Your bank shocks you by revising the interest rate on the home loan you had availed of a couple of years ago. And obviously you don't know what to do.
Can you take a legal action against the bank? Can the bank do it in the first place? Did you read your home loan documents carefully before taking the home loan?
Do you know which tax laws govern the imposition of stamp duty, registration fees and processing fees? Is there any restriction on claiming tax deduction on home loans for NRIs?
Home loan expert Harsh Roongta answered these and other home loan related queries in a chat with Get Ahead readers on February 27.
For those of you who missed the chat, here is the transcript.
Part I - Budget and your home loans
Sagar asked, Hi Harsha, I have taken a home loan 3 years ago at 7.5% fixed rate for a tenure of 7 years. The loan document does not mention whether they will revise the Interest rates and vice versa. I mean it does not mention they will not revise. In case the bank decides to revise my Interest rates, do i have any legal options to take them to task ? Thanks in advance
Harsh Roongta answers, If you have documentation syaing the interest rate is a fixed rate thehn the bank will need a specific clause in the agreement allowing it to increase the interest rate. In the absence of such a clause the bank will not be able to increase the interest rate. The only caveat is as i had said - you should have documentation saying the interest rate is a fixed one.
Raj99 asked, Hi Mr. Roongta I want to know which are IT acts (rule numbers ) for following 1. Stamp duty & registration tax exemption 2. Processing Fee tax exemption 3. Principal & interest amount split in case of joint home loans .thanks
Harsh Roongta answers, 1) stamp duty and registration charges - is section 80C (2) (xviii)(d) 2) processing fee is deductible as interest. see definition of interest under section 2 (28A) 3) Please see amortisation calculator on the following link http://www.apnaloan.com/index.php?option=com_calculators&task=show
Tom asked, Dear Harsha, Is there any way to save Short Term Capital Gain (arising from sale of flat in 2 years from date of purchase) by investing in another property etc.
Harsh Roongta answers, unfortunately no.
vinayak asked, Sir, First let me tell you a big thanks for constantly giving useful information. I have bought an independent house in bangalore for Rs 27 lakh. I paid registartion & stamp duty of Rs 130,000. I know this can be included under Sec 80C. now, this year i have some LIC & Principal repayments & EPF together makes more than Rs 1 lakh under 80C. can i claim exemption of the registartion & stamp duty charges next year ? in case Rs 1 lakh limit is raised to a little more as some people predicted, can i claim this years registartion & stamp duty for next year ? Please help me.
Harsh Roongta answers, the dedcution for stamp duty and regsitration can be claimed only in the year of payment. so you cannot claim it next yaer
Shilpa asked, Hi Harsh, I am seeking to get interest of around Rs 5 lakh, will the interest rate go up again and which is the better option fixed or floating interest rate ?
Harsh Roongta answers, This is one question that bothers all buyers. Fixed gives a sense of security... while you wonder am I paying too much all the time. This is one question that perennially bothers the person going in for a home loan.
The biggest reason is because in a rising interest rate regime, one always feels safer in a fixed rate. Fixed Interest Rate loans as the name suggests the interest rate in these loans should remain constant throughout the tenure of the loan. These loans are normally priced higher than a variable rate loan for a similar tenure.
That is, in the present market scenario while you would be able to get a floating rate loan at 9.5 per cent interest rate, the fixed rate would be somewhere around 10.5 to 11 per cent.
The other option is variable/floating rate loans. This kind of loan is also called 'adjustable rate' home loans. Here, the interest rate is linked to a benchmark rate. Some banks use their 'prime lending rate' (PLR) as the benchmark rate. Some banks have a specific benchmark rate that they use for home loan purposes. Typically, the interest rate applicable to your loan tends to be a certain percentage below this benchmark rate.
XYZ asked, Sir, suppose I have an amount of X lakhs, using which I can buy a site. Which of the following options is better when it comes to tax saving - (a) Take a home construction loan of 20 lakhs after buying a site or (b) Take a loan of 10 Lakhs to buy a site, using (x - 10) lakhs from x lakhs I already have, and take a loan of 10 Lakhs for construction and use it along with 10 lakhs left from x lakhs
Harsh Roongta answers, not fully understood all the X-10 stuff but prima facie it will not make any difference for tax calcualtions whichever way you do it.
Vishal asked, I have a home loan from ICICI in April 2006. Though I have been paying all the instalments till now, I cannot claim for any rebate as I have an NRE status now. Is there any way that I can claim the rebate in the next financial year ?
Harsh Roongta answers, I assume when you say that you cannot claim the deduction for loan repayments you actually mean that you have no Indian income against which this deduction can be claimed. There is no restriction at all for NRIs to claim the deduction.
nk_soni70 asked, will we see a downward trend in the interest rates, if yes by when ?
Harsh Roongta answers, Sir if i could answer that correctly i would have mad billions in the money markets :-) :-). But more seriously i think this is impossible to predict though it is relatively easy to predict that interst rates are unlikely to go down in the next 3 months at least.
hyd_siva asked, Hi,I have got my Home loan pre approval from a bank & I have recently selected a property, but the owner has a loan with a different bank, is it possible to clear the other banks loan on behalf of the owner and get the papers released and get the registration done on my name? any kind of response is appreciated.
Harsh Roongta answers, off course it is possible. Typically the seller will obtain a letter from his lender syaing the amount outstanding and the amount that needs to be paid to clear off the loan calculated on a future date.
This letter will also state the legal documents lying with the sellers bank as security. Your lender will than make the payment to that extent with a direction to the sellers bank to directly release the documents to them. This is fairly standrad procedure and you should not have a problem with this.
Vip asked, As per Apnaloan.com, I.T. rebate on processing fees charged for Home Loan is possible, but ICICI Bank does not provide any "certificate" saying that they have charged me such amount. All they can give is a Statement of Accounts mentioning the amount charged from me. Will that suffice in claiming the I.T. rebate at the time of filing returns?
Harsh Roongta answers, If the property is self occupied you will definitely need that certificate from the bank to claim this deduction. The claimability of the deduction is not as per Apnaloan.com but as per the definition fo interest clearly laid down in section 2 (28A) of the IT act which clearly includes "service fees or other charges in respect of money borrowed".
If you are still not able to get this certifiacte then try claiming it on the basis of the statement of acount from the bank. Unfortunately this is not widely known and hence the issue that is being faced by you.
rajeshr811 asked, hi harsha. as of now, which is the bank which gives the best home load schemes, in your opinion.
Harsh Roongta answers, This question is asked often and the answer remains the same. There is no such thing as the best bank. If that were true than all the other banks would have to close down. As far as an individual is concerned the best bank is the one which is able to meet his requirements fully at the best possible rates. This is exactly what we assist consumers in discovering by making interested banks compete for your loan. This is the only possible way to find out whi9ch bank is the best for your need.
Julie V P asked, Dear Sir, If I want to buy a Mhada house of Rs 2.5 Lakh, can any bank help me for a loan or is it convinient and safe to take a personal loan? Is this a good time to take the alternate loan or should i wait till the budget?
Harsh Roongta answers, Personal loan is expensive otherwise there is no other problem in taking a personal loan to finace the acquisition of a house.
Harsh Roongta says, It was good chatting with you. Due to time constraints, I will not able to answer all your questions, but do join me next fortnight on the Harsh Roongta chat and I will try and answer them then. Watch out for the details of the next chat on rediff.com. You can also logon to www.apnaloan.com for any queries that you might have. Bye for now.
Part I - Budget and your home loans
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