Top 12 Terms You Must Know Before Taking Home Loan!

Updated on March 7, 20198 mins read
taking a home loan

Updated: January, 2018 Taking a home loan is a mammoth task, especially with all the paper work and cumbersome legal formalities involved. A lot of first time home loan customers are unfamiliar with several loan jargons and find themselves at a loss while dealing with bank officials and builders. But taking a home loan is one of the biggest financial liabilities you will incur. Thus, before you take the leap, you must familiarize yourself with related terms and common practices. So, we have compiled a list of 12 Common Terms You Must Know Before taking a Home Loan: Taking a home loan Click on the topic you want to know more about or just scroll down and read them all, 1) Margin 2) Offer/Sanction Letter 3) Post Dated Cheques 4) Disbursement 5) Equated Monthly Installments (EMI’s) 6) Pre – EMI 7) Resale Property? 8) Pre – Approved Property? 9) What is Credit Appraisal? 10) Is Pre-payment of Home Loan Beneficial? 11) Security 12) Processing and Administrative Fees

1. What is Margin?

In 2010, RBI set a ceiling limit on home loans which limits the amount of loan one can take against property to 80% of the property value. This means that while the bank pays 80% of the total cost of your property, the remaining 20% needs to be paid by you. This remaining amount is referred to as margin or down payment. For example, if you purchased a property worth 75 lakhs, then the bank can fund up to 80% of total amount, which is 60 lakhs. So, the remaining 15 lakhs has to be paid by you. However, in practice a lot of other factors determine an applicant’s loan eligibility. Note: In June, 2017 this limit was enhanced. Now for loans up to 30 Lakhs, banks can fund up to 90% of the property value. The higher the margin amount, lesser will be your loan amount, reducing the total cost of your property (since interest paid on home loan adds on to total cost of property).

2. What is an Offer/ Sanction Letter?

An offer letter is a formal confirmation from the bank stating that it has agreed to consider you as one of its loan customers. It does not confirm sanction of home loan. The loan will be disbursed after a verification of all legal documents and eligibility of applicant. The validity of a sanction letter is generally around 6 months. If the loan is not availed during this period, the sanction lapses and the entire process needs to be reworked if applicant approaches bank again. A sanction letter usually states the following;

  • Amount of loan sanctioned
  • Loan tenure
  • Interest rate applicable
  • EMI and pre-EMI amounts applicable
  • Validity of sanction letter
  • Terms and condition of loan agreement

3. What are Post Dated Cheques?

Taking PDCs for home loan repayments is a common practice banks. These cheques are addressed to the bank, state the exact EMI amount and are signed by you. These cheques cannot be processed ahead of date mentioned on them. 4. What is Disbursement? loan disbursement Disbursement means payment. It refers to the release of loan amount to borrower by lender. Usually, banks disburse the loan amount once all the submitted documents have been verified and the down payments have been paid. A loan is always disbursed by cheque, which can be credited into a loan account with the bank; it is never given by cash. Most banks charge a loan disbursement fee. It is added the principal amount when loan is granted. This fee covers all expenses involved in giving the loan to you. A loan can be disbursed in different ways, depending on your arrangement with the bank and its policies:

  • Full disbursement: A full disbursement means the entire amount is paid in one go. The bank hands over entire payment to seller on your behalf.
  • Partial disbursement: A partial disbursement means that the payment is made in stages. If you are buying an under construction property, then the bank will disburse payments as the construction progresses. For example, after completion of first floor, 20% of the payment will be made and so on.
  • Advance Disbursement: An advanced disbursement means that the entire payment is made before the completion of project. This is done only if the buyer request the bank to do so, or is convinced that builder will complete construction on time. However, its not a common practice.

5. What are Equated Monthly Installments (EMIs)?

EMI payments EMI is the repayment you make to your lender every month. It is an unequal combination of your principal repayment and interest payments. According to the thumb rule, EMI should not exceed more than 30% of your total income, considering other liabilities. To arrive at EMI, your bank will consider several parameters;

  • Principal amount
  • Repayment period
  • Rate of interest

EMI payments start once the loan has been fully disbursed. A break up of your EMIs over the entire loan term can be found in your amortization schedule. It’s important to go over your amortization schedule regularly to keep a track of any changes in interest rate or loan tenure made by the bank.

6. What is Pre-EMI?

When you buy property which is under construction, loan amount is partially disbursed to the builder. When a loan is partially disbursed, only interest payments are made on that amount. These interest payments are known as pre-EMI. So the longer your builder takes to complete construction, the more interest you pay to the bank, adding on to the cost of your property. Pre-EMIs too have tax benefits. After the construction is completed, you can claim tax deduction in five equal annual installments. However, any principal repayments made during this period are not liable for tax deductions. But this should not stop you from making repayments as it brings down your loan burden considerably.

Is paying full EMI a better option than pre-EMI?

Even though paying pre-EMI seems more lucrative in the short run, as you have to pay only the interest component, opting for full EMI payment is more beneficial in the long run. This way you start repaying principal amount even before you get possession, reducing total cost by reducing the tenure of home loan. For example, in the case of pre-EMI, if loan tenure is 20 years, and the builder takes 3 years to complete construction, you will actually end up making interest payments for 23 years.

 7. What is Resale Property?

ResaleProperty   When you buy property from someone who already owns it before, it is termed as resale. It indicates that you are not buying a new home straight from the builder and are not the first owner of that property. While buying resale property, make sure you have a record of all previous owners of property and the reseller has undisputed ownership. This will ensure smooth processing of loan application.

 

 

 

8. What is meant by Pre-approved property?

pre-approved property Now days, several builders get their projects pre-approved by lending institutions. A pre-approved property means that the concerned financial institute has verified all legal and technical documents of the project and has found them in order. So any buyer, who applies for a home loan for this property, need not get the legal verification done again. There are several misconceptions held by borrowers related to pre-approved properties, here are a few of them:

  • Getting a home loan is assured: Several builders misguide customers by assuring them home loans from the financial institute which has pre-approved their project. This is not true. Each application is assessed individually and there is no guarantee that home loan on pre-approved project will always be approved.
  • The project will complete on time: Though the financial institute takes into consideration, the builder’s past records and ability to complete projects on time, it doesn’t mean that it will take any action if construction is delayed
  • The project is legally safe: Though in most cases this holds true, sometimes, small banks  undermine several legal aspects and approve the project to get more business. So it’s always advisable to check which bank has pre-approved the project. A reputed bank is less likely to undermine such details which giving approval.
  • Less documentation is good:  Since the project has been pre-approved, the builder can directly share several documents with the bank, keeping you out of the loop. This way you are saved from the hassle of handling so many documents, but you will never get access to important documents related to the project.
  • You cannot take home loan from other lenders: This is not true! Just because the project has been pre-approved by a particular bank, it doesn’t mean you have to take the loan from them. The builder may try it’s best to convince you otherwise, but you are free to take a home loan from any lender of your choice.

9. What is Credit appraisal?

Credit appraisal is a check on the applicant’s financial situation to determine eligibility for home loan and the maximum loan amount. Credit worthiness of an applicant assures his repayment capacity. Several parameters are considered to confirm the credit worthiness of a loan applicant; credit appraisal

  • Incomes of the applicant and co-applicant
  • Age of applicants
  • Qualifications
  • Nature of profession
  • Employer
  • Security of tenure
  • Tax history
  • Assets owned and investments
  • Additional sources of income
  • Recurring liabilities

10. How is Pre-Payment of loan beneficial?

When a borrower chooses to make lump sum repayment of loan, it is termed as pre-payment. Pre-payments are beneficial as they help get rid of debt faster by reducing loan tenure.

11. What is Security in a loan?

home loan security Security is the asset provided by borrower while taking loan. In this case, the property being purchased serves as asset for home loan. If you fail to repay the loan due to certain circumstances, the bank can sell this property or convert it into an asset to recover loan amount. Therefore, before finalizing a loan, you must analyze the terms and conditions of various banks, and choose the one with favorable terms.

12. Processing & Administrative Fees

Every bank charges processing and administrative fees for processing the documentation of your home loan. On an average, the fee ranges from 0.5% to 2% of loan amount.  Though it seems like a small percentage, it can add considerable weight to your home loan costs. Several banks offer schemes wherein they waive off processing fee, to attract more customers. So while choosing a bank, it is advisable to opt for one which offers the lowest or no processing and administrative fees. For more information on home loan related terms, refer to; 3 Important Home Loan Terms Before You Switch! SwitchMe is an end-to-end service that helps you with everything related to your Home Loans! Signup for identifying the right lenders to figuring out the best tenure, interest rates or balance transfers. Also get one FREE call from one of our Advisors. Our customer, Mr. Girish Nambiar says “SwitchMe consultants are very proactive and responsive. They would listen to your challenges and provide creative ways to solve your problems. They are willing to go above and beyond to make their customers happy and they always stick to their commitment.”


