this loophole.

None that I am aware of.

Originally Posted by .sushilkumar

I always thought that my loan is from HDFC Bank not HDFC NBFC.

If you approach HDFC bank, they redirect you to HDFC Ltd. I don't think HDFC bank does home loans.

Originally Posted by .sushilkumar

I am thinking of filling a RTI to RBI with the original question and see what their response is. My assumption is that any lender borrowing from RBI must benchmark against Decided Repo rate. Thinking back, It's Unethical business practice IMO

It is definitely unethical. Why do they call it floating rate when it floats only one way ? RBI has reduced repo rate 3 times at the rate of 25 basis points (0.25%) during each of the last three reviews. Inspite of the total reduction totalling to 0.75% over the last 3 reviews, even 0.00001% has not been transmitted to the consumer. RBI doesn't have the mettle to enforce it. They have been reduced to nothing but a bunch of clowns after the demo exercise.

[adi.mariner]

I also have a Floating Rate Home Loan with HDFC. The interest rate revisions are done every 3 months by HDFC. And it is always in the upward direction. I have reduced the "Spread" by paying 4-5k to reduce the interest rate of the Home Loan. The overall saving was a few lakhs which is the reason why I did it. The SBI Max Gain Home Loan offers some flexibility with the "Overdraft" facility. But the interest rate was at par with HDFC.

[Engine_Roars]

Originally Posted by KL01toKA03

Doesn't the builder pay the interest till possession in the subvention scheme? If yes, it might be better to invest the spare funds somewhere (say an FD or NCD) till December 2020.

Yes, that is the case and that is why I am confused about how to go about it. Investing the fund somwhere else looks like a better option but I am not sure if reducing the loan amount right now would have any impact on future interest calculation hence the question.

[archat68]

Originally Posted by adi.mariner

I also have a Floating Rate Home Loan with HDFC. The interest rate revisions are done every 3 months by HDFC. And it is always in the upward direction. I have reduced the "Spread" by paying 4-5k to reduce the interest rate of the Home Loan. The overall saving was a few lakhs which is the reason why I did it. The SBI Max Gain Home Loan offers some flexibility with the "Overdraft" facility. But the interest rate was at par with HDFC.

HDFC do reduce the rate but for that you'll have to apply to them and will have to pay a processing charge .

[KL01toKA03]

Originally Posted by Engine_Roars

Yes, that is the case and that is why I am confused about how to go about it. Investing the fund somwhere else looks like a better option but I am not sure if reducing the loan amount right now would have any impact on future interest calculation hence the question.

AFAIK reducing the principal during the time the builder pays the interest is not going to help you in any way. I suggest investing that amount somewhere else, where there is low risk.