Parliamentary panel recommends pro-buyer measures in Real Estate Bill 2013

Real Estate Bill 2013A Parliamentary Committee today(30-July-2015) recommended a slew of measures favouring property buyers, which include a three-year jail term or a fine for a defaulting builder under a new law which will now cover projects of 500 sqm or eight flats.  



The Select Committee of  Rajya Sabha, which examined the  Real Estate Bill 2013 and submitted its report in the House today, also recommended that 50 per cent of payments made by homebuyers for a real estate project should be kept in a separate account and used for that specific purpose only while the rest can be spent on other projects.  


Real Estate Bill 2013The Bill aims at establishing the Real Estate Regulatory Authority (RERA) for regulation and promotion of the sector and setting up of an adjudicating mechanism for speedy dispute redressal. It also aims at establishing the appellate tribunal to hear appeals against the decisions of the  RERA. 


Under the proposed new law, a jail term of up to three years or a penalty of up to 10 per cent of project cost or both can be imposed on a builder in case of defaulting on commitments made to a buyer.  The committee also recommended that the new law should cover projects of 500 sqm and more or eight flats, instead of 1000 sqm or 12 flats as proposed initially in the bill.  


The panel recommended that promoters should get their accounts audited within six months after the close of every financial year by a practising chartered accountant.  


It was also of the view that real estate development beyond town planning area may be brought under the ambit of the Bill.  


The committee, however, did not agree that a person holding more than two apartments or plots in the same project should be treated as a promoter.  


It said that a promoter, while applying for registration of any project with the authority, should enclose details of its existing projects, details of approvals, land title and payment dues.  


The panel also redefined the carpet area, saying it means the net usable floor area of an apartment, excluding the area covered by the external walls and that under service shafts, exclusive balcony or verandah and open terrace areas, although it would include the area covered by the internal partition walls of the apartment

Learn about the HDFC bank RPLR rate!

HDFC’s home loan interest rate is dependent and decided based on Retail Prime Lending Rate (RPLR). 

If the base rate changes due to changes in the interest rates in the economy, your rate will be affected. This base rate typically varies from lender to lender, and so does their nomenclature. HDFC calls it the RPLR — Retail Prime Lending Rate. ICICI Bank uses the term FRR — Floating Rate Reference.

HDFC follows a three month reset cycle for its floating rate loans and hence the change in RPLR will impact all the existing customers over the next three month period depending on their date of first disbursement. 

The maximum period of repayment of a loan shall be up to 30 years for the Telescopic Repayment Option under the Adjustable Rate Home Loan.

Here is the Historical Data for HDFC Bank’s Base Rate and Benchmark Retail Prime Lending Rate

April 13, 2015 Base Rate: 9.85% Benchmark Prime Lending Rate: 18.35%
November 02, 2013 Base Rate: 10.00% Benchmark Prime Lending Rate: 18.50%
August 03, 2013 Base Rate: 9.80% Benchmark Prime Lending Rate: 18.30%
March 30, 2013 Base Rate: 9.60% Benchmark Prime Lending Rate: 18.10%
December 31, 2012 Base Rate: 9.70% Benchmark Prime Lending Rate: 18.20%
June 30, 2012 Base Rate: 9.80% Benchmark Prime Lending Rate: 18.30%
August 13, 2011 Base Rate: 10.00% Benchmark Prime Lending Rate: 18.50%
July 12, 2011 Base Rate: 9.50% Benchmark Prime Lending Rate: 18.00%
May 12, 2011 Base Rate: 9.25% Benchmark Prime Lending Rate: 17.75%
March 14, 2011 Base Rate: 8.70% Benchmark Prime Lending Rate: 17.25%
February 24, 2011 Base Rate: 8.20% Benchmark Prime Lending Rate: 16.75%
January 01, 2011 Base Rate: 7.75% Benchmark Prime Lending Rate: 16.25%
October 05, 2011 Base Rate: 7.50% Benchmark Prime Lending Rate: 16.00%
July 01, 2010 Base Rate: 7.25% Benchmark Prime Lending Rate: 15.75%

Graphical representation :

HDFC Bank RPLR rate

Top 8 reasons why you can choose HDFC for your home loan :

*Home Loan for Properties Across India :

Through any of its offices across India and abroad, you can purchase properties from their current location.