Tarini

Tarini

Tarini comes with a degree in Mass Communication and Media studies. She joined SwitchME as a content writer and moved on to being an assistant product manager. Tarini is an experienced Content Strategist with a background in Product development and management. She is skilled in SEO, social media strategy and online content marketing and likes to travel when possible
381 COMMENTS

Have a question? Post it here and we will get back to you within 1 working day.

  1. Narasimha
    Mar 16 2015 at 5:57 pm
    Reply

    Hi

    My wife has availed home loan from SBI.

    Now she has lost Job and I am not co-applicant

    can I become co-applicant now and get tax benefit.i dnt have any loans

    • Tarini
      Tarini
      Mar 17 2015 at 5:03 pm

      Hey Narsimha
      Unfortunately, co-applicants cannot be added to a loan once it has been disbursed 🙁

    • Narasimha
      Mar 17 2015 at 7:13 pm

      Thanks for answering…
      But is there any other way , because I am the person paying for EMI and I can’t avail tax exemption.
      Is there any Clause or facility were in I can get home loan tax exemption.

    • Tarini
      Tarini
      Mar 18 2015 at 7:55 pm

      Hi Narsimha

      We understand the situation you are facing, but unfortunately there are no such provisions under which, it could be done :/

  2. Rosy
    Mar 16 2015 at 10:57 am
    Reply

    Hi, I have taken a Home Loan from hdfc if i am unable to pay the emi for 3 months and can i still sell the house and clear the complete loan amount to the bank does bank allow to do the so.

    Regards

    • Tarini
      Tarini
      Mar 16 2015 at 1:28 pm

      Hey Rosy

      Yes, you can do so by notifying your bank about your plans to sell the property to repay the loan.

  3. Priya
    Mar 11 2015 at 2:53 pm
    Reply

    Hi Tarini,

    Im planning to sell my flat which is 23yrs old in chennai which is in a very main area.
    Im hearing through some source that banks donnot provide loan for properties older than 20 yrs is that true?

    • Tarini
      Tarini
      Mar 12 2015 at 4:37 pm

      Hey Priya

      Yes, this is true. Although all banks have different rules and guidelines on lending, most of them prefer to give loans against newer properties.

  4. parag
    Mar 10 2015 at 6:35 am
    Reply

    Hi Tarini,
    I have booked an under construction property by paying 20% (12lacs) of the price(60 lac). For the remaining amount of 48 lacs, I plan to take a home loan of 37lacs with a moratorium period of 18 months and make arrangements for 11lacs through savings in those 18 months and borrowing from family.
    My query is – 1)whether back will agree to such arrangements?
    2) If yes, how would be the loan disbursement ratio of bank and my share will be decided once the demand is raised from the builder?

    • Tarini
      Tarini
      Mar 10 2015 at 8:17 pm

      Hey Parag

      Though most banks offer the option of availing a moratorium period for their home loan, the terms and conditions are subject to their individual approval. So you will have to check with your bank about the possibility of availing it for the exact tenure and amount you need it for.
      Typically how a loan with a moratorium period works is that the interest for 18 months will get accumulated and at the end of tenure, you will be expected to pay up all of it as lump sum. At the end of this period, your regular EMIs will resume too.
      So I don’t believe a moratorium period would actually help you out in this situation.

  5. Mahesh
    Mar 07 2015 at 10:28 am
    Reply

    hi
    I have applied for loan from icici of re 3500000 and it is sanctioned .my query is in the builders demand letter the bank should pay demand + service tax or i have to pay service tax by myself

    • Tarini
      Tarini
      Mar 09 2015 at 6:48 pm

      Hey Mahesh

      The bank will only help you finance 80% of the total property value, the remaining service tax, stamp duty and registration charges need to be paid by you.

  6. Shweta Bharti
    Feb 28 2015 at 1:14 pm
    Reply

    Hi Tarini,
    Is it compulsory for a bank to inform its Home Load Customer about the disbursal of Amount Demanded by the builder? I mean, though we have signed all the legal document and Demand letter of the builder, but I think bank should send us a mail or a phone call before disbursement? Am I right?

    • Tarini
      Tarini
      Mar 09 2015 at 7:11 pm

      Hey Shweta

      There are no such RBI guidelines which direct banks on intimating Customers on disbursal of loan amount to builder. However, several banks follow a policy of informing before disbursal out of courtesy. So, for this you will have to check the internal policies of your bank.

  7. amrit
    Feb 26 2015 at 8:05 pm
    Reply

    hello everyone……I need ur valuable advice so as to proceed towards buying my first home. I have decided to buy a 3bhk flat (costing 35 lakhs + 2.5 lakhs registry amount).I earn 61000 p.m. gross and only has about 4 lakhs cash .I reference to this subject, following are my queries:-

    (a) Does bank considers only the cost of home for calculating home loan eligibility?? I want to apply for home loan including the registration amount also…is it possible to get that kind of home loan????

    (b) Paying up Bank emi is easier for me and hence is curious to know if there is any way by which I can get maximum amount from bank as home loan or any other kind of loan and thus is left to pay very little cash as down payment etc.

    (c) Does any bank provides loan for buying residential Plot?

    Your valuable advice will be highly helpful and appreciable.

    Regards
    Amrit

    • Tarini
      Tarini
      Mar 02 2015 at 8:10 pm

      Hey Amrit

      Buying your first property is a big step. Congratulations! Here’s a clarification to all your queries:
      1. No, the bank considers several factors before giving a home loan, the most important being your repayment capacity which is determined by your take-away income and other dependencies (other loans, pending bill payments etc.). The cost of home loan only helps give an estimate of the maximum amount you can borrow i.e. 80% of the total cost of property. And yes, there are several banks which offer such loans, kindly inquire with your bank regarding the same.
      2. According to RBI regulations, banks cannot lend more than 80% of the property’s market value. So that is the maximum amount you can borrow, the remaining 20% will have to be paid as down payment.
      3. Yes, most banks provide loans for land purchase and construction of property, you can check with your preferred bank regarding the same.

      I hope this is helpful. All the best with your purchase! 🙂

    • amrit
      Apr 08 2015 at 3:43 am

      Hi Tarini,,

      Thanks for your valuable suggestions and fruitful advice. I have already signed a sale of agreement with a seller who currently possess a 3 bhk Flat in a builder multistorey society(Please note seller has not done registration of flat till date).Builder has promised to provide possession in next 3 months.Following are my queries in relation to the matter:-

      (a) When will registration of flat on my name will be done (before possession or after possession)?? & who will do the same i.e. builder or existing seller???

      (b) Even after obtaining a NOC/Transfer certificate from Builder ,if any pending dues are demanded from builder side ,then am I liable to pay the same??

      (c) Do I possess all rights of flat similar to first purchaser based upon builder-buyer agreement??In case builder deviates from any of his committed amenities etc.,then do I hold right to take necessary steps against builder??

      (d) what actions can I take against builder if he doesn’t provides possession as per his committed timeline??

      I am purchasing my first property,hence wants to be double-sure and at the same time wants to know my rights as a purchaser…..Hope with your valuable advice and suggestions ,i can be a confident purchaser.

      Your reply will be highly appreciable!!!!

      Regards
      Amrit

    • Tarini
      Tarini
      Oct 07 2015 at 8:21 pm

      Hey Amit

      Here’s a response to all your queries:

      1. Registration of property will have to be done by you, after you get possession of the property.
      2. The builder cannot demand any dues from you. He will have to deal with the first owner only as his agreement was with the first party. So you ahev nothing worry about here.
      3. Yes, you possess equal rights as the first owner.
      4. There a few legal options that you can explore if the matter is serious, otherwise there isn’t much that you can do in this regard.
      I hope this helps 🙂

  8. MAHESH AMRUTKAR
    Feb 24 2015 at 1:02 pm
    Reply

    HI TARINI,
    I HAVE TAKEN LOAN OF RS.15 LAC FROM THE CO-OP SOCIETY. LOAN WAS SANCTIONED IN 02.06.2014,
    INITIALLY RS. 10L CHEQUE(07.06.2014) GIVEN TO BUILDER FROM THE LOAN AMOUNT. AND REMAINING AMOUNT OF RS.5 LAC FROM THE LOAN WAS GIVEN IN LAST WEEK(15.02.2015). SO BANK(CO-OP SOCIETY) PEOPLE ASKING US TO PAY THE DIFFERENCE OF AMOUNT RS.65K. BECAUSE WE ARE PAYING RS.13K AS MONTHLY EMI FOR RS.10L, AND NOW FROM THIS MONTH WE ARE GOING TO PAY RS.20K AS EMI. SHALLL I PAY THE DIFFERENCE OF AMOUNT RS.65 K. I GET CONFUSED WITH THIS

    • Tarini
      Tarini
      Mar 09 2015 at 7:35 pm

      Hey Mahesh

      What I understand from your description is that they are asking you to pay an additional interest on an amount which was not disbursed earlier.
      If I understand correctly, your home loan was disbursed in 2 installments: first was of 10 lakhs and the second one was of 5 lakhs. This means that until the remaining 5 lakhs was disbursed, you need to pay interest only on 10 lakhs. After disbursal of 5 lakhs, you will need to pay interest on the entire 15 lakhs. So I don’t see any reason for why they would charge you an additional 65k. Please ask them to give you a clarification for this, and a break up of how and on what amount and for what rate is this being calculated.

