The Golden rule for any business to flourish is to keep existing customers happy but Home Loan Lenders like SBI, HDFC, AXIS, ICICI etc think otherwise…For any individual, Building own dream house is a major achievement of life but this happiness is short lived if you have built ur dream house by taking Home Loan…Home Loan business is in deep mess right now and all the home loan lenders i.e. both the Banks e.g. SBI, Axis etc and HFC (Housing Finance Companies) e.g. HDFC Ltd, LIC, DHFL etc are taking their existing home loan customers for bumpy ride, reason being existing customers are paying very high interest compared to new customers & are being treated as cash cows for profit by home loan lenders…In a nutshell Banks/HFC are charging differential rates from existing and new customers.
RBI (Banks like ICICI, Axis, SBI etc are regulated by RBI) tried to curb this practice by introduction of Base Rate..6 months back NHB i.e. National Housing Bank (Housing Finance Companies like HDFC, LIC etc are regulated by NHB) came out with directive for HFC’s to treat new and old customers equally by charging same interest rate but the catch was that risk profile of both old and new customer should be same….Risk profile is very very subjective therefore Regulation in this regard is as good as No regulation. HFC can easily give an excuse that Risk Profile of Existing Customer is not same as that of New Customer therefore uniform interest cannot be offered to Existing Customer…You can click on following link to check out the NHB directive.
http://www.nhb.org.in/Regulation/pol%20cir-44.pdf
At the same time while introducing Base Rate, RBI forgot that Banks charge mark up on Base Rate, which is controlled by Banks & can be easily tweaked whereas HFC’s offer discount on BPLR, which again is controlled by HFC. Effectively introduction of Base Rate by RBI has not served any purpose. Infact banks are not moving base rate as per RBI policy (which i highlighted in my previous post)..You can click on following link to read more on this
https://www.nitinbhatia.in/home-loan/rbi-the-king-without-kingdom/
For existing customers, the discount or Mark up remain fixed throughout Loan period, which is the root cause of this problem. Take e.g. if i took loan from Bank A & bank offered me mark up of 1% over base rate of 10% at the time of availing loan, which implies my Rate of Interest (ROI) is 11%…Now in order to remain competitive, After 6 months bank may offer mark up of 0.5% to new customers. Assuming Base Rate being same, New Customer is paying 10.5% and Old Customer is paying 11% i.e. New Customer is paying lower interest rate compared to Old Customer.
The point is banks and HFC’s are making fool of old customers, it’s not the case that u can’t lower your interest rate but it comes with a cost…Recently SBI introduced a scheme that Old Customers on high interest rate can migrate to existing interest rate by paying 1% on outstanding amount as transfer fees therefore if ur loan outstanding is 20 Lac then u need to shell out 20k for shifting to lower interest rate…Similarly HDFC Ltd charge differential interest on loan outstanding to increase discount i.e. to lower interest rate e.g. If old interest rate is 11% and new Interest rate offered is 10.5% then u need to pay 0.50% on loan outstanding in order to shift to lower interest rate.
Before taking decision to shift to lower interest by paying fees, my only request to u is just to check how much benefit u will get from this shift…Normal tenure of Home Loan is just 8 years i.e. more than 90% Home Loans are closed in 8 years…Just to take e.g. if i am shifting from 11% to 10.5% by paying 10k plus on outstanding loan of 20 Lac then i need to check when I will breakeven e.g. if on average basis my per month interest burden reduced by 500 Rs then I will take approx 20 months to recover my 10k which i am paying upfront and my real benefit of this shift will only start after 20 Months…May be within 20 months i will prepay my loan then my break even will further increase to say 36 Months and by then may be i will close my loan so psychologically i am happy today that my interest is reduced but it comes with cost and u will take at least 2-3 years to recover the cost which u r paying upfront that is why I mentioned banks or HFC’s are making fool of customers.
Now u must be wondering if everyone is following this practice then whom shall we trust, Honestly my personal opinion is still u can trust banks and to be specific u can trust SBI… Reason Bank’s Home loan is linked to Base Rate & secondly Average cost of Borrowing of banks is much lower compared to Housing Finance Companies like HDFC etc becoz of CASA contribution. Only catch is, its very difficult to get loan from SBI as SBI don’t need customer but customers need SBI…SBI’s plate is already full and getting Loan from SBI itself is a big achievement…You can try other banks like Bank of Baroda, Axis Bank etc. In nutshell as a new customer you will be treated as King and as a old customer you will be cursing ur decision of availing Home Loan.
Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.
