Steps to Stay Afloat even after Loan Defaults

Steps to do the same:

1. Provide documents supporting your crisis situation to the bank instead of just a verbal clarification as proof always convince banks better than verbal accounts.

2. Provide an estimated time-line to the bank you may face the crisis:
a) In case of short term crisis period, the banks usually agree to work through a mutually agreed deferred repayment option.

b) In case it turns out to a long term crisis situation, it is advicable to sell off your house rather than pilling up your burden of the house loan and then passing on it to your children or family members.

3. Use your savings at this time to keep yourself afloat while on the other hand also find an alternate solution to your crisis problem.

Home Loan Queries Answered

Q - Can a home loan be taken from relatives. Are there any complications in that? How about tax benefits? What all paper work is required? Is the interest obtained by lender taxable?

A - There are no complications on taking a home loan from your relatives. Tax deduction benefits will be available on the interest paid under section 24. However, there would be no tax deduction benefits available for capital repaid to your relative under section 80 C.


Q - Can I take a housing loan jointly with my brother? Is an exemption in income tax for principal amount and interest on said loan paid, available?

A - You can of course take a home loan with your brother. You can get exemption for the home loan in the ratio of your respective shares in the loan.Tax deduction benefits will be available under section 24 (interest paid on the loan) and under section 80 C (for the principal repaid).


Q - What is the difference between home loan for an approved colony and a regularsied colony? Do financial institutions grant loans for both the types of colonies? If yes, please explain the requirements in detail.

A - Banks cannot provide home loans if the construction is unauthorized. If the construction is considered legal (whether originally approved or later regularized); then, getting a home loan could be possible, depending on the terms and conditions.


Q - Could we get tax implication on 100% loan disbursement for an under-construction building which would take 2-3 years for completion?

A - You can get tax deduction benefits only from the financial year in which the construction is completed.


Q - What is the 'Pre-EMI' interest and when is it applicable?

A - When the loan disbursement is done in stages, based on the construction of the property, the bank charges the interest till the last such disbursement is made. This is called Pre-EMI interest.


Q - Do banks provide home loan on total value of property inclusive of stamp duty charges?

A - Typically, banks provide 85% of the total cost of the house as finance. This amount includes charges like registration charges and stamp duty.


Q - What is the rate of interest of all banks for loan against property?

A - The broad range of interest rates for a loan against property will be 12%-14%.


Q - Can we take loan on property (land) for construction purpose?

A - Yes, you can definitely get a loan to buy property to construct a house. However, not all banks will be ready to fund such loans.


Q - Why are loans get rejected without giving proper reason? Is this country ruled by banks law where no communication done while approving loan. Also, once you stop the EMI payments, the banks come home with goondas. This shows how they communicate and talk rational while rejecting loan.

A - Register a complaint on the bank's official website. If you do not receive a response/satisfactory response to your query within 2-3 weeks, approach the Banking Ombudsman. Details are available on www.rbi.org.in .

Some more Q/A on Home Loan

Q - Already repaying a housing loan. Can you take one more housing loan. With this would there be any tax benefit?

A - You can claim income tax deduction benefits from both the housing loans. To get a detailed response and an answer to similar queries, click on the link below:

http://www.apnaloan.com/index.php?option=com_content&task=vie w&id=125&Itemid=2&limit=1&limitstart=3 (Please refer to question number 3 (a).)

Q - I have purchased a flat in Pune in 1995 & taken loan from HDFC for 15 year tenure.I am paying EMI & availing Tax Rebate. I have purchased another flat in Mumbai & taken a loan from HDFC & paying PRE-EMI to HDFC. Wheather I will be able to avail Income Tax Exemption on both the houses against EMI & PRE-EMI.

A - You can claim tax exemptions for both, the EMI and the pre-EMI. For a detailed response on claiming tax deduction benefits on EMI; and an answer to a similar query, click on the link below:

http://www.apnaloan.com/index.php?option=com_content&task=vie w&id=125&Itemid=2&limit=1&limitstart=3 (Please refer to question number 3 (a).)

With regards to claiming tax deduction benefits on Pre-EMI, click on the link below:

http://www.apnaloan.com/index.php?option=com_content&task=vie w&id=125&Itemid=2&limit=1&limitstart=5 (Please refer to question number 7 (a).)

Also to calculate your EMIs you can avail the benefit of the following calculators:

http://www.apnaloan.com/loan-advice-india/calculator.html

Some Chat Questions on Home Loan

• Planning to take a personal loan for building a house at your native place. Is it a good move?

Ans: Taking a home loan would be better off rather than a personal loan as a home loan is cheaper.

Choose a bank which is active at your native place so that they can do the property verification. If that is difficult, then a personal loan could be taken though it will be quite expensive as compared to a home loan and will also be for a shorter duration. The EMI will also be much higher.