  9. Vini
    Feb 24 2015 at 11:15 am
    Reply

    Hi – need some advise.

    I have booked an under construction property and since the payments are linked with construction stages, I have calculated that I would be able to pay the disbursements myself for next 18 months. After that I would need some funds and therefore would need home loan. I wanted to understand how I should go about this. Shall I just pay myself for 18 months without applying for loan and then apply for loan closer to the time or should I apply for loan now and ask for disbursements after 18 months (which the bank may not agree to since they have validity to the loan sanctioned). Please advise.

    The second question I have is – is it possible to get home loan in a way that the bank pays for some part of the overall cost in the middle tenure.

    For example, I pay 30% upfront myself. Then the bank pays 40% in multiple disbursements based on construction progress and then once that is done I pay the next 30% myself. Please let me know if this is possible too.

    • Tarini
      Tarini
      Feb 24 2015 at 2:52 pm

      Hey vini!

      Here’s a clarification to all your queries:
      1. If you plan to pay the builder for the first 18 months, then i suggest you take a loan later as the bank’s pre-approved loan holds valid only for 3 months. So around the 15th month, you can apply for a pre-approved home loan.

      2. I am unaware of any such home loan scheme in which bank pays the entire amount for a certain period. The closest to this is opting for a moratorium period during which you will not have to pay any interest on your loan. At the end of this period you will need to pay the entire accumulated interest in one go. Another option for you could be going for pre-EMI option on your loan until you get possession. If the property is bound to get delivered within the next 2 or 3 years then this is a good option as it will reduce your EMI outgo in the short run. However, in the long run, you will end up paying more for your home loan.

      I hope this helps you decide better 🙂

  10. rahul
    Feb 24 2015 at 12:04 am
    Reply

    hi,
    i have purchased a flat of Rs. 50 lacs. Recently i had paid 15 lacs to the builder .Due to financial constraints i am feeling bit hard to pay slab installments, now i wish to take home loan of 30 lacs with a plan to pay rest of Rs 5 lacs at the time of possession from my other sources..Is it possible to get home loan in this case from any financial institution??

    • Tarini
      Tarini
      Feb 24 2015 at 1:44 pm

      Hey Rahul

      In this situation you could either approach another bank for a second mortgage loan or you could take a top up loan from your existing bank. This loan will be treated as an additional loan to your home loan and you will not be able to get any tax exemption on it.
      I believe it will be a lot easier for you if you approached your existing bank for a top up.

  11. swamy
    Feb 21 2015 at 7:21 am
    Reply

    How much processing fee in lichfl

    • Tarini
      Tarini
      Feb 24 2015 at 3:19 pm

      Hey Swami

      At LIC HFL, the processing fees will depend on your loan amount. This makes it difficult to give you an estimate. Kindly contact the bank regarding the same 🙂

  12. Bala
    Feb 18 2015 at 10:37 am
    Reply

    Hi Tarini,

    I have shortlisted an under construction property worth 54.6 Lakhs in Bangalore. Registration charges of 2.25 Lakhs extra. This project has been approved by well known banks. Ready for occupation in Dec-2015 (10 months from now).

    I have below offers from 2 different banks.

    1. Bank-1 will fund 80% of property cost (80% of 54.6 Lakhs). Not for registration. But EMI after possession. No pre-EMI also. Interest amount till that period will be accumulated & will be added to Principal & I can pay full EMI from Dec-2015.

    2. Bank-2 will fund 80% of total cost (80% of 54.6 Lakhs + 2.25 Lakhs registration). But I have to pay pre-EMI as applicable.

    Please let me know which is the best option I can go for. How much gain or losses I will be making comparing both the offers?

    I am inclined to go for the offer from Bank-1 because I don’t have to make any payments till possession. I can save till possession & pay for registration.
    In case of Bank-2, I have to start paying pre-EMI immedietly & also the current rent & other commitments, but they would fund for registration also.

    My current financial status is that, I am putting all my savings for 20% down payment & will be literally left with no bank balance.

    • Tarini
      Tarini
      Mar 02 2015 at 3:24 pm

      Hey Bala

      Sorry for the late response, this is a tricky situation as in option 1 you will be facing a high principal amount after possession while in option 2 you will have to pay a pre-EMI. So it all comes down to how much time till completion of project and possession.
      It’ll be helpful if you could do a comparative analysis of how much interest you will accumulate over the period against how much you will end up paying as pre-EMI along with the interest on the additional 2.25 lakhs. You can go with which ever is lesser.
      I hope this helps 🙂

    • Bala
      Mar 03 2015 at 10:16 am

      Hi Tarini…..Thanks for the reply…..that’s exactly the help i needed….i am not sure how to do the detail calculations as i am not from finance background…..looking for your support on this.

    • Tarini
      Tarini
      Mar 03 2015 at 2:37 pm

      We are happy to help @bala. The calculations are pretty easy actually, here’s what you have to do:

      1. For an estimate of how much EMI will get added to your principal amount till possession, get a rough idea of the tenure, the interest rate being charged by the bank; multiply the interest rate with the amount and add for each month until end of the tenure. This should give you a rough idea.
      2. For the second scenario, add up all the pre-EMI you will need to pay and then find out the interest rate levied on the additional 2.5 lakhs, add up both the values and you will get a rough estimate.
      Now you can go with which ever amount is lesser. You can contact your bank to find out the interest rates charged by them.
      I hope this helps 🙂

  13. Aditya
    Feb 17 2015 at 4:03 pm
    Reply

    Hi,

    I am planning to purchase a Resale Property in Mumbai. The loan officer told me that since the flat is resale, he will sanction 100% loan based on the market rate of the property (he said that the bank will give 80% of the market rate which is above the cost of the house that the seller is selling for).

    He said that I needed to pay only an initial token amount of 2 lacks (which will also be returned) and the registration and transfer fees. The rest of the amount (almost 1.2 Cr) will be disbursed by the bank after the loan is sanctioned.

    Is this possible or is there some catch in this that I am missing.

    • Tarini
      Tarini
      Feb 19 2015 at 5:02 pm

      Hey Aditya

      According to RBI regulations, banks are restricted from lending more than 80% of the property’s value. So its quite possible that there’s a catch. I suggest you proceed carefully and borrow only as much as you need. Over borrowing will only add more financial burden in the future.

  14. SW
    Feb 16 2015 at 7:35 pm
    Reply

    Hi Tarini,
    I have pre-sanctioned letter from HDFC bank and I shortlisted a resale property in Mumbai as I was informed that once the property is logged in the sanction on the property would take 7 days to clear.
    While paying the earnest money to the seller, I informed the bank that the building society does not have an OC copy with them, however the BMC has it with them . I was told that it would not be a problem and the bank would find out other means. The bank did an absolutely tardy job and was completely careless .The loan officer approving the loan was never reachable despite of constant followups, and whenever reached gave “will get back” reply which never came.

    Even after one month from the date of handing over all the documents required to them, they made me run from pillar to post without giving any clear cut answers. Finally the seller ran out of patience and sold the property to another party and the Bank does not have the courtesy to even revert back.

    I am feeling extremely frustrated having lost a wonderful deal due to the casualness of HDFC and intend to escalate the matter. Can you advice me how I can take this bank to task?
    Thanks
    SW

    • Tarini
      Tarini
      Feb 17 2015 at 3:07 pm

      Hey SW

      We completely understand the frustration and anger you are feeling right now. Lack of professionalism has cost you a great deal of time, money and effort and, its only natural to want to make the other party pay for how your feeling. But in this case, I believe there isn’t much that you could do, other than writing a mail to their Head/ Circle office. Any other action will only lead to a further waste of your time and effort. Hence, I suggest that you let this one slide and direct your efforts towards looking for an even better property than the previous one 🙂

  15. D.V.Nathan
    Feb 15 2015 at 7:20 pm
    Reply

    Tarini.
    Thank you for an informative article. I have a query. I have finalised a deal to buy a property where the seller has a loan from HDFC bank. It’s a property where most of the payment has been made to the builder, except the last one to take possession. The seller has been paying pre-EMI for the past 4 years while this project was getting ready. I plan to take a loan from the same bank but for only about half the outstanding amount and they bank says that they will internally adjust after they get paid from the seller the other approx half. The only way this can be done I believe is if I pay the seller beforehand that sum which I have to do without any transfer of property which exposes me to a certain risk. Can you advice. Note that the balance due to the builder is a very small sum compared to the price I am paying.