Nitin, I agree with this completely. I’m a customer of SBI and SBT for two home loans. Currently Im paying about 14% where as new customers are paying around 10.75%. SBI does not care and the manager at Besant Nagar does not care that he may lose a customer as he is moving to another branch in Velachery in chennai. Bank of Baroda is willing to take over the loan at 10.75% but my total expenses comes to about 30k for this. Should I go for this or not. My outstanding amount for chennai loan is about 35lacs. Am I getting into more trouble for change in interest rate with new bank.. would it be possible for me to negotiate with SBI to reduce my processing fee and re calculate my interest?
Dear Jolly,
It makes sense to change home loan provider, if ur loan outstanding period is more than 5 years and secondly new interest rate is lower by 2% from existing interest rate…In your case u have not mentioned remaining Loan period but i assume it will be more then 5 years…As i understand bank of baroda’s base rate is 10.5% and they are adding mark up of 0.25%..As per RBI guidelines, bank cannot lend below base rate therefore probability is minimal that Bank of Baroda will lend below 10.75%.
You can also lower your interest rate from SBI by paying 1% of Loan Outstanding Amount as conversion fees, which means on loan outstanding of 35 lacs, you need to pay 35k.
In my opinion, instead of paying 30k and shifting ur loan from SBI to bank of Baroda, you should pay 35k to SBI and shift your loan to lower interest rate i.e. existing market rate from SBI only as benefit of transferring to Bank of Baroda is just saving of 5k but it will be big hassle to transfer the loan.
Hope i answered your query.
BR
Nitin Bhatia
Hello Nitin,
Thanks for sharing such great information with us. You posts have been really helpful. I am planning to go for a home loan of 55 lacs, I am confused if SBI main gain will be beneficial or not, or is it just so hyped about. I am reluctant to go with central banks because of poor service. What is your opinion about Axis Bank.
Regards
Gurpreet Singh
Dear Nitin – Many thanks for the blog, you are doing a wonderful job, educating all of us and helping the lay man understand the bank’s/HFC’s malpractices.
Pls guide me as well. I have a home loan of (outstanding as of today) Rs 24 Lakhs with LIC and still 12 years to go for my term @ 11.65% floating (20 yr loan started in 2004 @ 7.5%). Am thinking to convert to Stan Chartered Home Saver option, which they are offering at 10.25% for now. Shall I go for it??
My question is till what time will I remain a new customer ( 1qtr, 1 year etc), because that is the saving I can make apart from keeping some cash in Home Saver and earning interest. Total takeover will cost me Rs 5K. Need your expert advise to take the final decision. Thanks
Dear Ashok,
Just to correct that Stan C is providing under 25 Lacs Loan @ 9.99% interest Rate (Cheapest Interest Rate offered as of date) & yesterday SBI has reduced interest rate to 10% for loans under 30 lacs i.e. 0.25% above base rate of 9.75%. I will suggest you to go for SBI as SBI is most transparent among all Home Loan Lenders in fixing the interest rate.
If u r not keen to go for Nationalized Bank then Stan C is good option as their interest is at par with SBI. Also just cross verify that 9.99% interest rate of Stan C is not under any limited period promo offer else your interest rate will further increase after offer period.
Unfortunately, you are new customer only till u sign the Loan agreement. After signing loan agreement you join the league of unfortunate old customers :)
Thanks and All the Best
Nitin Bhatia
Thanks for your quick respone
Hi Nitin, I am Sachin Gupta and I have taken a loan of 21 lacs in Oct 2008 with floating rate of interest of 11.25%. I have made some prepayment and as of date the outstanding loan is Rs 1690000/-. Present rate of interest with LIC Housing Finance is 11.65% and 138 EMIs left. HDFC is offering a loan at 10.25% interest. Shall I switch over to HDFC. Also would like to know whether HDFC will increase interest rates after 6 month or quarterly and charge interest same as an existing customer.
I will not recommend you to switch your loan as your outstanding is less & difference between new and old interest rate is also less therefore you will not gain more. You may check with LIC to lower your interest rate by paying conversion fees.Secondly we cannot predict interest rate movement for existing customer but for new customer, it will definitely come down.