*Interest subsidy :

Most PSUs offer interest subsidy facility on loans their employees take from banks or FIs. HDFC considers this interest subsidy as part income and offer high loan amounts to you.

*Tailor-made easy EMI Schemes ;

Besides the regular EMI scheme, they also have step up, FLIP and other payment plans to help you choose repayment scheme which is just right for you.

*Loans on Alternate Securities :

In case, it can’t accept the funded property as security on the loan, it offers loan against an alternate security. Any other immovable property can be taken as alternate security subject to its legal and technical clearance. HDFC will retain the documents of the property as well as of the collateral security.

*ADD-ON Loans on a single property :

You can avail of a Home Loan, Home Extension Loan, Home Improvement Loan, Top up loan or Loan against Property subject to total exposure on the property not exceeding the limit ascertained by HDFC from time to time. No additional security required.

*Subvention and Flexi payment schemes with reputed developers :

These are the two attractive schemes –

In subvention schemes, the interest of the home loan is borne by the developer, for a specific period.

In Flexi-payment schemes, the developer offers you discount in some form.

*Easy Access :

  • Door Step assistance is available by sales officers who provide complete information on the products.
  • Can also apply on the mobile site. m.hdfc.com
  • Complete online access to the home loan, where you can view all the related important information.

*Due-diligence of developer projects by the in house legal and technical team :

Developer projects are approved only after the due-diligence by the expert team, so that you can buy a legally sound property.

Hence, with the trends of rplr and the advantages you can make a wise decision regarding your home loan.

Most Inspirational Quotes from A.P.J Abdul Kalam

Most Inspirational Quotes from A.P.J Abdul Kalam

A.P.J Abdul Kalam great man with modesty, simple thinking and great living sets a standing example of innovation in the thought process for decades. Abdul Kalam also served as the 11th President of the Country for five years. APJ had massively contributed his knowledge and observations during the nuclear tests of Pokhran – II that were done in the year 1998. Kalam also penned a popular book, India 2020, where he laid foundation for the vision to see a developed India by the year 2020. His thoughts and words of inspirational quotes are very famous among youngsters who dream of reaching heights in life. The student community of India is heavily motivated with Kalam’s many speeches and interactions. 

“Failure will never overtake me if my definition to succeed is strong enough”. – A.P.J Abdul Kalam 

“Don’t take rest after your first victory because if you fail in second, more lips are waiting to say that your first victory was just luck.” – A.P.J Abdul Kalam 

“All Birds find shelter during a rain. But Eagle avoids rain by flying above the Clouds.” – A.P.J Abdul Kalam

“Man needs difficulties in life because they are necessary to enjoy the success.” – A.P.J Abdul Kalam

“If you want to shine like a sun. First burn like a sun.” – A.P.J Abdul Kalam  

“It is very easy to defeat someone, but it is very hard to win someone” – A.P.J Abdul Kalam 

“All of us do not have equal talent. But , all of us have an equal opportunity to develop our talents.” – A.P.J Abdul Kalam 

“Be more dedicated to making solid achievements than in running after swift but synthetic happiness.” -A.P.J Abdul Kalam 

“Thinking should become your capital asset, no matter whatever ups and downs you come across in your life.”  – A.P.J Abdul Kalam 

“Without your involvement you can’t succeed. With your involvement you can’t fail. ” – A.P.J Abdul Kalam

Best banks for home loan borrowers!