    • Tarini
      Tarini
      Feb 16 2015 at 4:47 pm

      Hey D.V Nathan

      As I see this case, you and the seller are completely different customers for the bank. This means that your loan should not have any direct relationship with your seller’s loan. Its advisable that you go ahead with full payment once your loan has been disbursed and the property has been registered in your name. Before that, you could make a token payment to the seller, or pay a small percentage of the total amount.
      I hope this helps 🙂

  16. Ritu Gupta
    Feb 11 2015 at 6:01 pm
    Reply

    Hi Tarini,

    My husband has applied for a home loan with HDFC. I wish to be a co-applicant for the loan. Is it possible to get added as co-applicant later on?

    • Tarini
      Tarini
      Feb 13 2015 at 8:00 pm

      Hey Ritu

      Although most banks are a little reluctant to add on co-applicants later, and they may ask you to file an application all over again, incase you want to add a co-applicant at a later date. Hence its advisable that you become co-applicant while filing for the loan.

  17. Ankit
    Feb 10 2015 at 10:24 am
    Reply

    Hi Tarini,

    I have some basic query on purchasing resale flat(almost 25 year old property), I am planning to purchase 25 lac property & taking home loan from axis bank. They have already sanctioned loan of Rs 40 lacs based on my profile & salary. They have already done property legal verification & valuation. following are my queries

    1. After valuation they told they can approve 80% of property value but they have not given any document claiming sanctioned loan amount on property, are there any document which specifies legal verification & valuation of property.

    2. Since i have to pay complete remaining amount to seller before he will sign on seller agreement to be submit for loan amount disbursement. Can I cancel the deal if loan amount turns out to be less than(lets say only 60%) what bank person verbally communicated to us & in that case does i hold any penalty to bank.

    3. Once bank issued photocopy of disbursement cheque & asked to proceed for property registration but at this position in any case seller refused to sell property & go for registration. So can i cancel loan since bank did not released original cheque & do I hold any penalty to cancel this.

    Since I am first timer for bank home loan, I have this basic queries.

    • Tarini
      Tarini
      Feb 10 2015 at 6:26 pm

      Hi Ankit

      As a first time buyer, we would advise you to be extra careful while dealing with the bank and builders. Do read the terms and conditions carefully and as far as possible, try to get all agreements and propositions in writing from both parties. This will help avoid misunderstandings (if any) later.

      Regarding your queries:
      1. Banks generally give maximum 80% of the property’s value as loan and expect you to pay the remaining 20%. However actual sanction of loan amount is depends on several factors like the age and location of property, any changes in your disposable income since pre-approval etc. Depending on these factors the bank may revise the loan amount.
      2. You can cancel the home loan after its sanctioned. However, you cannot cancel it after the loan is disbursed. This may attract a penalty. Since all banks have different terms and conditions, I suggest you read up on your bank’s policies related to cancellation of home loan. You can ask them for a copy. It is advisable to finalize the deal and pay the remaining 20% to the builder only after you have been sanctioned a favourable loan amount.
      3. Generally, once the token amount has been given, sellers go ahead with the sale. However, if you think there is a possibility for the same, please discuss this with your bank in advance as they will be able to guide you better regarding their policies.

      All the best with your purchase 🙂

    • Ranjish
      Feb 13 2015 at 8:24 am

      Hi Tarini,
      I have a doubt regarding EMI of an approved home loan. I got a home loan from SBI for 43 Lakhs and EMI is fixed around 430000. Now bank isalready released 30 Lakhs to the builder but now I can pay rest 13 lakhs from my pocket to Builder directly. Now my doubt is whether bank will reduce the EMI based on the released amount and not on the approved amount?
      -ranjish

    • Tarini
      Tarini
      Feb 13 2015 at 7:39 pm

      Hi Ranjish
      Have the 43 lakhs been sanctioned or disbursed? You can get your loan amount reduced only before disbursement, please check on this with your bank asap.

  18. rohan
    Feb 06 2015 at 4:47 pm
    Reply

    Hi Tarini,

    I am new in buying home property. need guidance. Supposed my loan eligibility is 40 lac. I want to pre-approved this loan. But i want to buy the home of 32 lac. so here my question come.

    1. Does bank credit my eligibility amount (40 lac) directly to my account ?
    2. If yes, the remaining 8 lac can be used for paying 20 percent amount of property to builder ?
    3. Is bank approve the pre-approved home loan on the 32 lac it is of 80 percent and not the total 32 lac ?

    Thanks & Regards

    • Tarini
      Tarini
      Feb 07 2015 at 12:24 pm

      Hey Rohan

      Here’s a clarification to all your queries:
      1. Once you have a pre-approved loan, the bank will make final disbursement after analysing your property. This amount will not get credited into your account. The bank will create a separate loan account through which the amount will get disbursed.
      2. You can never get a 100% home loan to finance your property purchase. Even if you are eligible for 40 lakhs and the property is worth 32 lakhs, you will get a loan only for 80% of 32 lakhs, the rest needs to be financed by you.
      3. The pre-approved home loan will be an approximate amount based on your eligibility, whereas the final disbursement will depend on the property’s value.

    • rohan
      Feb 07 2015 at 12:56 pm

      Thanks Tarini 🙂

    • Tarini
      Tarini
      Feb 07 2015 at 1:19 pm

      We are happy to help @Rohan. All the best with your purchase 🙂

  19. Monali
    Feb 05 2015 at 3:16 pm
    Reply

    Hi Tarini,

    I am in a fix now and I hope you can give me some guidance. This is a rather cranked up case.

    In last week of October ’14, myself and my husband saw a prospective resale flat at Hyderabad which we liked very much. The owner was migrating to Canada and hence wanted to sell the flat fast.

    Being a good property at a dream location, we did n;t want to let it go and hence we agreed to buy.
    I wanted to take a loan for the purchase.

    I approached SBH for the loan where they provided with a list of documents for submission with application. One of the document was a registered agreement for purchase.
    Due to some family emergency at seller’s end, the registered agreement for purchase took time and I could submit the document to the bank only by December 20th. The seller working on a tight schedule requested that the deal should be completed by Jan 31st, 2015 which we agreed to in the purchase agreement. With borrowed funds from relatives, we paid off the seller on the agreed date since there were other buyers who were willing to buy up the property instantly.

    As on date, the home loan application is in process with the bank, some queries were raised and additional documents were requested which I have agreed to provide.

    My query is, is it possible for the bank to issue the loan disbursement cheque to me (initiall they said cheque is given to seller only)? I am yet to take up this sale completion matter with the bank. I don’t know how they will react. I need the home loan also for availing the tax benefit.

    I guess I got too attached with this dream home that I did n’t handle the matters well and now I don’t know whether I will get the loan. I wish you could give me some sound advice on the forward path?

    – A helpless couple holding onto a dream!!!

    • Tarini
      Tarini
      Feb 09 2015 at 6:31 pm

      Hey Monali

      It isn’t a cranked up case really, people get caught up in such situations at times. You will find a way out 🙂
      Regarding your query:
      1. Yes, most banks prefer to give loan disbursement cheque to the seller than the buyer.
      2. I think it will be best for you to come out clean with the bank and tell them about the completion of sale. They will then be able to guide you better through this. You could inquire about the possibility of taking a loan against property to help you repay your friends and family.
      3. Since you have taken a loan from friends and relatives, you will be able to claim tax benefits only on interest payments made to them, against a receipt they provide. Do note that they too will have to pay tax on income from your interest payments.
      Here’s wishing you a happy and stable financial life!

  20. Rudresha CMB
    Feb 03 2015 at 1:23 pm
    Reply

    Hi,
    I have applied for a home loan in Axis Bank. We are in need of 22 Lakhs for 12 years tenure. In application we requested for 25 lakhs with 15 years tenure as executive said we can reduce it later once loan get sanctioned. Now, the same person is telling as we can’t reduce the tenure but we can do loan amount to 22 lakhs. If we want to reduce the tenure along with loan amount then need to wait for 15 days to get with new sanction letter.He suggested to go with 15yrs only as you have plan to prepay loan whenever you have enough money, with no charges. I said him to go ahead with 15 years tenure only.
    By this way am I going to loose any major part of amount here? Is this OK to go with 3 years of difference.

    • Tarini
      Tarini
      Feb 06 2015 at 5:23 pm

      Hey Rudresha CMB

      Technically if you see, if you have the determination and financial capability to pay off your home loan in 12 years then the 15 year tenure shouldn’t affect you. But you see, 12 years is a long time and, to make sure that you prepay some bit with every EMI you pay is a mammoth task. It will take a lot of planning and self determination. This is exactly what the bank executive is playing on. A longer tenure for the bank means more interest, for you means you it will mean spending more than you need to on your home loan. So I suggest you ask them to reduce the loan tenure.