Hello Nitin,
Thanks for your informative post. My dad had taken a home loan around 4-5 years back from SBI when he was working and is now retired. My dad does not know the interest rate and home loan details properly though he is always disappointed and cribs his decision of taking the loan. The reason is simple. SBI is looting him like anything. SBI gave him variable interest rate initially of around 9% when he took the loan back at that time. He only took a home improvement sort of loan for extending our house which was of only Rs.7 lakhs. However, SBI seems to be looting and fleecing him as he does not understand these details. He has been paying his loan regularly from his retirement salary account too but SBI is continuously bumping up the interest rate on his loan again and again. The other day I was utterly shocked when I saw that they had increased the interest rate to a humongous 14% without any reason. This is inspite of the fact that SBI base rate is only decreasing in the last few months. When dad went to ask in SBI about his loan details sometime ago, he was told there is no surety of how long the loan will last and they said that it might go another 10 years or more. The transparency seems to be completely lacking and they are just looting him as a customer as he does not know proper details. He has already paid for the last 4 years or more at a rate of Rs.7000 or so per month initially which he later on increased to around 10K for the last few years. Ethically he should have paid some portion of the loan but they are saying hardly anything is paid. They are not clarifying anything to him and not informing the balance loan remainder too. I often feel sad as that loan is taking a significant portion of his retirement income and yet there is no surety when the loan term would end. And I am unable to understand why a retired govt. employee who has a significantly safe profile needs to pay an interest rate of 14% when it is less than 11% if a person like me goes for the loan. What do you suggest? He would probably not take legal actions against SBI too as his retirement salary is also through SBI being a govt. employee.
Firstly i would like to add that Home Improvement Loan is technically not a Home Loan. The interest charged on Home Improvement loan is higher than Home Loan Interest rate. As i understand, u dad must have taken Home loan from same house becoz Home Improvement Loan is only provided to customers who had home loan with same bank.
Your father can visit SBI branch and request for his loan account statement which will give clear picture on how much principal amount is being repaid and how much is pending. Then he can pay conversion fees (1% of outstanding principal amount) & request bank to lower his interest rate (Bring at par with existing interest rate). Hope it will solve your dad’s problem.
If SBI refuses for any of above, your dad can file a complaint in consumer court against SBI.
I want to construct my house’s first floor. Cost is app. 5 lacs. I can do it through my own resources. But I have been suggested to take home-loanwhich will be beneficial. Example given is that for a 20% tax-bracket salaried employee, if home-loan intt is 10% then due to 20% rebate on intt nett intt. will be 8% & he can get this 8% by keeping his non-used funds ( due to taking home loan ) in ppf etc. Hence effective ROI will be zero %. Please answer my query with elaborate details.
Viponsharma
Till the construction is completed, you will be paying only Pre-EMI i.e. Simple interest on loan amount. Pre-EMI’ is not eligible for any deduction u/s 24(b). It becomes eligible for deduction u/s 24(b) in the year of completion. From the year of completion you can claim total Pre-EMI paid as tax relief for next 5 years in 5 equal installments.
After construction is completed, you can claim tax relied on Principal & Interest Paid amount paid every year:
1. Deduction on principal amountYou can get tax relief on your principal amount only if it is borrowed from recognized lender. Claim can be made for principal amount of housing loan together with other expenses such as registration fee; stamp duty etc from the financial year in which events like purchase, reconstruction, completion etc occurs. However you will not be eligible for tax relief, if principal amount is repaid before construction of your house. If you paid after completion of construction, you can claim maximum of Rs 1 lakhs in a year to deduct from your taxable income under section 80(c).
2. Deduction on Interest paidYou can avail tax relief for interest paid along with your monthly EMI. You can claim your interest deduction up to Rs 1, 50,000/- .However, you need to either acquire or complete construction of property within three years from the end of the financial year in which loan is taken. Tax relief can be enjoyed if you could not occupy the house due to your business or employment and your house is not let out during the year. If property is self occupied then you cannot claim tax relief on interest component.
In your case, Your actual interest cannot be 0% as calculated by u therefore i will not advise you to avail Home Loan and if u can manage finances on your own then its more beneficial for u.
Thanks & BRNitin Bhatia
Hi Nitin,
I had taken home loan of 26.5 lacs from Tata Capital at rate of 10.5 in Sep-2011. But from Mar-2012, they changed ROI to 10.75 resulting in my tenure increase from 240 to 273 months.Now, I made part prepayment of 2,20,000 so my tenure reduced to 195 months.
In TCHFL, u can make max. part payment of 25% of outstanding loan amount in a year. So going forward for prepayment in future, I may have to pay fees of 2% of principle paid.
I feel SBI is more trustworthy compared to TCHFL.
Should I switch from TCHFL to SBI at 10% ? Will it yield any benefits for me? A bit confused abt it..
Thanks in anticipation.
Hi Shailesh,
I request you to share your EMI amount then only i will be able to comment on same. Prime facie it seems that you will not be able to benefit by this switch.
Thanks & BR
Hi Nitin,
My EMI is 26,014.
Thanks Shailesh
Hi Shailesh,
I have checked your calculations and financially u will not gain much if u switch your loan from TCHFL to SBI but if u r planning to prepay your loan within 5 years then u may shift to SBI else you will bear penalty in terms of prepayment fees.
Thanks & BR
Thanks a lot Nitin for making it clear.
Axis Bank is good. You may go ahead
I have taken loan in 2006 from IDBI Bank @8.75 Interest of Rs. 7,50,000. Now the interest rates are 12.25%. They dont offer any conversion scheme as well. What should do to reduce the burden of Interest.
