To help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A will appear every other Monday.
We have just bought a property in Mumbai and now my company is transferring me to Bhopal. I do not want to sell the property and would like to continue my EMIs. What is the procedure to apply for an account shift and how long does it take?
As I understand from your letter, you are in a transferable job. In such a situation, it is always advisable to retain the files at the originating branch and continue servicing the loan from the city you are posted in.
You may do so by paying the EMIs at the local office—in case your loan provider has an office in Bhopal—or opt for an electronic clearing scheme facility, which will directly debit the EMIs from your salary account.
However, you would need to inform your loan provider of the new contact details so that all future correspondence can be redirected— such as your tax certificate, account statement, and so on.
At HDFC, all our offices are interconnected and a customer can seek information about his loan anywhere across the country.
It is only incase of a permanent shift that you may consider transferring your file, which could be done by sending a request letter and should not take much time.
I read about special offers by loan providers where they are offering lower interest rates for a limited period. I am in the process of identifying a property, which might take some time, but will like to avail of the lower rate benefit. Please advise.
You may come across several special rate offers by home loan providers round the year. However, to avail the benefits, it is a must that you have the loan disbursed within the offer period.
Since the interest rate tends to move up or down, the rate applicable on a loan is based on the rate prevalent on the date of its disbursement and not on the date of approval. Which means that even if your loan is approved today, and at the time of your disbursement interest rates move down, the rate applicable on your loan will be the prevailing lower rates and not the rate you got the loan approved at, and vice versa.
I intend to carry out some major repair work in my house. I would need an amount of about Rs3 lakh as loan and would like to know whether I should go for a home improvement loan or a personal loan from a cooperative bank where I bank regularly as I need the loan urgently and for not more than three years.
I do not know the terms or the rate of interest at which your bank is offering you the personal loan, but assuming that the interest rate charged is more or less the same,it is still advisable to go for a home improvement loan.
This is because—under Section 24 of the Income Tax Act—interest paid on a home improvement loan of up to Rs30,000 per annum is tax exempt, which in effect brings down the effective rate of interest on the loan.
To give an example, HDFC charges an interest rate of 11.25% (floating rate) on home improvement loans, but if you factor in the tax rebate on a loan amount of Rs3 lakh, the effective rate of interest would come down to 7.86%, assuming you are in the highest tax bracket.
Also, under the home improvement loan, you get financed up to 85% of the cost of repairs and in case you are an existing home loan customer of HDFC, and the repairs are to be carried in the same mortgaged property, then the loan amount can be up to 100% of the cost of repairs.
Moreover, home improvement loans are available for a much longer duration (up to 15 years), thus allowing the flexibility to repay over a longer time period.
If required, you may prepay the loan at any given point of time without any prepayment charges, unless the loan is being refinanced.
Renu Sud Karnad is executive director with HDFC.
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