    • Rudresh
      Feb 13 2015 at 5:19 pm

      Thanks Tarini for the quick response..
      I spoke to the executive again to reduce the tenure from 15 to 12. As per my calculation, saved rupees 4.8L by reducing 3 years of tenure. Anyhow, I have plan to payoff the max of 8 yrs by paying whenever I get some good savings.

    • Tarini
      Tarini
      Feb 13 2015 at 5:57 pm

      That sounds great @Rudresh! There’s nothing like it if you could pay it off within 8 years. All the best 🙂

  21. HP
    Feb 02 2015 at 2:34 pm
    Reply

    Hi Tarini,

    I had taken home loan from HDFC limited for a property worth 50 lakhs. The payment plan was 60:40.
    My loan was not fully approved 80% & was done only for amount 35 Lakhs due to another ongoing loan for car. I had made initial payment of 15% towards builder after which 45% was disbursed by HDFC to make 60%. I was told by bank to make rest 5% as my share during possession & difference another amount of 5 lakhs before taking last 35% disbursement from bank. Now, I have closed my car loan & obtained NOC for it & I think based on this, my home loan eligibility can go upto 44-45 lakhs. 1) Please guide me whether I need to go to bank to increase it & then pay my 5% amount & rest can be paid by bank?
    2) Can I further take or increase loan for registration & stamp duty?

    Thanks in advance !!

    • Tarini
      Tarini
      Feb 24 2015 at 3:49 pm

      Hey HP

      Here’s a response to your queries:
      1. As per RBI regulations, banks are forbidden from lending more than 80% of the total property value. So I don’t think the extra 5% payment would help you get loan for a higher amount.
      2. Yes, you can take a loan to pay stamp duty and registration.

  22. PANKAJ KUMAR
    Feb 01 2015 at 9:56 pm
    Reply

    Hell Tarini, I had applied for home loan in OBC, now they are asking for Blank 15 PDC before issuing sanction letter
    . My loan amount is 27 lakh for 30 years. what to do ?

    • Tarini
      Tarini
      Feb 06 2015 at 3:31 pm

      Hi Mr. Kumar

      Please excuse me as I have taken the liberty to combine both your comments for ease of understanding and replying.
      Regarding your query, all banks have different procedures and terms and conditions regarding home loans. I suggest that you go through OBC’s T&C to see what is the provision for taking blank PDCs and ask your bank manager about the same. Is this because you don’t have a savings account with OBC through which their ECS can deduct EMIs? If that’s the case then I suggest you discuss it with the Manager and open a savings account. Generally most banks deduct EMI from savings account and persuade borrowers to open one with them if they don’t have one already.

  23. Deepali
    Jan 30 2015 at 10:37 am
    Reply

    The loan is actually not disbursed and there is no sale deed yet happened. I have also not signed the copy of offer letter. The bank has already taken Rs. 13,000 for the documentation and processing fees from me. Now they are asking for cancellation charges also.

    • Tarini
      Tarini
      Jan 30 2015 at 5:51 pm

      @Deepali, the same has been combined in the answer to your previous query, kindly refer to that.

  24. Deepali
    Jan 30 2015 at 10:32 am
    Reply

    Hi,
    I had applied for a home loan with AU housing Finance (with 17% too high) , later i came to now that the documents of property for which I had applied for loan were incomplete ,also loan approval procedure is too long , so I had already called the executive and told to cancel the loan 2 weeks before. Now, yesterday 29/01/15 I got a offer letter for the same.
    I went to bank with the letter and told to return all the original property documents which I don’t know why he had taken. The bank is refusing to return the documents and is saying that loan is already disbursed and its EMI will start from 10th Feb. If u want to cancel the loan you have to pay the cancellation charges. Now the loan is not yet disbursed and before receiving sanction letter I have cancelled the loan, so is it necessary to pay the cancellation charges and with what %

    • Tarini
      Tarini
      Jan 30 2015 at 5:50 pm

      Hey Deepali

      First of all, PLEASE don’t approach such money lenders which have little or no reputation. As you have mentioned, the are charging an interest rate of 17%, which is 6.5% higher than market rate! This should have been a red flag for you. I urge you to approach only well established lending institutions with reasonable lending rates and terms and conditions.
      Regarding the cancellation charges, generally lending institutes do not charge any cancellation charges. However, referring to this sheet of terms and conditions, I believe you will have to pay up as it is clearly mentioned here. Kindly check your terms and conditions sheet to see what they have mentioned in that section. If it states the same, then you are bound by it. If not, then you can challenge them, refuse to pay the charges and report them to National Housing Bank.
      Please be careful the next time.

  25. Asif
    Jan 27 2015 at 10:38 pm
    Reply

    Hi,

    I have taken the home loan from HDFC bank. let me know, In case of I will not be able to payment of remaining EMI than what take action can by bank

    • Tarini
      Tarini
      Jan 30 2015 at 5:03 pm

      Hi Asif

      The bank can take the following actions against you, if you are unable to repay the remaining EMIs;
      1. As you faulter on payments, teh bank will send you notices and you will have to pay additional interest on delayed payments.
      2. If you continue to default the bank can either take over your property, by giving you due notice, or sell of the property to reclaim loan amount with pending interest and give you the remaining amount from selling off property, if any.

  26. Kishore
    Jan 27 2015 at 12:41 pm
    Reply

    Thanks for the quick response, any point of contact for legal advisor is greatly appreciated. 🙂

    • Tarini
      Tarini
      Jan 27 2015 at 1:14 pm

      Happy to help @kishore 🙂
      Unfortunately, we will not be able to help you with contacts of legal advisors.

  27. Kishore
    Jan 26 2015 at 10:02 pm
    Reply

    Hi Guys,

    Really a very good blog for all your questions related to home loan, thanks…I have a query

    Am planning for a home loan for construction of new house on a empty land, the land is my mother’s name..can avail home loan as a dependent ?? and will i avail 100% tax benefit on loan as my mother income is nill.

    Please guide me how to proceed.

    • Tarini
      Tarini
      Jan 27 2015 at 12:28 pm

      Hi Kishore

      Thank you for the appreciation, we are always happy to help 🙂
      Regarding your query, you can take a home loan for construction of property with your mother as co-applicant. However, since you are not a co-owner of property, you will not be able to claim any tax benefits on your loan repayment. If your mother executes a deed to include you as a co-owner of property before taking the loan (as after taking it she will need to take permission from bank to include co-owners in land), then you will be able to claim 100% tax benefits on the loan. To go ahead with the deed, you can contact a legal advisor.

  28. Rajesh C
    Jan 21 2015 at 4:26 pm
    Reply

    Thanks Tarini,

    Yes I work with a commercial banking firm, wherein the employee benefit includes interest at 9%. LIC has disbursed only Rs.24 lacs of which the current outstanding is Rs.23 lacs.

    • Tarini
      Tarini
      Jan 21 2015 at 7:45 pm

      Hi Rajesh

      In that case it will be better if you switched to your banking firm only if the prepayment penalty gets covered within 3 to 4 months by the money you will save here.

    • Karthik Srivatsan
      Mar 15 2015 at 9:36 am

      Hi rajesh,

      I have taken a loan from lic hfl with a fixed interest of 10.10 for 2 years. However in the sanction letter the ‘after two years’ interest is mentioned as to be decided based on prevailing interest rates. Is this how it’s mentioned in yours as well? Shouldn’t it be listed as something relative lchlr? Like minus 300bps? Please clarify..

  29. Rajesh C
    Jan 21 2015 at 2:27 pm
    Reply

    Hi

    I have taken a loan of Rs.3500000/- from LIC HFL last year with a fixed tenure of 2 yrs for interest at 10.20%. Since now my employer is offering interest rate of 9%, I wish to transfer the same, in which case it would call for foreclosure charges of 2% on the outstanding amount (Rs.2300000/-).

    Please suggest.

    • Tarini
      Tarini
      Jan 21 2015 at 2:47 pm

      Hi Rajesh

      I am not clear on your reference to ‘my employer is offering 9%’, do you work with a financial lending institution? Or will this be a loan from the company you work for? If its the latter case, then i would advise you to go through the terms and conditions and agreement thoroughly before going ahead. 9% as a lending rate is way below the prevailing market rate, which makes me think if there is a catch here.

      Regarding the prepayment penalty, I would advise you to wait for the fixed tenure to pass as its a large amount, unless the total cost of switching get covered easily by your savings.

  30. manjunath ramesh
    Jan 21 2015 at 11:23 am
    Reply

    Hi,
    I need your hlp regard to my querries below:

    I would like to transfer my housing loan from existing to other bank since the ROI is lesser than 0.9%.

    also i am intrested to reduce my tenure to 12 years which is presently 20 years now.
    While speaking to the bank representative, they suggested me to keep the loan tearm as 20 years only though i am ready pay the emi for 12 yrs.
    They instead of committing the fixed emi for 12 yrs they suggested me to keep the term as 20 yeras and additional amount you can pay directly to principle every month.
    They said, in this case alos loan will be get completed in the 12 years only if i regularally paid the diffrence amount 12yeard emi amount- 12 years emi amount to 12 years from now.