In my opinion, you may transfer your Home Loan.
Nitin this is very informative, I had taken home loan of 21.5 lakhs in 2006 from ICICI bank and switched to HDFC in 2009 January for a loan of 21.85 lakhs as I have to pay the preclosure penalty and it was shocking for me. That too after 3 years I am taking a loan more than what I availed (I was wrong may be in my decision) I have paid an EMI of close to 20k at that time. Now at HDFC I am paying an EMI of 21k, started at 9.5% initially in 2009 and in between automatically got reduced to 9.0 and now it is 11.75%. Known people suggesting me there is reduction in interest rate and asked me to check with Bank on the same. When I enquired they have asked me to pay 5600Rs as conversion fee to reduce the interest to 10.25% from 11.75%. I am also planning to bump up my to 35k as I can afford it.
Is it a good thing to do? Please suggest.
It will help you to reduce interest burden. Kindly mention your current loan outstanding & remaining loan tenure then only i will be able to be comment whether you will gain financially or not.
Dear Nitin
Current loan outstanding is around 20 lacs and around 280 months. If I pay 5800 rupees, EMI months is coming down to 180 months around I believe. If I bump up my EMI further on this to 35k from 21k, tenure will come down to 80 months.
It will be beneficial for u to pay conversion fees and reduce interest rate / loan tenure
Hi Nitin
I had taken a home loan of Rs. 1190000 on Feb,2009 from LICHFL at floating rate of interest which is 9%. From Last two years, LICHFL rate of interest is 11.9% and nowadays, my balance amount is Rs. 830000 with prepayment of Rs.100000 extra. Kindly suggest me that how should i proceed, ” Shall I switch to other Bank” or “Shall I ask LICHFL for converting my loan ROI to going on interest rate”.
If there is any other solution, kindly suggest.
Already answered
Hi Nitin
Sorry Earlier i have not given you the tenure and EMI for loan, please note down my loan tenure on Feb,2009 is 10 years and EMI is 15036/-
1st you request LICHFL to reduce Interest rate. In case LICHFL refuse to reduce then u may switch to other bank.
Hi Nitin ! Great Blog ! Very impressed ! I understand that there is no gurantee that for new customer there will not be even lower interset rate with offer of higher spread. However, don’t you feel RBI should not allow this exploitation of old customer as HFC do not offer linkage to base rate. For old customer interset rate increases very fast but does not decrease with decrease in base rate. How can we avail true and transparent floating rate from HFC?
In my case loan sanctioned under construction linked program is 8,20,000. Amount disbursed is 5,54,000. Current interest rate is 11.65 . Amount demanded by bank to convert it to 10.15 is rs.3900. Any idea how HDFC calculate conversion fees? Should I wait for interest rate to go down further or pay conversion fee now? Any guess what will be interest rate after 6 month?
i have already answered this query
Hi Nitin,
I have a home loan of outstanding amount Rs.2261548/- from DHFL. Remaining tenure is 187 months. I would like to transfer the loan to AXIS/ Bank Of Baroda. Both the banks are offering me 10.25% ROI. Which one will be better ? Please suggest. If any other bank is best for me please inform that one also.
Thanks
Abhishek
SBI / Bank of Baroda / Axis bank (In order of preference)
Hi I have taken a Home loan from SBT in 2010, the current interest rate shows as 12.75% is there any possibility to lower the interest rate and link this to base rate as in SBI
You can give written application to SBT to link your Home Loan to Base Rate. Don’t forget to take acknowledgement with stamp of bank, signature of employee and date.
After linking Home Loan to base rate, you may pay conversion fees to reduce ROI.
Any views on Corporation Bank? I am planning to take a home loan with them, their response was surprisingly refreshing and positive. Atleast so far.
This is for a property in Goa.
Corporation Bank is a good bank and ranked among top 10 banks in India. You may consider corporation bank.
in my experience . sbt. bank is the most worst cheating and irresponsible bank. in keral
I will suggest 2 points
1. Approach SBT and by paying conversion fees reduce your Rate of Interest. It will decrease your Home Loan liability
2. Give a written complaint to General Manager (Home Loan) of the Bank regarding deficiency in service i.e. no intimation regarding changes in Home Loan interest rates. If he will not respond within 15 days, we will approach RBI Bank Ombudsman. Take acknowledgement of Complaint registered with SBT.
Nitin Ji,
I tried to reduce ROI for my home loan from HDFC as existing customer without paying any conversion fee. But HDFC did not agree. Now, I have put this matter in front of NHB; regulatory authority for HFCs. Details of complain is as follows :
I need your expert advice what are chance of getting positive response from NHB. Even NHB has put this matter on hold/under discussion; may be due to pressure from HFCs since their last circular NHB (ND)/DRS/ Pol-No. 46 /2011-12 of 2012.