• Require Rs 20 lakhs for buying a flat but as home loan processing takes time, would it be better to take a personal loan and when the home loan is sanctioned, then repay the personal loan with it.

Ans: You need to disclose a huge amount of income for getting a personal loan worth Rs 20 lakhs. By making the banks complete for your home loan and providing you the best deal, you may end up getting more than expected as well as your home loan application would be processed faster.

• In an ideal scenario what should be the maximum EMI percentage an individual should/could afford, in percentage terms?

Ans: It depends on various components like -

1. Income - the higher the income, higher is the percentage you can afford to pay as EMI. However, as a general rule of the thumb, about 40 per cent of your net income is considered safe for an EMI. Anything above 55 per cent is in the red zone.
2. Loan Amount
3. Secured or unsecured loan

Some Loan Options for LAP

Overdraft option for LAP	Installment option for LAP
Limited Banks have this option with them	Both banks as well as housing finance companies who are offering LAP
Might have a higher processing fee, which also might be annually instead of one-time	One time Processing fee
Higher rate of interest (usually 0.5%) compared to the installment option	Slightly lower ROI
You pay interest only on the money you withdraw from the overdraft account to the extent you do not repay. You can keep withdrawing and repaying money as and when you like and incur interest expenditure only on the net outstanding amount from time to time.	You pay money on the reducing balance of loan amount outstanding as per the contract

Avail The Best Loan Against Your Porperty

FAQs related to Home Loan

1. Should you shift to a “fixed rate” home loan?

This is not advisable as very few banks provide genuine fixed rate loans anyway. Genuine fixed rate loans are those where the loan document does not have any clause in the agreement that allows the bank to change the “fixed rate” of interest. These loans are not available for less than 13.00% plus you will need to pay a fee for shifting to such loans. So your EMIs will go up immediately plus you will need to pay a fee to shift to such fixed rate loans. This shift will remain more expensive till the floating rates move beyond the current fixed rates of 13.00%. We must not forget that interest rates move in cycles and that over the long tenure of a typical home loan you will be able to benefit from the drop in rates (as and when they happen) also just like you have paid for the increase in rates.

Whilst the short term outlook on interest rates clearly points to an increase, an assumption that interest rates will forever remain high will be incorrect. We have already seen one cycle of interest rate movements in this decade (downwards from 2000 to 2004 and broadly upwards thereafter) and there is no reason to believe that this will not repeat itself again. Hence unless you are completely risk averse you should stick to the floating rate loan.

2. Should you shift to another lender offering a lower floating rate loan?

This is a worthwhile option. As a rule of the thumb if the new lender is providing a floating rate loan that is at least 0.50% cheaper than your existing lender and the balance tenure is not less than 7-8 years then this is an option that you should definitely explore despite pre-payment charges that you might have to pay to your existing lender. You need to be vigilant that you are getting the best possible floating rate loan in the market as some banks charge higher rates to existing consumers while giving lower rates to new consumers. So ask around in the market and keep yourself informed on this score. Remember your ignorance will prove quite expensive.

3. What are the other options to balance your monthly budget:
1. If you have the money pre-pay a portion of your loan to keep the EMI at the same level. In most cases banks do not charge for partial pre-payments and hence this is an excellent option, provided off course, you have the savings to make this pre-payment. In the given example you will need to pre-pay roughly Rs. 33,000/- for every 0.50% increase in interest rate to keep the Emi at the same level as earlier.
2. If you neither have the savings to make the pre-payment nor any money to pay the increased EMI then check whether the bank is willing to increase the loan tenure and keep the EMI at the same level. However normally the bank will not increase the tenure beyond the retirement age (normally assumed at 60 years for salaried people and 65 years for self employed people)
3. You can consider taking overdraft loans against your savings instruments (insurance policies with high surrender values, Mutual fund units, shares, etc.) to pay for the increase in the EMIs. The advantage of such loans is that for a small fee you get an option to draw upto the limit. You pay interest only for what you actually utilize and as long as the total amount does not exceed the limit you do not have to pay off either the interest or principal. Off course all this is only a temporary palliative. You should prepay the loan from your future savings or from the drop in your EMIs as and when the interest rates drop again.

4. If neither of the above options are feasible than you can consider approaching your existing lender to provide an additional loan on the security of the same house. You are likely to be eligible for the additional loan as house prices have gone up significantly in the last 2 years and your income would also probably have gone up.

5. Neither of option c or d are great options as you are actually borrowing money to repay your existing borrowings which is fiscally imprudent. Hence they must be exercised after due caution.

Source: http://www.apnaloan.com/articles/home-loan-india/homeloaninterestratehike.html