    Hence, i need your comment or suggestion in thois regard.

    Kindly clarify my doubts and revert with yur recommendations.

    • Tarini
      Tarini
      Jan 21 2015 at 1:42 pm

      Hi Mr. Manjunath Ramesh

      If you have a sound financial backing to pay EMIs for a 12 year loan the you should ask them to reduce loan tenure. Even though going by the bank’s logic you will end up completing the loan in 12 years, you will have to keep a check on your expenses and savings every month to make sure that you make the extra part payments every month. So I believe its best if you get your loan term reduced, it will save your time and effort considerably.

    • manjunath ramesh
      Jan 22 2015 at 4:31 pm

      Thank you very much your response and will defnitly respect your recommendations.

      Pls let me know, what percentage of net salary we can pay as emi.

    • Tarini
      Tarini
      Jan 22 2015 at 6:40 pm

      Hi Manjunath Ramesh
      We hare happy to help 🙂
      Ideally you can pay 40% to 50% of your take home salary as EMI. This percentage is however decided by the bank and can be altered at their discretion.

    • manjunath ramesh
      Jan 23 2015 at 1:00 pm

      Hi tarini,

      Can you pls explain how the loan will get over by 12 years only by paying diffrence amount of emi value for 12 years – emi value of 20yrs along with 20 years emi.
      How it is possible to complete the loan in 12 yeras?

    • Tarini
      Tarini
      Jan 23 2015 at 3:06 pm

      Hi Manunath Ramesh
      I am not clear about your reference to ‘EMI value’ here, kindly explain that. About repaying home loan of 20 years in 12 years, here is how it will work:
      Once your loan has been disbursed for 20 years, the bank will give you an amortization schedule with the EMI payments for the entire tenure. So suppose every month you need to pay Rs.X as EMI according to the amortization schedule, then you can pay Rs.X + Rs.Y (your savings) every month. This way Rs. Y will get deposited in your loan account and will go only towards principal repayment.
      So every month your outstanding balance should reduce by some portion of Rs.X (according to the principal and interest break up in amortization schedule) + Rs.Y.
      I hope this answers your query 🙂

  31. joshi
    Jan 18 2015 at 1:26 pm
    Reply

    Hi I need help I am confused with moratorium period interest calculation. I took 78 lacs loan in june 2013 with 10.35 % Rate of intrest for 18th month of moratorium period means dec 2014 moratorium period will end. In the sancation letter its mentioned as 75 thousand as my EMI for 282 months. Loan disbursed until today date is 59 lacs with different dates. Now in Jan 2015 I went to bank to ask what my next payment. bank asked me to clear 86 thousand an interest arreas. not sure what it mean?? can u help me please. Regards Raghu.

    • Tarini
      Tarini
      Jan 30 2015 at 5:13 pm

      Hi Mr. Joshi

      I apologize for the delayed response, here’s why the bank is asking you clear interest arrears:

      Simple moratorium interest rate logic states that during this period i.e. 18 months no EMI is to be paid but the interest for this period gets accumulated and once when EMI payment starts the interest amount is added to the loan amount and on that basis EMI is decided which needs to be paid. Calculating simple interest for 59 lakh over 18 months it comes to roughly 91 K. So I believe this is the amount they are expecting you to pay up.

  32. Jay
    Jan 13 2015 at 1:54 am
    Reply

    Hi
    I have booked flat around 1500000, nd I got loan sanctioned from axis bank and I have applied more then flat amount now want to know how bank do disbursement and after full disbursement. How bank give remaining amount, are they give cheque to me?

    • Tarini
      Tarini
      Jan 15 2015 at 4:12 pm

      Hi Jay
      Wishing you a happy and prosperous new year 🙂
      Has your loan been disbursed or has it just been sanctioned? If you have gotten a sanction for a higher loan amount then you can simply inform the bank that you need a loan disbursement of a lesser amount. However, if the 15 lakhs have already been disbursed, then there isn’t much that you can do.

  33. Vikram
    Jan 06 2015 at 4:54 pm
    Reply

    Hi, Thank you for your valuable input.

    I have booked a flat in Mumbai and have taken loan of 30 lacs for 25 years. Emi comes to around 27.5k pm. If I had reduced the tenure, the Emi would have gone up. My question is what would be the difference if I had taken 30 lac loan for 25 years and 30 lac loan for 15 years and repaid the entire loan amount in (say) 10 years in both the instances

    • Tarini
      Tarini
      Jan 08 2015 at 4:58 pm

      Hi Vikram
      Wishing you a happy and prosperous new year! 🙂
      If you are working with the assumption that you will repay the loan within 10 years in each case, then there wouldn’t be much difference in total cost in either case. However, if you chose to repay the loan in 25 years instead of 15 years then you would end up paying more in terms of interest in the former, making it more expensive than a 15 year term loan.

  34. Mani
    Jan 02 2015 at 3:10 pm
    Reply

    Hi Tarini,

    Wish you very happy new year to you and your family.

    I am planning to book a under construction flat worth 51 Lakh. Actual cost of flat is 39 Lakh and Other amenities cost of 10L + Service tax/VAT tax. As per the bank norms, they will sanction loan for 80%. So in this case Bank will consider 80% on 39 Lakh or 51 Lakh. And do I need to pay full 20% before the loan get disbursed?

    Thanks in Advance for your kind response

    • Tarini
      Tarini
      Jan 05 2015 at 7:39 pm

      Hi Mani
      Wishing you the same 🙂
      1. The bank will consider the selling value of the property, which is 39 lakhs. So you will be entitled to a loan of 80% of 39 lakhs.
      2. The payment of remaining 20% needs to be decided between you and the builder. Since your property is under construction, ideally the builder should ask for payments as the construction progresses.

  35. Arpit
    Dec 26 2014 at 12:25 pm
    Reply

    Hi,

    What would be ideal tenure for home loan for me 20 or 15 years. Age:26 years Loan amount: 42.7 Gross(Me+Wife): 88k. Considering i am comfortable for higher EMI.

    Regards,
    Arpit

    • Tarini
      Tarini
      Dec 26 2014 at 1:41 pm

      Hey Arpit
      Since you are comfortable with paying a higher EMI, I would suggest that you go with a tenure of 15 years as a long tenure adds on to your interest payments substantially.

  36. Niraj
    Dec 23 2014 at 3:37 pm
    Reply

    Hi Tarini,

    I have taken a home loan for a under construction property from PNB. Bank disburses the demand amount after the completion of every two floors. The EMI date falls on 10th of every month. Now, if the builder demands on the middle of the month and bank disburses on a date prior to the EMI date, I have to pay an additional pre EMI for the remaining days to my EMI date. Could you please explain to me if this is an extra interest amount which I am paying and if yes, is there some way to avoid it?

    • Tarini
      Tarini
      Dec 26 2014 at 11:14 am

      Hi Niraj

      This is matter of bank loan policy which is different for each bank. There is no way to avoid it.

  37. Amit kr saxena
    Dec 11 2014 at 6:12 pm
    Reply

    Dear Sir,

    This was one of the best article i read on home loan. Thanks. I have a query.
    I had applied for home loan to hdfc ltd. I gave them processing fee and i had got the sanction letter.
    However, when i got the first demand letter from builder, I had inform the same to the bank for disbursement.
    I had informed builder about my home loan. but builder said hdfc will not disburse your amount because property was not approved by them, and bank was saying that property is approved but they have not yet received the revised letter from builder. So, bank will not be able to proceed further due to this document.

    builder is saying we will get the revised letter soon. Now,it already 3 month passed but my loan is still not started and I am stuck between bank and builder.

    Now, I am bound to take the loan from builder’s guided bank “corporation bank”.

    Kindly guide me what should i do?

    Regards,
    Amit

    • Tarini
      Tarini
      Dec 12 2014 at 12:08 am

      Hi Amit

      This is a very peculiar case of builders pushing their buyers to banks they have tied up with before hand. They usually work out a deal with banks which finance their projects to push customers towards them, hence the uncooperative attitude towards your preferred bank. I would advice you that you judge your options and go with what you feel comfortable.
      It is not mandatory for properties to be pre-approved by all banks, even if your property has not been pre-approved by HDFC, you can take a home loan from them. All you need to do is provide them with several documents which they will need from the builder to verify the project and sanction your loan. You need to be persuasive with the builder and make sure that they give you that letter, if need be visit their office and persuade higher ups. Your are being troubled by sheer bureaucracy.

  38. Sandipan Banerjee
    Dec 10 2014 at 6:17 pm
    Reply

    Hi Tarini ,

    what I wanted to know from you is , I have taken housing loan from ICICI Bank , the project is under construction , will be delivered by aug-sep 2015 . I am paying pre EMI for the same . Now, due to some sudden financial constraint , I am not in a position to take the flat ,. I have given 10% downpayment and rest 10% I have to pay while taking handover of the flat . What is the procedure to came out from this scenario , will it be a heavy loss for me ? please advice .

