To help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A appears every other Monday.
I had taken a home loan in November 2006 and to my misfortune, the interest rates just zoomed up, resulting in my loan period increasing from 12 years to 20. I have other loans also. With interest rates now coming down, what do you suggest I do? My salary has increased during this period and I would like to prepay part of the loan.
With specific reference to your housing loan repayment, the lender would generally reduce your term unless you request them to change your equated monthly instalment (EMI).
In your case, you could continue with the same EMI and allow the period to be reduced whenever interest rates come down, and use your savings to prepay high-cost loans.
Since you are also servicing multiple loans such as a housing loan, vehicle loan, personal loan, etc., and have to make the choice to repay, it is advisable that you evaluate all the loans and decide to repay the loan based on its cost.
Housing loans have great tax benefits which make the effective interest rate much lower. Hence you may find that prepaying the housing loan while retaining other loans may not make financial sense.
I am based in Chennai and am looking at buying a resale apartment by taking a home loan. While finalizing a resale flat in a society, how do I know if the property meets all the approved norms of the financial institutions and that they will agree to give a loan against it?
Prior to finalizing a property, it is important that you select your loan provider and discuss with them the available options. Before approving your loan, the financial institution usually does a through study of the property’s legal and technical documents, and would guide you on the documentation, which is one of the most important things while buying a resale property.
One also needs to keep in mind that resale properties are predominantly localized, each having different requirements, and therefore you may need to tap into the resources of your loan provider and seek assistance.
Renu Sud Karnad is joint managing director, HDFC. Readers may write in with their queries and comments to firstname.lastname@example.org