Favorite banks for Indian Home loan borrowers


                            In India, saving and investing money is the option which everyone looks for. Investing money in buying a home is in everyone’s to do list. So no wonder that they go for a detailed analysis about the home loan and the process involved in it to choose the best, the fastest and the safest home loan provider.

                            According to the recent analysis, here are the details of the favorite banks for Indian home loan borrowers.

  1. SBI  Home Loan capturing 25.5% market share.
  2. HDFC Ltd. with 24.13%
  3. LIC Housing with 15.83%
  4. ICICI Bank with 13.10%
  5. Axis Bank with 6.23%
  6. IDBI Home Loan with 4.67%
  7. PNB Home Loan with 4.22%
  8. Others with 6.32%

These are the points usually borrowers look at while applying for a home loan.

  • Interest rate – Fixed, floating, hybrid
  • Home loan processing speed and the fees involved.
  • Loan qualification
  • Repayment terms

Let us go deep into these topics.

  • Interest rate :

                                 

    Interest rate offered is the primary factor of comparison. It affects the EMI and total amount payable. For a home loan, it is advised to go for a loan with low interest rates. Also it is recommended to decide whether to go for a fixed or flexible or hybrid loan rate.

     

Interest rates of various banks are as follows :

  1. SBI                          –             9.50% – 10.00%

  2. HDFC Ltd.             –            9.50% – 10.40%

  3. LIC Housing          –           10.10%

  4. ICICI Bank             –           9.50% – 9.90%

  5. AXIS Bank              –          9.65% – 10.45%

  6. IDBI Bank               –          9.85% – 10.15%

  7. PNB                          –         9.85% – 10.50%


Here is the graph showing the trends of Home loan base interest rate over the five years :

Best banks for home loan

  • Home Loan processing speed and the fees involved :

                            

It is a bit difficult process to apply for the home loan. You have to submit a large set of income and property related documents. The timeline for the approval will differ from bank to bank. Some banks are comparatively slower than others in carrying out the procedures, while some banks will approve your loan in simple and less time-consuming way. 

 

                            You can choose your bank as per your convenience. If you can spend enough time to carry out the procedural work, then you can apply for the slower banks. 

Here is the list of some major banks processing fees :

Bank Processing Fees
ICICI Bank 0.50% – 1.00% of the loan amount or Rs. 1500/- (Rs. 2000/- for Mumbai, Delhi & Bangalore), whichever is higher + applicable Service Tax & Surcharge
HDFC Ltd 0.5% or 10,000+service tax (12.36%), whichever is higher
SBI Home Loan Up to 25 lacs : 0.25% of loan amount minimum Rs.1000/-25-75 lacs : Rs. 6500/-75 & above : Rs. 10,000/-
Axis Bank Up-to 1% of the loan amount subject to minimum of Rs.10,000/-
LIC Housing 0.50% of the loan amount
IDBI Home Loan Nil
PNB Home Loans 0.50% of the loan amount
  • Loan Qualification :

                            Each bank, internally, has its own rules to grant the loan.  The different aspects usually lenders look into are the age, the source of income, credit history, employment stability, etc. Hence, each individual chooses the lender according to one’s own preferences.

  • Repayment terms : 

                            Housing finance regulator, National HOusing Bank (NHB), has already barred home finance companies from charging any prepayment penalty. Among banks, State Bank of India was the  first to do away with the pre payment fee on both fixed and floating rate loans. Following this, nearly 20 banks withdrew the penalty on floating rate loans. however, most lenders continue to charge the penalty on premature closure of fixed rate loans. Hence, it is another aspect a borrower looks at while taking a loan.

                            Different lenders use different yardsticks for measuring the borrower’s eligibility. Why shouldn’t borrowers consider doing research and compare several competitive features of home loans offered by different lenders? It is better to have the policies, facts, terms and conditions clarified well in advance before locking in a seemingly ideal home loan with any lender.

How to reduce tenure of home loan?