***********************************************************************************
Dear Sir,
I have my housing loan with HDFC. My current ROI is 10.75%. But in case of new customer, applicable ROI is 10.15%.
There is huge difference of ROI for old & new customer. If customer wants to reduce ROI, he has to pay a conversion fee. HDFC is charging more rate of interest to an existing customer. In my case, this difference is 0.6% which is very much high.
I have presented my case in front of HDFC on various level but they are referring about loan agreement. HDFC has used a term “Spread i.e. discount on PLR” in their loan agreement which is actual root cause of this problem of old customers. And such non-uniform spread
which is resulting higher ROI for existing customer.
And this is clear cut violation of direction of National Housing Bank (NHB) by letter “NHB (ND)/
DRS/Pol-No. 44/2011-12” as well as “NHB (ND)/DRS/ Pol-No. 46 /2011-12”
Existing customer is asked to pay a conversion fee to reduce ROI same as new customer.
Why there is step-motherly treatment to existing home loan customers. We have already paid processing fee & other charges while availing home loan like for new customers.
Looking for your action/Advice on following points:
1) Is Housing finance company are free to link such kind of “spread/discount” in PLR to set effective ROI for customer? B’coz such provision is providing scope for HFC to implement non-uniform ROI for old & new customers and simply opposite of initiative taken by NHB & RBI.
2) I have gone through “HFC booklet of all refinance schemes” w.e.f. 5th Sep’2013, Conversion fee has been described in case of ‘floating to fixed’ or vice-versa & this is 0.25%. I could not find out conversion fee to reduce rate of interest. How HDFC can implement such procedures?
3) I have also gone through circular NHB (ND)/DRS/ Pol-No. 46 /2011-12”. It has been
directed that all HFCs will apply uniform rate of interest having same credit/Risk profile. But difference in discount/Spread is not based on this criteria, This is totally based on old & new customer.
And
4) You are requested to provide direction to HDFC to reduce my ROI same as applicable
for new customer without any conversion fee.
Rgds
Nirmal Kumar
Frankly speaking NHB will not take any action in regard. To answer your queries
1. Home Loan is governed by Home Loan Agreement which is legally binding on both the parties. The spread/discount is fixed for Home Loan tenure and cannot be challenged legally. Also Banks/HFC give justification that Rate of Interest is fixed based on cost of funds which may vary time to time.
2. Please login to online portal provided by HDFC to access Home Loan account. You will find offer to reduce ROI by paying conversion fees.
3. HFC’s have not implemented the NHB guidelines yet.
4. I have already taken up this issue with NHB and HDFC
Nitin Ji,
One month back, I complained against HDFC for charging higher rate of interest from current customers. It looks NHB is working for welfare of HFCs instead of borrowers. When today I called NHB for final answer on my complain. I came to know that NHB has withdrawn its both circular 44 & 46 by circular no.64 dated 22nd Aug to close my complain & they will close my complain tomorrow. I am shocked to see that how NHB is favoring HDFC instead of borrowers. Pls advise me what to do further?
http://www.nhb.org.in/Regulation/NHB-ND-DRS-Policy-Circular-No-64-14.pdf
Nitin Ji, As I complained NHB one month back regarding higher ROI for existing customer & shared with you.
Instead of directing HDFC on my complain, I came to know from NHB personnel that NHB has withdrawn circular-44 & 46 by circular no.64 on dated 22nd Aug. So, my complain has no meaning now. Pls let me know what to do further?
http://www.nhb.org.in/Regulation/NHB-ND-DRS-Policy-Circular-No-64-14.pdf
Dear Nitin Sir,
Please advise for below situation.
I have taken home loan of Rs 31,00,000 in Oct 2009 from LIC Housing for 20 years. First 3 years, I paid EMI based on fixed interest rate of 8.9%. After 3 years, the floaing ROI jumped to 11.65 and then to 11.75%. Also, the LIC Housing increased the tenure to 5 more years. Currently, I pay an EMI of roughly of 30600.
Should change to some other banks like HDFC / IDBI etc to get a lower ROI and less tenure?
In LICHFL, there is NO option to pay conversion fees and reduce ROI. In this case, i would suggest you to transfer your Home Loan to SBI / ICICI Bank / Axis Bank / Bank of Baroda
Unfortunately a borrower cannot do much in this regard as i mentioned in my other comments also. You may approach consumer court
You may approach consumer court
Hello Sir,
I had taken home loan of 3.5 lacs from Syndicate Bank in 2006 last qtr. @ 8.75 % fixed ROI. My EMI started from Mar-07 … surprisingly not a single time I had been charged with above ROI. Instead it starts from 9.25% and goes up as high as 12.5% and at present it is 12% whereas all other banks are offering 10.25 to 11%. Further, I have been paying more than EMI amount i.e. 7K instead of 4K however the interest has not been charged on actual outstanding amount. M planning to pay off the balance O/S of around 1lac but want above issues to be sorted our. Pls suggest with legal views.
