Home Loan- Which is the best?

POSTED BY niljag ON May 14, 2012 4:20 pm COMMENTS (17)

Hello All,
I am new to this community and by mistake I had put my questions at wrong place. I am asking here the questions agian.
My Questions:
Scenario : I have decided the property (Flat INR 49 Lac- possesion after 2.5 to 3 yrs) and now planning for Home loan(Required max. INR 38 lac) . I discussed with many friends and most of them said either go with LIC Home Loan or SBI Home loan.
1. Which one is the best – LIC Home loan or SBI home loan? I enquired at both the offices and interest rate for LIC would be 10.40% (under scheme) and 10.75 % regular. And SBI gives 10.75 % both floating.
2. Is the SBI MaxGain is better than LIC Home Loan? Are the processes to calculate the interest and reducing polices same with LIC and SBI? If not, what is the difference?
3. Is it neccessary to take Insurance policy on Home loan?Which type of policy need to take? If my loan amout is INR 38 Lac, how much value needs to be covered?
4. Is the policy premium added to the Home loan EMI or what does bank generally do?
5. If suppose bank approves max. home loan,but can we take less amout if we dont need full amout? e.g. if bank approves INR 38 lac however I need only INR 35 lac only. Can we do this?
6. In SBI MaxGain, is the question 5 applicable?
Thanks!

17 replies on this article “Home Loan- Which is the best?”

  1. freind4uall says:

    Hello,

    Today I went for SBI for home loan. The Property is under construction and they said to me that you need to keep at least 10% of the Home Loan Amount as FD with SBI. Till the property is not registered.

    Is this true ? Please advise.

  2. niljag says:

    Hi Guys,

    IS there any updates on this? Would really appreciate if someone replies to it.

    Thanks!

  3. niljag says:

    Hi Ashal,

    Hope you are doing great!

    I have a query related to SBI home loan agian. My loan is sanctioned and SBI is agreed to give me 80% of Agreement cost + Stamp duty + Registration i.e. INR 30,000.

    Now I will submit the form along wid docs for disbursement:

    (My flat is under construction and it will take 2.5 years for possesion. I would pay the amount to the builder step by step as per the completion of the work)

    1) What is the moritorium period?
    2)In the SBI loan application form, there is option to select for moritorium period in months? And whether you would like to pay interest in moritorium period?
    (SBI fellow told that we can give moritorim period up to 24 months)
    What we need to choose here? And what about the interest?
    3) Is the PreEMI and Moritorim period is same? What about the interest calculation during PreEMI period?

    Thanks!
    4)

  4. niljag says:

    Hi Ashal,

    First of all thank you so much for your sugestions. Today I went to SBI General Insurance office to discuss about the Property Insurance.

    As I had all the inputs from you guys I directly told him i dont want to go for insurance of Total Agreement Value(AV) but the actual construction cost. And finally I am successful in the negotionations and they agreed for Insurance only for the loan cost and not the full amount.

    Thank You so much..guys ..! I truly beleive if we have little knowledge of finance people especailly bank people will speak to us properly.

    THanks!

    ~Swapnil

    1. Dear Swapnil, glad to know that we are able to help you. Please keep us updated from your side & yes keep reading & learning from the forum.

      Thanks

      Ashal

  5. niljag says:

    Dear Ashal,

    I understood it perfectly now regarding Life issurance. I have a query regarding Property insurance.
    As you mentioned in earlier reply regarding Property insurance that “Consruction cost need to be covered only not the land cost”. I told the SBI guy exaly the same. So he said he will discuss with the Seniors of the respective dept.
    But my question is, who is going to decide the land cost in this situation and how? The builder has given me the rate as INR 3500 per sqr. ft. and the agreement values goes upto INR 45.5 lac plus 5% Stamp duty and INR 30,000 registration cost. So how can we decide the land cost out of this? Who will decide this? Any idea on this.

    SBI guy also not sure on this question?

    Thanks!

    ~Swapnil.

    1. Dear niljag, please ask that SBI person to contact his/her SBI Panel Valuer. This Valuer is the person who ‘ll differentiate the two. By the way, in any case, the SBI ‘ll ask you to go for property insurance of at least equal to home loan amount to protect it’s interests in your property.

