Home Loan Clarification needed

POSTED BY Suresh R ON February 19, 2013 1:31 pm COMMENTS (5)

Hi,
I am planning to get home loan for a land purchase already been identified. I don’t have any plan to construct house in this land for next 5 years. Just for investment I am purchasing this land. Below are details. Land Purchase Amount : 9 Lac. Home Loan Amount : 7 Lac (80%). Tenure : 5 Years.

1) Whether I should go for fixed or floating Rate. Also It would be helpful if anyone suggests me regarding the bank from which I should go for home loan.

2) As far as I know, SBI & HDFC are the best for Home loan. Only HDFC gives Home Loan for Land Purchase. If SBI means needs to start construction within 6 months from the 1st loan disbursement.

3) Can I claim Tax exemption for this home loan. Whether Interest / Principal consider for tax exemption?

4) When I asked for the loan in HDFC Bangalore branch, they said 10.25% interest rate and 0.5% processing fee + service-tax. But when I asked in HDFC Madurai branch (property in Madurai), they said 10.50% (since it is not housing loan, and it is land purchase there is 0.25% increase) interest rate and 1% processing fee. Is this acceptable? How come two different branches say different interest rates? (As far as I know, only HDFC bank giving loan for Land Purchase. No other banks giving!!)

Please help me.

Regards,
Suresh

5 replies on this article “Home Loan Clarification needed”

  1. Bala says:

    Hi Sir

    I have taken home loan from LIC HFL 2 years back. Amount 40Lakhs and fixed for 10 years for 10.95%.
    I increased my EMI from 39k to 59k per month and done partial payments.
    I brought my principle to 18Lakhs and I am planning to close it in 2 years of time from now.
    I would like to know as interest rate has come down. Is it right time to change my home loan considering I am going to close it in 2 years max. Ofcourse I need to pay 2% closing charge as I opted fixed for 10 years. Incase If I am not closing to keep some amount for tax purpose for few more years what should I do.
    Please help me deciding.
    Thanks and regards
    Bala.

  2. Credexpert says:

    Dear Suresh,

    Opt for Fixed interest rate as you are planning to close the loan in 5 years. Also you cannot claim tax benefits in this case.

    The interest rates of a lending institution across all its branches should be the same unless between the time you approached the two branches there was a revision in the interest rates.

    Regards,
    Credexpert

  3. Suresh R says:

    Thanks Ashish & Ashal.

  4. Dear Suresh, Let me try to answer you.

    1) Whether I should go for fixed or floating Rate. Also It would be helpful if anyone suggests me regarding the bank from which I should go for home loan.
    As your intention is to close the loan in next 4-5 years, please opt floating only. No need to pay high interest on fixed rate.

    2) As far as I know, SBI & HDFC are the best for Home loan. Only HDFC gives Home Loan for Land Purchase. If SBI means needs to start construction within 6 months from the 1st loan disbursement.
    Yes SBI, do force to start construction. so your only option is HDFC.

    3) Can I claim Tax exemption for this home loan. Whether Interest / Principal consider for tax exemption?
    No, for merely a land purchased on loan, you can not avail tax benefit.

    4) When I asked for the loan in HDFC Bangalore branch, they said 10.25% interest rate and 0.5% processing fee + service-tax. But when I asked in HDFC Madurai branch (property in Madurai), they said 10.50% (since it is not housing loan, and it is land purchase there is 0.25% increase) interest rate and 1% processing fee. Is this acceptable? How come two different branches say different interest rates? (As far as I know, only HDFC bank giving loan for Land Purchase. No other banks giving!!)
    Please ask in writing from both branches, Alternatively, you may confirm the same from customer care of HDFC itself.

    thanks

    Ashal

  5. Ashish says:

    Hi,

    As far as I know, the tax benefit is not there on Land purchases. In fact even on under construction homes there is no tax benefit on pre-EMIs (except on interest paid during pre-EMIs can be claimed under tax benefit in 5 installments after the construction is complete).

    Two branches saying two different things is possibly because of incomplete information at their end. If one of the branch is charging lesser RoI, ask for the same in writing before going ahead with papers to be on safer side.

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