Rgds,
Jayendra Rathod
1st check whether your Home Loan is linked to BPLR / RPLR or Base Rate of the syndicate bank. In all probability it is linked to BPLR / RPLR as loan was availed in 2006. As a 1st step, You can give a written request to bank to shift your Home Loan from BPLR / RPLR to Base Rate of the bank. There are no charges for this migration and as per RBI guidelines, Bank cannot refuse to link Home Loan with Base Rate. Once your Home Loan is linked to Base Rate of Syndicate Bank. Just check Rate of Interest. If it still high, you may submit written application with bank to reduce your Rate of Interest i.e. reduce mark up over base rate and also mention that you are willing to pay conversion fees (if applicable). Bank will charge conversion fees and reduce your ROI by reducing mark up. Don’t forget to take acknowledgement from bank ref to all your written communication with the bank. All the Best !!!
Hi Nitin Sir, This is Amit Bhide. I have my floating rate home loan in HDFC LTd. from last 2 years. When I started, they were charging me with 10.25%, now they are charging 10.75% rate as of now and their projected rate will be same or increasing only. They do not decrease the rate at anytime but keep constant and increase the rate when RBI / other banks increase. Now I am thinking of switching my loan to other lower interest rate banks and not with HFC’s
My 1st question is whether this is a correct decision, mean to say, each and every bank will treat like this way or what else you can suggest in this case.
and 2nd question is, which will be good to go with, either HFC’s or banks.
Waiting for your reply,
Thanks.
1. If Rate of Interest is only concern then i will not suggest Home Loan transfer. You can pay conversion fees and reduce ROI
2. Bank
Hello Nitin Sir.
I have taken loan from LICHFL of 2820000 for new new flat. with ROI 10.10% (for 24 Month), After 2 years it will convert to floating ROI. while
LHPLR rate is 14.50% which will linked to flaoting rate after 24-240 months.
Can you please suggest wherther Should I move to SBI or stay with LICHFL after 2 years from now?
Waiting for your view or suggestion on same.
Thanks in advance.
Regards
ArvindM
I suggest you to stay with LICHFL for 2 years. We will decide after 2 years what to do next.
sir,
i have taken loan of 1930000 from LIC HFL at rate of 10.7% for 3years then floating. in Jan’15 3 years completed now the interest rate is 11.75%. my outstanding is 1728746. what i have to do to reduce my interest burden. tell me top 3
You may transfer your home loan to SBI, Axis Bank or ICICI Bank
I Rameshwar lal prajapat r/o **Deleted by Moderator** got sanctioned LICHFL housing loan ,scheme griha vikas,loan amount 1540000/-, rate of intrest type floating current lhplr 14.40% with spread discount 75 for 144 months. another housing loan griha prakash ,loan amount 400000/- rate of intrest type super 3 current lhplr 14.4%. fixed rate for 36 monrhs 10.7%pa, floating rate for 37-144 months floating rate of interest linked to then prevailing lhplr, may i get privellege for equivelent to sbi home loan interest rate by lichfl or take off to other bank. pl guide me.
You may check with LICHFL what will be discount / spread on LHPLR after fixed interest period is over.
Sir, I have taken loan from LICHFL with ROI 10.25% for 2 years fixed and now it is completed the fixed period and they are charing ROI as 12% so could you please help me whether I should move to SBI ?? OR is any other option ?
Switch to SBI or ICICI Bank.
Hi Sir, I had taken 30 lac loan from LIC HF in 2008 at 10.25%. Even after 7 years my principal amount is 26 lacs and current rate of interest is 11.75%.
I plan to pre-pay 12 lacs in on go and don’t want to further extend loan period more than 3 years. Please suggest should I Continue with LICHF or shift loan to any other private bank. My salary account is in HSBC at they are offering to take over existing loan for 9.9%
You may shift your Home Loan to HBSC. Also check SBI and ICICI bank
Namaste Nitin Sir,
I have taken loan from LICHFL. It was fixed for 2 years (Started in Jan 2013) @ 10.25 % and after 2 years they are charging 11.75 from Feb 2015.
As of now LIC is offering option of lowering interest rate to 10.5 with conversion fee of 0.5 % on outstanding amount. My outstanding amount is (21.6 Lacs).