Moving into one’s own home brings in so much happiness that can be experienced but cannot be explained. Same is the case with Bhargav, enjoying the new house, the house warming session, the praises for the new furniture and the construction.

As the month dawns, no sooner he realized about the EMI. As the case with many, he has to fund his account to pay the EMI, as the money flew with other expenses and investments. It is then he placed himself as a fund manager of the house.

So, firstly, he made a list of all expenses and income sources; and also loan and investments. He found the expenses graph goes higher as and when there is an increase in the income. Also another insight was, he had investedReduce tenure of home loan in ULIP, PF,  which are low return sources. Because of this, he had opted for low EMI which increases the loan tenure. He thought investing in those and pay higher loan interest to somebody is not a wise decision. So he withdrew funds from PF and changed his endowment policy to a term plan with a little higher returns. This left him with enough funds. Now, he used the PF for paying the principal and the money saved from not paying the ULIP to increase the EMI.

Pre-payment:

Here, we found Bhargav taking a very clever step. He reduced his principal by paying some amount, at once (other than EMI). This is called pre-payment. This reduces the principal amount and in-turn reduces the interest amount.  Pre-payment can be done any time as there are no charges applied. You can use this option whenever there is an extra source of income like increment, gifts from family, savings from salary. 

A question arises is it worth using all the money saved to pay the principal. Yes, it is worth as you close the loan much earlier than agreed. But one should be sure that there is no other investment that gives you higher returns than the interest you are paying for the home loan.

Increase the EMI:

We also found that he had opted to increase his EMI.  This too reduces the tenure of the loan. Try to avoid unnecessary expenses and increase the EMI. Imagine finishing the home loan at the earliest. It is the most relaxing thought for sure. But don’t be enthusiastic. Be a judge for yourself. Don’t make the EMI a burden. 

Search for a lower interest rate:

Always note that you have to search for the lower interest rate and shift the loan. Follow the market trends and the interest rate. Even a .5% difference in the interest rate will reduce the tenure of the home loan by almost 30 EMI for a 20-years loan. Provided, you pay the same amount of EMI, though there is a decrease in the interest rate.

Reduce tenure of home loan

Know that there are always options to close your loan as early as possible. All you need is to get guided and monitored with careful steps and timely work. Realize that only after you finish your home loan, your house becomes YOURS.

Understand fixed vs flexible interest rates with examples!

Fixed vs flexible interest rates

The toughest decision to make while going for a home loan is deciding on which interest rate to prefer. As we know, Fixed rate has a constant interest rate during the whole loan period or fixed for certain number of years where as Flexible rate changes periodically with respect to the market. But there are pros and cons for both of them.


Fixed Rate :

Pros:

  • It is usually preferred when an individual doesn’t want to face any kind of financial risk.
  • It varies very little from lender to lender.
  • It is easy to understand.

Cons:

  • The interest rate would be higher when the market is on a higher trend, then.. 
  • the qualifying will be tough,
  • they will be less affordable, and 
  • the same higher rate remains, for the whole loan period, even when the market is on down trend or stable.

For example : Akshay bought a home for 50 lakhs. Out of 10 lakhs was payed as a down payment and 40 lakhs by a home loan. He took a home loan when the market is on the down trend and so, the interest rate is also lower, which is at 9%, ten years ago. Now the market is on the up trend, and the rates are higher. Akshay is saved from this financial risk of  increase in the interest rates.


 On the other hand, Abhinav bought a home for 50 lakhs. Out of which 10 lakhs was payed as down payment and 40 lakhs by a home loan. He took a home loan when the market is on higher trend and so,the interest rate is also higher, which is at 11%, interest ten years ago.  Now the market trend is stable and little on the lower trend, so the interest rate is 9%. But since the interest rate is fixed, Abhinav is paying 2% extra. 


So, when opting for a fixed rate as interest rate, take a wiser decision by knowing the trends of the market. This effects the number of years you are paying the home loan. Clever decision might increase to a decade or even reduce to half a decade. 


