Moneyraam

Want to take a home loan? You will need to know what questions to ask your loan agent before you finalize on the bank.

Term that you need to understand about home loan:

Prime Lending Rate (PLR): All banks publish their PLR on regular bases. It is the benchmark on which your interest rate is calculated.

Equated Monthly Installment (EMI): This is the monthly installment that you need to pay for repaying your loan.

What is the interest rate at which the banks are giving loans?
Most of the banks do publish their PLR on their site. But most of them don’t publish the rate at which they are currently giving loan. There are some sites like this, that let you get some idea about the interest rates that banks are offering. The best way to find out their interest rate is to go to one of their branch or call a home loan agent.

With which bank does seller have loan?
Most of the banks do not take over sellers loan from another bank. It is always easier and faster to get a loan with the same bank as the seller. In case you decide to go with a bank other than the bank with which the seller has an existing loan, there are two ways of achieving this.

1. The seller will have to pay off his loan with the pre-closure penalty. Get his property papers released. Then you can apply for loan with any bank. This is not always feasible.
2. The seller first gets his loan taken over by your bank. Then the bank will transfer the loan to your name.

Both these method take a lot of time.

How much loan is the bank ready to provide?
The amount of loan the bank will be willing to give depends on two things:

1. Amount of money you earn: Generally banks will give you loan upto the amount for which EMI will be about 50 to 55 % of your gross monthly income.
2. Registry amount of the house: Generally, Govt. banks will give you 80% of the registry amount as loan. Private banks will be ready to pay you about 85 to 90% of the market value of the house.

How much are the Prepayment charges?
Banks do not like you to prepay the loan. They discourage the prepayment by levying prepayment charges. Prepayment charges can be anywhere between 5% to 2% of the outstanding principal. Some banks let you prepay a part of the outstanding principle without prepayment charges.

How much is the loan processing fees?
Banks will charge you 0.5% or some fix amount for processing the home loan application for you. If you bargain well it is possible to get these charges waived off.

Meta: April 10th, 2009 by admin
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