RAMESH RAGHAVENDRA OF NEWAGE INVESTMENTS MYSORE REPLIES TO QUERIES ON HOME LOANS AND CRR HIKE

Arun Mishra asked, if i have two home loans, can i show income from home = 0 for both the homes? i have not rented any of the home. if not how much income i need to show? Ramesh Raghavendra answers, On one of the homes as per your choice you will have to take the notional rental value as your income (even though it may have been lying vacant). Selvaraj T asked, Will I be able to transfer home loan within State bank groups? I have loan with SBH and I would like to transfer it to SBI. Ramesh Raghavendra answers, Why not. they are different legal entities. Arup Bannerjee asked, Why banks are biased towards existing customers? When there is increase in PLR [due to CRR or any other reason] it is passed to every customer but when there is reduction is CRR, bank normally lends to new customer with less rates but existing loyal customers are kept away from reduction? Ramesh Raghavendra answers, I agree that banks are less than fair with their existing customers. Though existing RBI regulations cover this point not a single bank is following them. the affected consumer should complain to the banking ombudsman about the non following of such regulation. Paloma Mehta asked, Hi Ramesh, what are the tax liability when we make a prepayment for the housing loan, and waht are the advantages. Ramesh Raghavendra answers, There is no question of a tax liability when you prepay a home loan. In fact it is treated as principal payment and will be eligible for deduction under section 80C upto an overall limit of Rs. 1 lac. Off course if you are selling the flat itself within 5 years of acquiring it there will be a requirement to refund any tax benefit that you might have claimed in earlier years Babubhai N I asked, Rameshji will you answer my query i am currently 45 yrs and my net income is 45000 will i get a home loan of 15 lacs and what will be interest rate and tenure and what will be approx emi Ramesh Raghavendra answers, If you have no other loan you should not have a problem in getting a loan of Rs. 15 lacs (off course the house cost should not be less than Rs. 19 lacs). Thiruraj N asked, hi, 4 of us wants to buy a 1ground land and construct 4 flats (2+2) in that. All of us wants to take home loan for both the land and construction. Pls guide us how to proceed and which banks are providing loan for this arrangement? Ramesh Raghavendra answers, You have not stated what the arrangement will be for owning the land and flats. will you form a cooperative housing society or a condominium. This kind of loan is difficult to get as it is pretty unusual. You should perhaps try HDFC limited who might have some experience in this. Bardaoi Singhta asked, Ramesh Raghavendra- thanks for the answer sir. What if I remove the wheels - does it qualify as in immovable asset and hence for home loan ? I appreciate your efforts to guide me sir. Ramesh Raghavendraanswers, No it does not. A "house property" needs to be a building or land apeertunant thereto. A car body (with or without wheels) cannot qualify as a building John Ibumapalam asked, Hi Harsh, I have recently bought second new home and my emi has started. Can I get tax benefit on second home ( I will not claim any tax benefit on first home)? Ramesh Raghavendra answers, You can get tax benefits on loan repayment on both homes. It is a misconception that you can get benefits only in respect of one house property. Sandeep Ved asked, What can u speculate about the home loan rates after three years from now? and what will be the tax benefits then? Ramesh Raghavendra answers, I think anybody who can answer that question right would make millions on the bond market . Dipen Lakotia asked, hello. is the bank under an obligation to provide copies of all documents executed by the borrower in respect of the home loan. Ramesh Raghavendra answers, Absolutely. They are supposed to do this even without a written request by the borrower. But if you have not got it send a written request and if it is still not given please file an official complaint with the banking ombudsman. Sachin Darekar asked, Hi Ramesh i am opting for a loan of 13 lakhs from HDFC should i opt for 20 years repayment or 15 years repayment...I can afford 15 also Ramesh Raghavendra answers, It depends on your monthly budget and the provision it has for emergencies. If your monthly budget can afford the higher EMIs on a 15 year loan (as compared to a 20 year loan) the b y all means you should only take a 15 year loan. Pina Shah asked, is car loan and home loan same thing ? if i take car loan and live in car..will i get home loan rate since the car becomes my home ? Sir pls clarify. Ramesh Raghavendra answers, Extremely innovative question. This had me scarring to the law books. Unfortunately for tax purposes it recognizes only as buildings or land appurtenant thereto as "property". So if you live in a caravan you will not be eligible for any tax benefits on loan taken to acquire this Van. Also as far as banks are concerned the rates will be that applicable to a car loan as the depreciation of the asset values and its movable nature will determine the interest rate on loans. Manoj Gaitonde asked, I am having a housing loan for the house I have purchased few years back. I have got spare money right now. What shall i do- Purchase any property for appreciation in future or repay my housing loan? for your information I have got stable income for paying future EMIs. Ramesh Raghavendra answers, I think you should take professional advise in this matter from a financial planner. The answer would depend on your tax situation, asset financial goals, current asset allocation, risk taking abilities, etc. Without the benefit of personalized advise you are likely to take a wrong decision. Personally if your risk taking ability is moderate to high and you have good insurance cover for the risks that you are exposed to, the option to invest in residential property for renting it out and gaining capital appreciation can be pretty attractive. But as i said - this is a big ticket purchase and you should seek individual professional advise on this matter. Jitu Thadani asked, Hi Harsh, I have a home loan of 24 Lacs from HDFC with 10.25% interest. Now I have an option to low down the interest rate to 8.75% by paying processing fee of 1.5%. So it is advisable to keep the loan in HDFC or to transfer it to SBI?? Ramesh Raghavendra answers, Very clearly it will be advisable to shift to the new scheme. However you might be even more better off asking then to shift you to their new teaser rate scheme. If they refuse you should look at other banks in the market who offer such teaser rates. Manoj Daundkar asked, How is CRR directly impacting Home loans? Ramesh Raghavendra answers, There is no direct connection between CRR and home loan rates (or any interest rates for that matter). As you are probably aware CRR is the percentage of the deposits that a bank is required to compulsorily keep with RBI. When this percentage is increased the amount of money available with the bank to lend decreases. Also the CRR deposit kept with RBI carries no interest so the bank has to earn more from its balance deposits to compensate. In both cases this exerts pressure on the banks to increase rates on loans. But this is only one factor (though an important factor) that affects interest rates. General liquidity conditions, availability of deposits in the markets, fiscal policy, etc have their own influence on interest rates. Hence we may not see banks increasing interest rates even after the recent CRR hikes are actually carried out during February 2010. Michelle Pereira asked, Hi Harsh, I have opted for a new flat, which is under construction, for 37 lacs at Chennai. Planning to take a loan for 20 lacs (My monthly gross is 55k). Suggest which bank to go for and whether to opt for Fixed or Floating rate if the loan tenure can be 15 or 20 yrs. Will the interest rate go high in the coming years? I have shortlisted HDFC or LIC Housing. Any other suggestions from your end? Ramesh Raghavendra answers : , Congratulations on your decision to buy your own flat. If your age is less than 40 years you should easily be able to get a loan of Rs. 20 lacs from any bank based on a net income of around Rs. 45k per month (assuming you have no other loan outstanding). As far as type of interest rate is concerned (fixed or floating) this is never a one time decision and you need to keep reviewing your decision at least once every 6 months. As far as today's conditions are concerned a pure fixed arte loan that remains fixed for the entire duration of the loan will be prohibitively expensive at around 13.50% or so. In the current times the best bet is the teaser rates offered by various banks where the rates remain fixed for the first 2-3-5 years and is then floating thereafter is a good bet considering that rates are expected to go up in the near future.