I have enquired with ICICI and AXIS which are offering me interest rate of 9.9 and 9.95 respectively (Total charges include around 10 K for balance transfer). What should I do
1. Stay with LICHFL by paying conversion fees and reduce my interest rate to 10.5
2. Go with ICICI or AXIS. Which one specifically.
EMI amount is 23391.
Would there be any hurdles or charges from LICHFL when I transfer loan from LICHFL to other bank.
Thanks
I suggest you to transfer to SBI or ICICI bank.
Hi,
I am given to understand that RBI has cut the interest rate to 9.9%, which i think would be passed on to existing customers of HDFC as well. When i went to speak to the Customer care lady she said that to reduce the existing rate to 9.9% we need to pay a conversion fee. What i donot understand here is since RBI has reduced the rate shouldn’t it be automatically be passed on to us, why should we be paying some amount to reduce the interest rate. Please help me understand the logic.
Regards
Please check my posts on Home Loan. I have explained in detail. You need to pay conversion fees to reduce ROI.
It’s just a way for banks to take us customers for a ride.
Hi Nitin Ji,
I had taken loan of Rs. 40 lacs from PNBHFL with fixed ROI 10.5% for first three years and then floating. As the bank is now offering 9.95% fixed roi for 3/5 years, I enquired them how much I will have to pay if I opt for switching from existing fixed roi 10.5% to new fixed roi 9.95%. They ask me to give 0.5% of my loan amount + service taxes for switching to new scheme. Should I pay this much for shifting. I have the option of shifting to floating as well @9.95%. which option should I go for? Kindly suggest. Thanks
I suggest you to shift to floating interest rate.
Sir, I think current rate of 9.95% is very much competitive and its chances going down further are slim. Even if I goes down marginally, it might not sustain at that rate long. So, floating ROI might cost me more over a period of next 5 years. Under these circumstances,wont it be a better idea to switch to a fixed ROI of 9.95% for 5 years. I am confused. Please help. Regards,
It depends on individual judgement of current scenario. If you are convinced that interest rates are bottomed out and 9.95% is a good deal then you may go ahead.
Hi Mr. Bhatia.. I have purchased a property under construction in bangalore. for 25 lakhs of loan amount with 16 years tenure, i have 2 offers 1st – LIC HFL – base rate 9.90 % – 2years fixed and afterwards floating. Total of initial payment including processing, legal fees etv to get paper work and services will be approx 11000. 2nd option is Bank of Baroda with 10% base rate floating with benefit of linked saving account (interest waiver of = amount as in savings). total fees for paper etc will be 1500 max. which is best option mathematically.
I suggest you to check with SBI or ICICI bank if you are looking for long term financial benefits.
Hi Mr. Bhatia,
I took a home loan of 46L from HDFC in 2011, repayment- 20 years at 10% interest rate then. There were subsequent hikes in the interest rate and eventually it went up to 11.25% and I was paying this till April 2015 as a result of which my loan payment tenure had gone up significantly ( I think by about 12-18 months extra) HDFC then reduced the interest rate to 11.05 % in May 2015. Now my loan tenure is showing a decrease of about 10 months. My question is that if I Pay a conversion fee of 12400 (as stated by HDFC) and opt to covert to the NEW interest rate of 9.90% (and and additional 5%, in case of a woman; if that is possible while converting) then shouldn’t my Loan tenure go down dramatically, keeping the EMI the same (no decrease or increase in the EMI) .
However HDFC is saying that it will only go down by 3 months (so my current loan tenure at 11.05% is 212 months, and at 9.90% it will only go down by 3 months and will become 209 months. How is it possible that a decrease of 1.15% in Interest rate amounts to only a 3 months corresponding decrease in tenure? Kindly guide. Thanks .
It is not true. HDFC is sharing wrong info. May be to discourage you to reduce interest rate. I am assuming EMI will remain the same.
Hi Nitin,
My Home Loan was senction in 2005 through ICICI Bank. Loan amount was 635000/- but now till the date remaining amount near about 500000/- and rate of interest is also high. So please tell me what can i do for reduce this amount and i want sell this property. What is the best way to reduce these amount.
You can pay conversion fees to reduce your Rate of Interest. You may check with ICICI bank regarding the same.
Good Day Mr Nitin
I read your articles /posts on how banks are making existing customers fool by charging high interest rate.
I am LICHFL loan borrower. My home loan atarted from January 13. It was with fixed rate of 10.25 for first 2 years. now from 25 th month LIC charged me 12% interest rate. LIC is has proposed one scheme to me that by giving 0.25% of remaining pricnciple i will get 3.5% discount in PLR rate which is 14% so i will be charged with 10.50% interest rate after paying total 16 K INR.
Kindly suggest shall i accept scheme or transfer my loan to Nationalised bank eg Syndicate Bank
Regards
Kunal
Good Day Mr Nitin
I read your articles /posts on how banks are making existing customers fool by charging high interest rate.
