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Home Loan Provider in India is normally finalized based on the reference or word of
mouth. There is no harm in taking references or feedback from friends and family
members. It helps in better decision-making. In most of the cases, it is the builder
who decides Home Loan Provider of a buyer. He has vested interest in this entire
process as builder receives cut or commission to promote particular Home Loan
Provider. Secondly, he doesnt want you to initiate Title Search or Legal Check
Process again. Some of the common tactics of the builder to pressurize buyer are
Documentation, Payment Deadlines or everyone else is availing Home Loan from
same Home Loan Provider. In the financial world, Trust and Pressure are 2 biggest
enemies of an investor. I am not saying that you should not trust anyone. But, the
final decision should be yours and after your own due diligence. If you will allow
someone else to take decisions on your behalf or take any decision under pressure
then you will end up losing in financial terms.
While finalizing Home Loan Provider, everyone has a different criterion. Some
people prefer convenience while others are more particular about the interest rate.
Everyone has its own priority list. In one of the case, my client was availing a home
loan of 1.5 Cr but most of the Home Loan Providers refused. One of the small
Housing Finance Company i.e. HFC A agreed to provide Home Loan. If I go and ask
him which is the best Home Loan Provider then his obvious choice will be HFC A.
His priority was different and yours & mine might be different. Therefore, it is very
critical that we should take logical, scientific and pragmatic approach towards this
exercise. As a borrower, you may face the host of problems while availing Home
Loan. If you pose the right set of questions to your Home Loan Provider then you
can avoid most of these issues at letter stages. Secondly, in most of the cases
borrower is dealing with an agent of a Home Loan Provider. These poor guys dont
know much. It is always advisable to deal with an employee of a Home Loan
Provider. Till you apply for a home loan entire process looks like a cake walk as most
of the details are not disclosed to the borrower. The real problem starts when you
submit Home Loan application to Home Loan Provider and processing fees cheque
is encased.
The interest calculation is not transparent for few Home Loan Provider specially
Housing Finance Companies. Best example i can think is of one of the leading
Housing Finance Company. When you avail Home Loan from this HFC, the interest
rate is 10.10% which is only fixed for 2 years. It is not disclosed to the borrower what
will be the interest rate after 2 years i.e. when Home Loan will shift from fixed to
floating. If everything remains same for 2 years, your interest rate will be between
11.75% to 12% after 2 years. In short, its a unfair practice not to declare what will
spread on Benchmark rate after floating interest period is over. Customer gets the
shock of the life after 2 years when the interest rate shift from fixed to floating
interest rate. In some cases, discounted interest rate is only valid for short duration
say 3 months / 6 months. You should understand how the interest is calculated
against benchmark rate of the Bank or HFC. It is always advisable to compare the
interest rate movement of various Home Loan Providers for last 5 years to get a fair
idea of transparency in Interest Rates.
4. What are hidden Charges?
If someone ask me what are hidden charges? I say that they are Hidden :). I am
just kidding; it is advisable to put all the charges in black and white. Either Home
Loan Provider can share a printed page or you can send a mail based on your
discussion with an employee of bank / HFC. I shared most common 15 Home Loan
Hidden Charges Banks Dont Tell. Borrowers are under the impression that they
cannot negotiate on these charges, but some charges are in Banks / HFCs control.
For example, recently I advised my client to negotiate Home Loan Processing fees
for 1 Cr Home Loan. HFC agreed to reduce it from 0.5% to 0.25%. Only point is you
need to play your cards well.
Now this is the very crucial point. If you have not availed pre-approved home loan
then there is a possibility that your Home Loan Eligibility may fall short of your
requirement. Many of my clients stuck at this point and they have to run around to
arrange for the shortfall. In my post, How Home Loan Eligibility is fixed? I explained
that it vary from bank to bank. Some banks / HFCs offer top up or Home
Improvement loan in such a scenario. Therefore, it is critical to discuss this point
beforehand so that you should have clarity on same.
8. Do you need Co-Borrower / Guarantor / Co-Applicant?
As i highlighted in my post, beware of being a Home Loan Co-Applicant that you
should avoid the same. Co-Borrower or Co-Applicant should be added only if the coapplicant is co-owner of the property; you want higher home loan eligibility or wish to
avail tax benefits for both. I personally dont suggest co-applicant / co-borrower until
unless absolutely necessary. Most of the banks insist on the same therefore, it is
advisable to check beforehand. Word of caution: Entire communication with bank /
HFC should be documented through email to avoid any confusion in future. In this
post, i tried to cover most of the common points, which have wider financial
implications. I can mention many more such points, but they may or may not be
relevant for everyone. Be cautious while dealing with your Home Loan Provider.
Source: http://www.idbi.com/home-loan.asp