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Home loans: 'Avoid a mix of fixed and floating'
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August 16, 2007

If floating rates are too risky for you then should you go for a mix of fixed and floating rate of interest on your home loans? What are the problems that you will face if you ever go for such type of home loan financing?

Are you thinking of taking a longer-term home loan? Will it beneficial to you? If yes, then what are the advantages of going in for such a home loan?

Can you go in for a joint home loan between you and your mother? How do you go about doing it?

Can you sell your house during the loan repayment period? If yes, then what is the strategy employed by banks for the house?

Also, do you know which part of your home-loan is tax free? Is it the EMI which you repay to the bank or the entire capital?

In a chat with Get Ahead readers on August 14, home loan expert Harsh Roongta answered these and several other queries related to home loans.

For those of you who missed the chat, here is the transcript.

Part II: Can two brothers take a joint home loan? 

Vishnu asked, Good afternoon Sir, I have a housing loan from ABN AMRO bank and the current interest rate is 13%. Is it advisable to change the bank as no other bank charges 13%?

Harsh Roongta answers, I am assuming you are referring to a home loan which is on a floating rate basis. If that is true and you have maintained an excellent track record of repayment on your existing loan you should be able to get a new lender to give you the loan at around 11%. This will be more beneficial even if you have to pay a prepayment fee to your existing lender and pay a small processing fee to your new lender.

satya prasad asked, I want take a House Loan of Rs. 10 Lac. I can able to pay 10,000 EMI Pl. Kindly Advise how to proceed?

Harsh Roongta answers, If your income is sufficient to justify the loan and you have an existing good track record of repayment on any other loan you should be eligible for a 20 year home loan at around 11%. (of course you will need to be younger than 40 years to be eligible for a 20 year loan). The EMI @ 11% for Rs. 10 lakh loan works out to Rs. 10,322 which is within your budget.

Sina asked, HI Harsh. Which is better to go for? Fixed rate or floating rate? Can we have combination of fixed and floating? Can we go for joint loan between my mother and me?

Harsh Roongta answers, Firstly 'fixed' or 'floating' is not a one time decision. You will need to keep reviewing your decision at least every 6 months. Currently recommends to its customers to opt for a floating rate loan. The detailed answer is available on the following link I am personally not a fan of mixed rates (partly fixed and partly floating) mainly because of the non transparency of the banks on both these rates. The so-called 'fixed' portion may be varied and there is no objective mechanism to ensure that the 'floating' rate also floats down. These risks remain even when you take a pure 'fixed' rate loan or a pure 'floating' rate loan but in any case you are not exposed to dual non transparency.

deepakm asked, Should we go for home loan with a longer tenure or shorter?

Harsh Roongta answers, Longer tenure means lower EMI which means higher loan eligibility. But at the same time it also means that you end up paying more interest as the loan is outstanding for a longer period. The best bet is to take a long tenure home loan where prepayment charges are either nil or low. In such case you enjoy the benefit of higher loan eligibility and monthly budget comfort whilst at the same time having the ability to pre-pay the loan to save on interest amount.

sandip asked, Hi Harsh,can I get loan for buying a plot? If yes suggest me few banks' names and a little bit about documentation required for that? Thanks.

Harsh Roongta answers, Plot loans are not offered by all banks. They are available only for non-agricultural plots and then too most banks restrict financing to plots sold by statutory authorities in the state (CIDCO, NOIDA authority, Gurgaon authority, etc.). Some banks will allow them to be bought from a restricted list of developers approved by them. Very few banks will fund open market plots. Documentation is the same as a home loan. Which banks will fund your plot will depend on where the plot is situated and from whom you are buying it.

shantharam asked, Can we sell our house during the loan repayment period? If so, what is the strategy employed by banks for the house? Also, please let me know whether which part of the home-loan is tax free? Is it the EMI which we repay to the bank or the entire capital?

Harsh Roongta answers, Yes, you can, but you'd need the Bank's consent. Based on this consent letter which will typically provide the amount on payment of which the outstanding loan will be fully paid off. This amount includes the prepayment charge, if any, chargeable by your Bank and should list the documents held by them that will be released on payment of the stated amount.

This amount mentioned in the certificate is typically calculated as on a future date to enable time for the buyer to arrange the payment. Based on this certificate you can negotiate a sale with potential purchasers. If the new purchaser takes the loan from your existing Bank the process is far simpler than if s/he were to take the loan from another Bank that may need the title deeds in its hands before it agrees to release the payment.

In the event the purchaser is not taking any loan and is making an outright payment, the new purchaser can make a cheque favouring the Bank for an amount equivalent to the amount stated in the certificate. This will clear your loan.

For the balance amount, s/he will provide a cheque in your name. Your property documents will be released to the buyer only when you have prepaid your entire loan. 

cc asked, Hi, This is a grave issue: ICICI [Get Quote] and other Banks are charging higher interest rate from existing customers while lower rate is charged from new customers. Can these banks be taken to task? Existing customers are unduly paying for the loyalty of continuing with these banks.

Harsh Roongta answers, Unfortunately what you are saying is true of most banks. Their new consumers get better rates than their existing customers. The only thing that the customers can do is to vote with their feet and shift their loan. Read a more detailed article on this - Wives (existing consumers) and Girlfriends (new consumers) by clicking on this link

hyd asked, Are plot loans also non-taxable? Is it possible to get home loan tax benefits and HRA benefits simultaneously?

Harsh Roongta answers, No tax benefits are available on repayment of a loan taken to buy a bare plot of land.

Sina asked, My mother is working currently and has 3 yrs left for her retirement. Can we take a joint loan between my mother and me? The housing loan will be taken on my name and I will be paying the EMI. Plz let me know if banks will agree to this joint loan and which banks should I approach? Thanks in advance.

Harsh Roongta answers, Some banks have a step down loan to cover exactly your kind of requirement. The loan repayment will be higher in the first 3 years -- when you have 2 incomes -- and will then be lower for the rest of the loan period. You can approach banks on your own (HDFC [Get Quote] comes to mind immediately but you can also try other banks).

sachin asked, Hi, I got a flat in Nasik and bank is insisting me to go for a registered mortgage. Whereas I feel that equitable mortgage is also fine. Can you suggest the way out please?

Harsh Roongta answers, Most banks normally only go for an equitable mortgage. But if your bank is insisting on a registered mortgage why don't you go for it provided the expense of doing so does not make their offer non-competitive. If it is an expensive process you can go in for another loan provider.

vinayak asked, Hi Harsh Roongta, Vinayak here. I want to take home loan to save tax. As far as my knowledge goes we can get a tax exemption upto Rs 1,50,000 on home loan interest. Now my question is, is it a wise decision to take a home loan just to save tax as I end up paying too much interest?

Harsh Roongta answers, A loan is only a means to an end. Buying a home is a serious decision which entails deciding whether what kind of life style you want to live, where and whether you can afford it over a long tenure. You cannot take this decision for tax reasons. Tax benefits only reduce the cost of taking a home loan. It still is a cost which you should incur after some serious thinking.

shweta asked, I am 24 yrs old with Rs 4.65 lakhs annual income. I wish to take a home loan of about Rs 20 lakhs. Which is the best option for me to repay the loan with less impact on monthly expenditure?

Harsh Roongta answers, You will be eligible for a 20 year home loan of around Rs 15 lakhs @ interest rate of around 11%.

Part II: Can two brothers take a joint home loan?

Harsh Roongta is the CEO of, an online guide for retail loan seekers. Apnaloan also enables loan consumers get best rates by making banks compete for their loan.

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