Note : Even fixed rates undergo changes after a certain time interval. It varies according to the individual lender.


Flexible or Adjustable Rate : 
Pros :

  • Flexible rate, initially is set a little lower than that of the fixed rate.
  • Depends on repo rate.When RBI increases the repo rate the interest rate would also be increasing. Moreover, this interest rate hike will not be for the entire tenure of the loan. Say you took a loan for 15 years. Over such a long time frame, interest rates are bound to fall.
  • Ceiling, i.e., this is the highest interest rate that the adjustable rate is permitted to become during the life of the loan.  

Cons :

  • It is complicated.
  • The monthly payment may change frequently over the period of the loan. Usually it is for every quarter, but it depends on the individual lender. For e.g., ICICI bank reviews it for every quarter.
  • With the change in the interest rate, you either have to change the monthly payment or change your tenure. i.e., if the monthly payment is constant then the tenure increases and vice versa.

Have to make a note of the review date.

Influence of Repo rate on flexible rate : 
Repo rate is the rate at which the RBI lends money to the financial institutions. So when there is a change in the repo rate, there will be a change in the interest rate. If there is an increase in the repo rate, i.e., the banks have to pay more interest, then they charge more from the customers, which increases the interest rate.


For example : Akash took a home loan of 50 lakhs with flexible interest rate of 9% when the fixed rate was 10.5%. Now there is a review of the rates every quarter. The revised rates are sent to Akash. It says, december – 9%, march – 9.05%, july – 9.15%, october – 9.01%, So, we observe a frequent change in the interest rate. This is depended on the market trend and the repo rate. But the flexible rate did not reach the fixed rate. Infact, it is very rare that the flexible rate would have drastic changes.


 As observed, there are pinholes in both the cases and also true advantages. Hence, regardless of the type of the loan that we select, we have to chose carefully to avoid costly mistakes.

Learn the home loan terms definitions in an interesting way!

Home loan terms definitions

Buying a new home with the help of a home loan is now very common. Since, there are n number of financial institutions to provide loan, there is a huge competition. So, it is very usual that this competition forces them to make the proceedings a little easier and a little convenient.


Recently, there is  a discussion among our friends about home loan, the process and the terms involved. The discussion started as Ajay wants to buy a new home with the help of a home loan. Aarav is already in a home loan, which helped Ajay to discuss all the basic terms about the same. The discussion goes on like this…


Ajay : Saw a house. All of our family members liked it. But it costs me a fortune. So, planning to go for a home loan.


Aarav : Ohh! Is it! So how much are you planning to pay as down payment


Ajay :  (New to all these terms) Down payment?!


Aarav : ( already in a home loan)  It is very important to know everything about home loan before you go for it. So, Down payment is the payment made in the form of cash as the initial payment, when you buy a home. The percent may vary from 5% to 25%, with respect to the seller. For the rest of the amount, you can arrange for a home loan. So, you should know how much cash you can pay before applying for a home loan.


Ajay : Hmm, So, what are the other things that I should know…


Aarav : OK… For the rest 85% say, you are going for a home loan from a financial institute. You know that, the financial institutes approve the loan after verifying your personal details and the property’s details. Now, before you apply, you should decide about the  interest rate for your loan. There are two rates which are depended on the RBI’s repo rate. They are, fixed and floating or adjustable.


Ajay : Oh, fixed interest rate is the rate which stays constant for the entire term, and floating is the rate which will change periodically with the market.


Aarav : Very true Ajay. This needs some research. So do before you decide.


Ajay : And next is the tenure.


Aarav : Is it just the number of years I take the home loan?


Ajay : Yes, ofcourse but, it is not just..there is a lot in it. Tenure depends on the EMI (Equated Monthly Installments) you can pay. Usually, EMI and tenure are inversely proportional. The more you opt to pay in a month, the lesser the years you will pay the loan. Tenure also depends on your age and length of the career. This is another aspect you should know about.