    • Tarini
      Tarini
      Dec 11 2014 at 11:45 pm

      Hi Mr. Banarjee

      You have nothing to worry about, several people sell of their property before possession. All you have to do is inform your bank and builder about your plans of selling in written. Once you have sold it off, you can use the money to pay off your remaining loan amount. This should take care of your problem 🙂

  39. Hemant Verma
    Dec 03 2014 at 3:29 pm
    Reply

    Hi Tarini,

    I have a running home loan with HDFC bank and bank has disbursed one demand again my loan while next few demands I have paid on my own. The possession of my property will be somewhere in 2017. I am repaying the loan EMI for the disbursed amount, I might need to pay the builder’s next demands by loan or may be I can pay those on my own. My question is, can in repay the total disbursed amount or do i need to wait till all the demands have raised by the builder or for possession?

    • Tarini
      Tarini
      Dec 03 2014 at 5:20 pm

      Hey Hemant

      Since you are repaying full EMI on your part loan disbursal and not just making interest payments, you can pre-pay your existing outstanding loan amount. However, since all banks have different policies regarding home loans please check with your bank about the prepayment penalty (if any).

  40. Thomas
    Nov 21 2014 at 10:47 am
    Reply

    Hi Tarini,

    Thanks a lot for your response. Appreciate your support.

  41. Thomas
    Nov 20 2014 at 12:28 pm
    Reply

    Hi Tarini,

    I have booked a flat that is under development and about 65% of the loan amount is already part disbursed by the bank. Due to some financial crisis, I’m exploring the possibility of getting out of this – by selling/transferring the property (don’t know how feasible/easy it is) or some other means. Can you kindly suggest the best possible option?

    • Tarini
      Tarini
      Nov 20 2014 at 8:48 pm

      Hi Thomas,
      Since I am unaware of your current financial situation, I will be unable to suggest any alternatives.
      If you want to sell the property, then its as easy as selling a developed property. Before you put it up for sale, do notify the bank about your plans as they have a legal right to know. Once you have found yourself a buyer, you can use the amount to repay your loan. All the best for your endeavour.

  42. SPB
    Nov 16 2014 at 8:52 pm
    Reply

    Hi Tarini,

    Once the sanction letter lapses (after 6 months), will the processing fee have to be paid again to renew the sanctioned loan amount?

    In the 6 months period, if there is a change in my salary structure, can the sanctioned loan amount be enhanced based on my new salary?

    Normally builders require 20% at the time of booking a flat. Assuming I have a pre-approved loan, will the bank disburse 80% of the initial 20% (or) should the initial 20% have to be completely paid by me?

    • Chintan Udani
      Nov 25 2014 at 2:52 pm

      Hi,

      Please find answer to your queries below.

      1) Once the sanction letter lapses (after 6 months) you will not have to pay again to renew the sanctioned loan amount.
      2) In these 6 months if your salary increases than yes you can ask for increase in sanctioned amount.
      3) If you have a pre approved loan than yes bank will pay 80% of the amount required for booking a flat.

    • Nilkanth Patil
      Feb 14 2015 at 11:34 am

      Dear Tarini

      I have a Q. as an extension to reply to Chintan Udani says: November 25, 2014 at 2:52 PM,,,

      Chintan Udani Q. Normally builders require 20% at the time of booking a flat. Assuming I have a pre-approved loan, will the bank disburse 80% of the initial 20% (or) should the initial 20% have to be completely paid by me?

      Your A. 3) If you have a pre approved loan than yes bank will pay 80% of the amount required for booking a flat.

      My Q.

      Which are the financial institutions give 80% of initial 20 % the amount required for booking a flat, so that i can approach those institutions for pre approval??

    • Chintan Udani
      Feb 19 2015 at 7:26 pm

      Hi Nilkanth,

      All big banks and financial institutions give 80% of initial 20% amount required for booking a flat. SBI, CBI, HDFC, ICICI, AXIS, HSBC, IDBI, Standard Chartered all of them give 80% of initial 20% required for booking a flat.

  43. Anuradha
    Nov 05 2014 at 12:47 pm
    Reply

    Dear Tarini,
    I have applied for an overdraft doctors loan from Bank of Baroda to purchase a commercial shop of MHADA building. The MHADA rules of not selling for 5 years is not applicable to commercial properties. The only papers we submitted was the allotment letter by MHADA to current owner, registration of the shop and his loan statement from HDFC bank. The BOB manager only verbally over the phone said that loan is approved. there is no official letter given at all. He just asked to go ahead with the agreement and registration of the property. after submitting registration details, loan amount will be disbursed. Shouldn’t bank give a sanction letter saying loan is approved but it will be disbursed after following conditions are met? I am worried that after we go ahead with the signing of agreement and registration of the property, what if bank says that now the loan isn’t approved or something like that. is it OK to go ahead?

    • Tarini
      Tarini
      Nov 05 2014 at 1:34 pm

      Hi Anuradha

      That is very unusual as all banks give a letter stating approval and then disbursal of loan amount. Hence, you should demand a written confirmation of loan approval which states the terms and conditions before you go ahead with the final deeds of your property purchase. All leading banks have a practice of giving pre-approved loans too, so this shouldn’t be a problem 🙂

    • Nishit Dey
      May 19 2015 at 1:42 am

      Do the mhada property need the “plan copy” of the building….

    • Priyanka
      May 25 2015 at 3:29 pm

      Hi Nishit,

      Yes.

      http://www.SwitchMe.in
      91-810889980

  44. Dhaval
    Oct 30 2014 at 4:39 pm
    Reply

    Dear Tarini, I have taken a home loan for an under construction property. Now, the time has come to take the possession and to get the final disbursement from the bank. If I make a part of the final payment from my pocket and do not take the full disbursement from the bank i.e. do not consume the fully sanctioned amount, what would be the impact? Is that advisable?

    • Chintan Udani
      Oct 31 2014 at 11:14 am

      Hi Dhaval,

      If you make the final payment from your pocket and do not take the final disbursement then the loan amount will go down which will affect your EMI too. If you think this way you will save you more money in the long run then yes this is an advisable option.

  45. Amit
    Oct 15 2014 at 10:48 pm
    Reply

    Dear Tarini,
    I am planning to purchase a resale property in Delhi. The Loan has been sanctioned and am just waiting for some documentation formalities to complete before I proceed with disbursement. Today I got to know that once I sign my disbursement documents, the interest will be applicable from the very same day though the cheque would be handed over to seller couple days later at the time of registration. Also, in my case, the first EMI date has been finalised as 5th of Nov. But since I will sign the disburse documents on Oct 17, I will have to pay the Simple Interest for 18 days( Oct17-Nov 5) on the entire loan amount. Its almost like I am paying pre-EMI for 13 days. Is this the way it works? Anyway I can make them not to charge this simple interest.
    Thanks in advance for your help.

    • Tarini
      Tarini
      Oct 16 2014 at 6:43 pm

      Hey Amit

      Looks like there is some confusion regarding the EMI payments. Your EMI payments will start on 5th November, irrespective of when you hav esigned your disbursement documents. There is no need to pay pre-EMI. Please clarofy this with your bank.

    • Amit
      Oct 19 2014 at 5:45 pm

      Thanks for the reply Tarini. Pre-EMI may not be the right word but I have double checked and they confirmed below:
      1. There are no interest free days.
      2. Once loan gets disbursed on papers( my signing of disbursement documents), the interest starts from the very same day.
      3. The EMI starts from the subsequent month of disbursal. Hence, interest is applicable on the number of days remaining post disbursal till end of current month.
      4. If I take disbursement on 31 Oct, I only have to pay interest for 1 day. In my case I have postponed by disbursement to Oct 21, hence I will have to pay interest for 11 days. My EMI will start from Nov.

      Not sure if this is how to works but would be glad to see your expert comments on this.

    • Chintan Udani
      Oct 30 2014 at 11:07 am

      Hi Amit,

      According to bank policy the EMI is on monthly basis. If the disbursement happens on 20 Oct than you can have EMI payment starting from 20 Nov. Making it a monthly cycle.

    • Ranjit Kumar
      Mar 28 2015 at 10:39 am

      Hi Tarini,

      I have similar query, What should be the start date of interest from below:
      1. Cheque handover date
      or
      2. Actual Payment realization date

      HDFC calculates interest from date of Cheque handover

    • Ashwini Menon
      Ashwini Menon
      Mar 31 2015 at 4:00 pm

      Hi Ranjit,

      The start date of interest should be the date from the Cheque Handover.

  46. Dhiraj Kumar
    Sep 30 2014 at 2:51 pm
    Reply

    Hi Tarini,

    After having a home loan sanctioned from ICICI Bank, I have booked a ICICI Bank approved under construction property at Noida. As project is nearing completion, as per agreed payment plan we need to pay 60% of total cost within a month. I am paying my share of 20% & balance has to come from Bank ASAP.

