Need to understand the meaning of a certain term in home loan sanction letter

POSTED BY Raghavendra Nainala ON July 18, 2012 11:27 pm COMMENTS (5)

Hi All

I am going for ICICI Home Loan. Before, I could get the home loan sanctioned for me, I wanted from them a copy of the sanction lettertemplate to understand on how it looks and the conditions they might mention in it.
In the sample template they have shared it says under
“Fees on Full & Final Prepayment *
0% on amount prepaid and on all amounts tendered by the Borrower towards Prepayment of the Facility during the last one year from the date of final prepayment.
Wanted to know the meaning of the above statement, because during initial discussions with the Bank Rep, it was mentioned that RBI has abolished Pre-closure charges for floating rate loans.
Which I also read while going through the jagoinvestor site as was mentioned in some of the threads.
I am NRI, hence have entrusted with my DAD the Power to do the signing on my behalf.
I want to keep him appraised of this, so that we know what it means.
I know, it is not the copy of my own sanction letter; but wanted to understand it so that I am prepared.
Regards
Raghavendra

5 replies on this article “Need to understand the meaning of a certain term in home loan sanction letter”

  1. Dear Rakesh, earlier when ICICI HFC was charging prepayment penalty, it was charging the penalty including all the prepayments made in last 1Y from the date of final prepayment. The wordings mentioned by you are actually the clarification of abolition of that prepayment penalty. ๐Ÿ™‚

    Thanks

    Ashal

  2. Raghavendra Nainala says:

    Thanks Ashal!

    Even I found something interesting on this, When Banks were charging pre-closure charges earliereven now on maybe fixed interest rate loans.

    They not only charge X% whatever is mentioned as per loan document on not only the principal outstanding, but also on the amount what ever we pre-paid(Part Prepayment) in the preceding year before the final payment.

    This statement has been used for that reason. Now that RBI has abolished it for floating rate loans, they have made it 0%.

    Regards
    Raghavendra

    1. Dear Raghavendra, Yes you are bong on target now. Your understanding is correct. Congratulations.

      Thanks

      Ashal

  3. Dear Reghavendra, I’m giving below an example to understand. I assume you are already running a loan. You prepaid in following fashion –

    5 Aug 2011 – Prepaid 2L Rs.
    17 Nov 2011- Prepaid 5L Rs.
    28 Jan 2012- Prepaid 3L Rs.
    5 Apr 2012 – Prepaid 5L Rs.
    19 July 2012 – full & final prepayment to close the loan

    Now the wordings of that statement reads – the prepayment charge ‘ll not be applicable on the partial prepayments done in the last 1Y from the date of final closure of loan. In effect no prepayment charge at all.

    thanks

    Ashal

    1. Rakesh Sahu says:

      Hi Ashal ,

      I m taking home loan from ICICI HFC

      Can u elaborate below line in detail

      โ€œFees on Full & Final Prepayment *
      0% on amount prepaid and on all amounts tendered by the Borrower towards Prepayment of the Facility during the last one year from the date of final prepayment.

      As I understood i dont need to pay fees for last year but what about prepayment before 1 year.

      Hi Raghavendra,

      Did u took loan from ICICI if yes how is it ??

      Please help

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