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Read fine print in home loan contract for hidden charges

If you have availed loan on a floating rate basis, with the change in MCLR/ erstwhile bank PLR, interest rate should be reset automatically.

home loan, real estate sector, real estate industry
It is the depositors who need to be aware of the risks involved and take a decision accordingly.

By Chaitali Dutta

Why do I have to pay the bank some money every time when I request them to reduce the interest rate on my loan?

– Uday Gaurav

If you have availed loan on a floating rate basis, with the change in MCLR/ erstwhile bank PLR, interest rate should be reset automatically. However, some banks have clauses inserted in the fine print of the arrangement letter, which allows them to charge this fee. At the time of sanction of the loan, the relief of getting the loan cheque is paramount and many a time we overlook to read through the clauses in the papers we are signing.

I want to take a home loan for `50 lakh. I have been reading about the problems with NBFCs, so should I go to a bank for loan?

—Aditya Maheshwari

It is the depositors who need to be aware of the risks involved and take a decision accordingly. In contrast, for a home loan, the NBFC is parting with the funds (by giving the cheque to the builder), you, being the borrower, will be repaying the loan. The risk of repayment always lies with the borrower.

Is it compulsory to take insurance with a home loan? If so, what kind of insurance should I take—life or general insurance?

—Dhruv Agarwal

Ideally both. The life cover is required as you do not want the family to be burdened with repayment of the loan, if something happens to you. The amount should be equivalent to the loan amount. The general insurance is for the property to ensure against natural calamities, fire and terrorism. The property being the security to the bank, usually the bank will ask you to get this cover as well.

I had taken a negligible amount as bank loan to buy a property and am playing the EMI. Now I have done the registration of the flat and the bank has taken the original registration papers. Can it do like that?

—L K Khaty

For the bank to give the loan amount cheque, they need security. Home loan is a securitised loan. In India, this is done by way of equitable mortgage (EM) of the property. The EM is done by physical handing over of the property papers and in some states, EM is registered as well. In case of a default in payment, the bank has the right to take possession and sell the property to foreclose the loan.

The writer is founder, AZUKE Personal Finance Advisory. Website: www.azukefinance.com. Send your queries to fepersonalfinance@expressindia.com

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