    Wanted to know, what all document Bank will be needing from me before disbursing the balance 40%. Will Bank be paying directly to builder basis their demand letter (may be direct online transfer) or payment will be routed through me, may be Bank will issue a cheque to me & I personally need to hand it over to builder ? I have heard about heavy interest these builder charges if payment are not done on time & hence this query.

    Thanks, Dhiraj

    • Chintan Udani
      Sep 30 2014 at 5:14 pm

      Hi Dhiraj,

      1. Since the documents requirement of each ban differs, we will not be able to list out all the documents for you. Kindly contact your loan branch for the list of documents. One main document you will require is Architecture Certificate which will be provided by the builder. It will show that the construction has been complete.
      2. In most cases, bank disburses loan amount directly to the builder. You will not have to bother about timely payments to builder, as banks take care of that. Once you have paid your share of 20%, the bank will pay the remaining installments as specified by the builder.

  47. Arpit
    Sep 25 2014 at 6:01 pm
    Reply

    HI,

    Can i pay first disbursement amount by myself and for rest of the amount take home loan.

    Thanks & Regards,
    Arpit

    • Tarini
      Tarini
      Sep 26 2014 at 3:34 pm

      Hi Arpit
      Your question is not very clear. Could you help me with more background info, as to; have you already applied for the home loan? At what stage are you in the negotiations? This will help me solve your query.

    • Arpit
      Sep 26 2014 at 3:51 pm

      Thanks for your response.

      I have done only pre-sanction of home loan but for the first disbursement amount i want to pay by myself and rest amount by home loan

      also, i want to add one more query if co-applicant income is not considered in first home loan. Then, while calculating eligibility in second home loan is co-applicants eligibility would be reflected by first home amount.

    • Tarini
      Tarini
      Sep 29 2014 at 6:04 pm

      Hey Arpit

      1. In that case, you make an arrangement with the bank wherein you pay the first installment, and the bank disburses the loan from the second date of payment to seller.
      2. If your co-applicant’s income was not considered in the first home, then it will not reflect even now. However, if you are applying with the same co-applicant again, then whether or not the income get considered this time, depends on the bank.

  48. jaysparshjay
    Sep 19 2014 at 2:33 pm
    Reply

    Hi,

    What if I pay more EMI than what is calculated…Is that Allowed?

    Does that clear off my loan early?

    For example..for an asked EMI of 45k/month for 10 years…if I pay 60k/month…does that mean it will get cleared with me having to pay lesser interest?

    • Tarini
      Tarini
      Sep 20 2014 at 12:55 pm

      Hi Jaysparshjay

      1. Yes, you can pay more that the calculated EMI.
      2. Yes, by paying more than the decided EMI, you will be paying off your loan faster. This will indeed reduce your interest payments.

    • Karthik Srivatsan
      Mar 15 2015 at 9:41 am

      Hi tarini,

      It’s a very well written and informative article. I just have a small query.. I have taken a loan from lic hfl with a fixed interest of 10.10 for 2 years. However in the sanction letter the ‘after two years’ interest is mentioned as to be decided based on prevailing interest rates. Is this normal? Shouldn’t it be listed as something relative to the base lending rate of the bank ? Like minus 300bps? Please clarify..

    • Tarini
      Tarini
      Mar 18 2015 at 8:14 pm

      Hey Karthik

      This is a common practice by LIC HFL, most of their teaser loans start off with low interest rates, which get reset to anywhere between 11.50% to 12.50% after 2 years. So you need to be prepared to pay those high interest rates, 2 years from now.

  49. sandip
    Sep 09 2014 at 12:01 am
    Reply

    Hi,
    One of the best article i read on home loan. Thanks. I have a query.
    I have applied for home loan to icici and hdfc ltd simultaneously. I gave them processing fee cheques. Icici was first to give me sanction letter with comfortable terms and conditions while hdfc was delyed in giving me saction letter. Meanwhile icici has realized the cheque from my account. Since processing fee is non returnable, i had no other option than go with icici while hdfc agent was pressing me to abondon icici and take loan from him. I chose to go with icici and submitted them sale deed and other documents for disbursement. Also hdfc ltd has sent cheque for clearance to my bank but i got it blocked it earlier and kept my account balance to minimum so cheque can not be realized. Now hdfc has sent me email stating that cheque has been dishounered by bank for insufficient fund.

    Please guide me what i can do as i fear hdfc will take legel course.

    Regards
    Sandip

    • Tarini
      Tarini
      Sep 09 2014 at 4:47 pm

      Hi Sandip

      I don’t think it was a wise decision to give a cheque for processing fee to both banks as this indicates that you are willing to go ahead with the loan. This should be the last step of deciding which bank you want to go with.
      Since the situation cannot be rectified, I suggest you verbally inform HDFC Bank that you will not be going ahead with the loan. Ideally, you should have informed them before blocking the cheque. This would have prevented this complicated development in your case.
      Next time, please take extreme precaution as dishonored cheques are liable to legal action.

    • Rekha
      Mar 20 2015 at 11:45 am

      Dear Tarini thanks for the reply posted by you. I have a query on it. I have applied for the home loan in Indiabulls but they decline my application due to non availability of guarantor. On decline I again put my application in DHFL and they have given me the sanction letter but due to some prob in property they hold my application meanwhile I got a guarantor. hence I again go for with indiabulls. Now on the builder advise I have stopped the cheque given to DHFL.
      Now you are requested to pls advise, is it possible that the DHFL blacklist me on any future laon processing.
      Also what can be the corrective action?

    • Tarini
      Tarini
      Mar 20 2015 at 1:23 pm

      Hey Rekha

      This is a very common situation several borrowers find themselves in, there’s nothing to worry about 🙂
      Although I am not completely aware of how DHFL functions, I believe there is no apparent reason for them to blacklist you for future dealings. All the best with your purchase!

    • Rekha
      Mar 20 2015 at 1:48 pm

      Pls also confirm, is there any negative impact on loan sanction if my cheque gets dishonored , as one my known told me that my loan will not be sanctioned/ disbursed if anything like happens?

    • Tarini
      Tarini
      Mar 20 2015 at 4:44 pm

      Yes Rekha

      A bounced cheque may reflect badly on your credit score (lower the score, lesser are your chances of getting a loan), which could in turn prompt the bank to decide against giving you the loan. Bounced cheques, delayed bill payments, defaults on previous loans, high debts etc. could all lead to the same.

    • Neha Jagtap
      Jul 22 2015 at 1:20 pm

      Hi! DHFL follows routine process. They check the title of property, valuation of property and visit t property is done. After credit department gives ok, they sanction the loan.
      Rekha, If you have gone through the agent, then catch hold of him. Or if you have gone their directly, then definitely meet the appropriate people there (BKC office) and seek status of your application and reason for which it is stuck.

    • Sandeep
      Jul 28 2015 at 10:28 am

      Hello Tarini,,,
      I have taken home loan from bank for redy to move flat. it s more than 20 days Loan has been sactioned & more than 1.5 months from application but the disbursement is not yet done. Being a NRI customer i dont have any clue what exactly going on. there is no reply from bank on status. whenever i call they give some excuse of some missing document etc…
      Now if i dont give the remaining amount with in 2 months builder may charge the interest to me.
      I have couriered them my original agreement and orginal receipts of 20 % payment so i cant go with other bank as well.

      Is there any rule that in how many days bank should disburse the loan amount ? by sending the email can i cancle the loan ? and get the papers back ?
      The service is worst what can i do about it ?

      your advise will be appriciated.

      Br
      sandeep

    • Tarini
      Tarini
      Jul 28 2015 at 6:57 pm

      Hey Sandeep

      This is indeed a very unfortunate situation to find yourself in. The best solution here is to look at other banks. Since your loan has been sanctioned and not disbursed, there is no need to carry out any other formalities or communication with the bank. You can simply write them a letter requesting your original documents back. I hope they revert back soon enough, take care!

  50. Rahul Awari
    May 01 2014 at 12:02 am
    Reply

    Dear Sir,
    we both Husband and wife jointly going to purchase flat at Mulund. The deal will Hopefully closed by Next week. The Bank of Baroda has also sanctioned offer letter of 25 Lacs. where the tenure is 20 years. and we both want to reduce the Tenure to 8 years. Yet we have not signed and returned the offer letter.

    Please guide us How to Reduce the Tenure. as our Deal is near to completion.

    • Tarini
      Tarini
      May 15 2014 at 5:52 pm

      Hi Rahul
      The tenure of your loan is subject to your eligibility to repay the loan. Once you take the loan, it will be easier to request them to reduce the loan tenure, than otherwise. However, if the bank refuses to reduce the loan tenure then you can always pre pay the loan by paying off the same EMI amount you had in mind.