Aarav : Is there anything more to know and to check before I go for a home loan.


Ajay : Yes, the financial institutions charge processing fees. To get our work done, institutions do some ground work which involves documentation process, underwriting process, legal charges, etc. It usually varies from 0.25% t0 0.5%. Due to huge competition, there are some institutions which do not charge the fees.


Aarav : That’s interesting. Though minimal, we should try to reduce the cost in all means.

Ok, it is now my piece of cake to make a wise decision.

Home Loan, a true gateway to fulfill your dreams

Home Loan, a true gateway to fulfill your dreams

Everybody has a dream, to own a home. Irrespective of the class, gender and age, one thinks of investing one’s money in a property, in which owning a dream home would be the first in the list. However, to get this wish fulfilled, there is an interesting and helpful gateway called home loan.

         

Home loans are loans that are taken for the purpose of buying a house. Home loans are secured loans. The house acts as a collateral or security to the loan.The borrower needs to repay the lender the sum of money loaned part by part over time in order to clear the debt.

Usually, a home loan is offered, after validating the details of the individual and the property, e.g., salary, identity proof, etc. Specific interest rate, either fixed or varied, is applicable on the sum of money, which will decide the equated monthly installment (EMI) payable. The individual can decide the number of the years he wants, to repay the amount. So, to get the work done, financial institutions usually charge a minimal percent of processing and administrative fees. If the individual fails to repay the loan, the financial institution can sell the house or convert it into an asset to recover the loan amount.

Before finalizing a loan, it is a must to go through and analyze the terms and conditions of various banks, and choose the one which suits the best to make the dream come true. Check  Home loan hot tips  to make the right decision.

11 must know home loan tips and tricks!


Buying a house is once in a life time decision for most of us. Buying a house can be a fun and exciting experience. But finding the right home is just one step in the process. Most of the us ignore choosing the right home loan and see set of surprises later. Mostly we will refer the builder or friend who had recently taken home loan. Here are some tips to help make finding the right home loan as easy as possible. You can visit LoanYantra.com to compare the home loans

Home loan tips and tricks

“When I took the home loan I compare home loan interest rates of loan products on Loanyantra.com While I was sanctioned a loan for 15 years, I foreclosed my loan six months ago, that is within ten years,” said Gopi Krishna.

What are the right things he did? Read on to learn a few useful tips from him. 