      Thanks

      Ashal

  6. Dear Niljag, Here what I mean was – SBI may offer a single prem. mortgage term cover linked with your home loan where the sum assured ‘ll be always equal to the outstanding loan balance. So in a sense, it ‘ll keep decreasing with each passing month. What’s the harm? As the prem. is paid in a single prem. & the same ‘ll be added to your home loan, you w’d have to pay interest on this increased amount in your home loan.

    So opt for plain vanilla term cover for yourself either from SBI Life or any other insurer of your choice.

    Thanks

    Ashal

  7. niljag says:

    Hi Ashal,

    Thank you for your reply. I met with SBI person today regarding the loan and queries related to insurance.

    He said that Property insurance is compulsory but Life insurance is not. Could you please explain more details about
    “Just make sure that you are not opting a mortgage term cover for your life prem. included in that loan amount.” that you mentioned.

    Thanks !

  8. There is nothing called compulsion. Yes Bank need to meet thier target. They do impose such conditions.

    For example, you need a safe deposit locker, buy a ULIP or 1 lakh FD.
    Check with other branch. Max gain looks exciting on paper but practically keep it simple. Lower the EMI the better.

    Any extra amount. Prepay and get out fo the Loan ASAP. This will give you peace of mind.

  9. niljag says:

    @Manish: Thank you for your inputs.

    @Ashal:

    I am not sure about this, whether we need to cover building cost only or cost and life cover both. What is the general practice in case of Home loans.
    If the flat cost is around INR 50 lac, how much value needs to be covered? What is the best practice?

    1. Dear Niljag, Here is the info you are asking for.

      Cover for building is to be purchased from general insurance cos.

      Cover for your life is to be purchased from life insurance cos.

      Out of that 50L cost of your flat, a certain part is meant for the land on which the building is situated. So out of those 50L Rs. you can reduce the cost of the land as in case of collapse of building, land ‘ll remain & you w’d have to only reconstruct it.

      So construction cost is the cover requirement.

      thanks

      Ashal

      1. niljag says:

        Hi Ashal,

        Thank you so much for yur answer. However I am not cleared. I enquired in SBI for SBI MaxGain home loan and the insurance. And SBI official said it is compulsary to take insurance policy from SBI only if u take loan from them.

        So as you are saying “Cover for building is to be purchased from general insurance cos.” do we have any other options if we dont want to take it from SBI?

        And if SBI sanctions loan of INR 38 lac, how value in number should be covered? Is there any guidelines or best practices?

        Thanks!

        ~Swapnil.

        1. Dear Swapnil, now days, SBI has both a General Insurance co as well as Life Insurance co. So purchasing the required cover from both these cos. is ok to me. Just make sure that you are not opting a mortgage term cover for your life prem. included in that loan amount.

          Please ask the branch staff that you ‘ll purchase a term cover from them of say 1 crore Rs. of SBI Life Ins. Co. Staff ‘ll help you & ‘ll co-operate better to get the loan.

          The loan of SBI is for the combined thing land + building. Out of which land ‘ll be still there in case of building collapse. So purchasing a cover of construction value or equal to loan value is ok.

          Thanks

          Ashal

  10. Dear Niljag, here are the answers for your queries.

    1. The ROI are about to change very soon & the difference between the 2 may become zero or very less. On the basis of Pan India presence & branch network & for that Max Gain product, I w’d prefer SBI over LIC.

    2. If you can build a corpus over the period of time, SBI’s Max Gain is certainly better than LIC’s normal home loan product. The process of calculating interest is same in both SBI & LIC.

    3. Please confirm you are asking to cover for your life or for building regarding this insurance thing?

    4. Please answer question 3 first to get the answer for Q 4.

    5. Yes, it’s possible to later on withdraw less amount as per your requirement but you w’d have to write an application for the same to the bank/institution you are dealing with.

    6. Yes in case of Max Gain also, you can withdraw less amount.

    Thanks

    Ashal

  11. As per the survey I did recently .. SBI and LIC are both preferable (HDFC is also one at top) .

    So I would say go with SBI as first preference and then LIC .

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