  • Tip  1 – Good research:
    • Do not go as per what your loan agent says. You do your own research of the best terms available in the market. “While taking a loan, my agent did everything to stop me from going to a specific bank. I later on realized why, specific bank was paying less commission to agents, so they earn less. Hence the agents never encourage few banks,” said Srinivas. “I went and choose the bank that gave me the cheapest rate of interest,” he added.
  • Tip  2 – Get your financial documents in order: 
    • When you apply for home loan you need to provide your lender with number of financial documents. Having these documents already assembled will help accelerate the processing of your loan application.
  • Tip  3 – Park your additional funds: 
    • A couple of banks have a facility, which allows borrowers to park their additional funds in the loan accounts. “This will reduce the interest proportionately from the principal amount for the time that the amount was parked. This is an interesting option. This was not there when I took a loan,” said Sandeep.
  • Tip  4 – Learn what is floating or fixed rates: 
    • There are two types of interest rates that banks offer: floating and fixed interests. Floating interest rate is linked to market. It moves in tandem with a base rate.  Where as fixed interest remains fixed for a few months defined in the loan agreement. It is important to understand that in most cases floating rates work out cheaper than fixed rates in the long run.
  • Tip  5 – CIBIL Score : 
    • It is important to have a score of 750 plus to get attractive rate of interest on your Home loan. CIBIL data indicate that 80% of the home loan approvals are given to customer who have a credit score of 750 plus. Low CIBIL score could possibly reject your Home loan application or you may have to pay a higher interest rate.
  • Tip 6 – Understand foreclosure norms
    • Recently, RBI banned foreclosure penalties. So make sure you do not pay anything extra while foreclosing your loan.
  • Tip 7 – Save up to foreclose: 
    • If you can save Rs 1 lakh in the current fiscal, do not use it on a dream holiday abroad. Instead use it to foreclose your loan. “My advice to every borrower is that learn to foreclose your loan as soon as possible. The sooner you free the amount you pay for equitable monthly installments (EMI), the earlier can you enjoy the freedom to spend that money on luxuries of life,” added Sandeep.
  • Tip  8 – Compare processing fees:
    • Whether it is for a fresh loan or for a balance transfer. Enquire in all the banks before you finalize. Also make sure you give a cheque for processing fee instead of adding it to the loan account. If we add processing fee to home loan, say Rs-10,000 fee on 20 years loan with 10% interest rate, then one would endup paying Rs-23161. 
  • Tip  9 – Read the documents: 
    • Read everything written in the loan agreement before you sign on the dotted line. It is very important to be aware of terms and conditions. “I have to pay Rs-5000 every time I take a home loan provision certificate for tax saving” said Ramesh. 
  • Tip 10 – Increase the down payment: 
    • Every borrower has to pay some money from his own pocket while buying a house. Try to pay as much as possible as down payment. This will reduce your interest paid on the principal.
  • Tip  11  – Spend conservatively: 
    • Keep a tab on your spends during the home loan tenure. The old adage “A penny saved is a penny earned,” holds true in case of home loan too. When you save money, you could actually use it to foreclose the loan.

Learn about switching home loan costs!

Learn about switching home loan costs!

Over the last few quarters, the RBI has lowered the repo rate by 0.5 per cent, which has been followed by rate cuts by banks and lenders. This has resulted in lower home loan rates. In fact, the falling interest rate cycle has just begun. Indraneel has a home loan of Rs 55 lakhs that he took at an interest of 11.00 per cent. The tenure of his loan is 25 years. Five years down the line, he wants tswitching home loan costso refinance his home loan for the remaining tenure at an interest of 11.50 per cent to take advantage of the falling interest rate cycle. Will this be a wise decision?  The new rate is applicable for new borrowers and not existing ones. Should he opt for a balance transfer to another lender?

Many existing borrowers are looking to switch their home loan to another lender in order to take advantage of the new rate and lower their EMIs. When done properly, refinancing can be very beneficial.

 However, before Indraneel goes any further, he must carry out a thorough cost benefit analysis. It is important to time the loan refinancing in a way that saving on interest payable is maximized.

Indraneel is likely to find switching lucrative as only five years of his loan tenure are over, which means a large portion of his principal is outstanding, as his EMI is mostly made up of the interest component. With time, the interest component comes down and principal component goes up. 

There is no prepayment charge on floating rate loans, but some fixed rate loans may have it. 

Indraneel must check if his lender will levy the same if he were to prepay and switch lenders. The loan processing charge of the new lender is the second part of the cost that should also be considered. A high processing fee may make the new loan quite expensive. Indraneel must also consider the hassles of repeated paper work that goes into transferring the home loan from one bank to another.

Therefore, instead of making the switch decision by purely considering the interest rate differential, Indraneel must make sure that he factors in all these costs when computing the potential savings. Needless to say, refinancing is a profitable move only when the potential savings in the long run are significant.

Cost of switching  : 

Pre-payment charges (if any) + Processing fee + Legal charges (if any) + Yearly home insurance (if the lender says its must) + Other hidden charges ( SMS charges +

Provisional Statement charges + Pre-payment charges + Change of tenure charges + Change of EMI charges )

Benefit of switching using LoanYantra.com :

Helps in minimizing the cost of switching and makes this process smooth.  Your 1-day of your work with LoanYantra.com can save your 3-years of your salary.  Use the balance transfer calculator to check what you can save.