I
am LICHFL loan borrower. My home loan atarted from January 13. It was
with fixed rate of 10.25 for first 2 years(Loan term 20 years). Now from 25 th month LIC
charged me 12% interest rate. LIC has proposed one scheme to me that
by giving 0.25% of remaining principle i will get 3.5% discount in PLR
rate which is 14% so i will be charged with 10.50% interest rate after
paying total 16 K INR.
Kindly suggest shall i accept scheme or transfer my loan to Nationalized bank specially Syndicate Bank
I suggest you to transfer your Home Loan. You have not mentioned reason for shortlisting Syndicate Bank.
Hi Nitin
First of all you are doing a wonderful job and all the information are up to date..Thanks a lot for this
Requesting for suggestion
I took a home loan at July 2010 from LIC HFL ( 25L ) at interest rate of 9.25% fixed for 5 years . Now they are going to increase the interest rate to 11.75%
1) They give me an option of converting the existing loan amount to a lower interest rate by paying 0.50% of the outstanding amount ( Currently it is 18L )
2) Does it make sense to transfer from LIC HFL to any other banks, I have salary account with HSBC Bank
Please let me know your suggestions
Thanks
Regards
Kumar
You have not mentioned what will be rate of interest after conversion.
Dear Mr.Nitin, I hv taken a loan of 25 lakhs on May 2012 from LICHFL with 3 years fixed basis. Now after 3 years LICHFL increased the rate from 10.7% to 12% and I was informed that to reduce interest rate from 12% to 10.5% I need to pay 0.5% of the outstanding amount. I have an outstanding of 20.4 lakhs as on date. Now I am thinking to transfer my loan to SBI or HDFC for lower interest rate (9.75% to 9.85%). Kindly suggest me for better savings and please let me know which bank is good for lower interest rate and also in service. And after shifting to new bank, if the interest rate will further reduce or increase based on RBI how the bank will going to charge interest rate for me and how it will affect.
You may transfer to ICICI Bank. Ref to query on movement of interest rate, you can check my posts on Home Loan.
Thanks for your reply. Is there any specific purpose to go for ICICI bank.
Lowest Interest Rate
Good Day Nitin,
I am also facing same problem like Babu. you suggested ICICI bank for transfer but SBI giving less interest rate than ICICI. Is it possible to provide your thought how ICICI is better?
As i mentioned ICICI Is offering lower interest rate and processing is fast.
Thank you for your
clarification Nitin. As per website ICICI offering 9.90% and SBI with 9.75%. As per my understanding SBI offers less ROI. Also after transfer, is it possible for Banks to increase the ROI after 2 years like what LIC did ( from 10.25% to 12%) ? Please advise.
Interest rate keeps changing therefore any suggestion from my end today may not be valid tomorrow.
H. N. Rangaswamy
Dear sir Nithin i have taken Loan from LIC HFL In 2005
I have 4 Accounts there
and my total Loan disbursement value is 1225000
1. 550000/- Purchase – 2005 @ 7.75% Now it is 10.9% After rewriting by paying 1% of Out standing Date of LIquidation is 1-Jan-2030
2. 100000/- Altration -2005 @ 7.75% Now it is 10.9% After rewriting by paying 1% of Out standing Date of LIquidation is 1-Jan-2030
3. 175000/- Improvement – 2007 @ 7.75% Now it is 10.9% After rewriting by paying 1% of Out standing Date of LIquidation is 1-April-2026
4. 400000/- Mortgage -2011 @ 12.5% Now it is 13.75 % which was cleared by forclousure.
HDFC Is offered me 455261/- On BT Of 1st one 10.15% 18 YEARS On 2nd & 3rd @ 10.15% 15YEARS
And 600000/- @ 9.9% 15 years – Top up.
Shall i go for the takeover or shall i stay with LIC Only.
Which one is better for me?
I suggest you to merge all loans and opt for single loan i.e. Home Loan. You may check with Banks like SBI or ICICI Bank, if they agree. Advantage is that you will be paying lower and uniform interest on total outstanding.
I will offer you @9.55%
Raju
Dear Sir,
I have taken Home Loan from Corporation Bank in January, 2015. Home Loan Amount is Rs. 1600000 repayment 180months @ 10.25% and 6 EMI Over.
Now I required additional Rs.1200000 for Altration, Improvement & My sister Marriage purpose.
Already Bank surveyor Valuation of my land & Building Cost is Rs. 5800000/-
Please let me know your suggestions.
Thanks & Regards
Raju
You may opt for Home Improvement loan.
Hi Mr. Bhatia,
I read through your article and found it very interesting.
I took a home loan of Rs. 35L from HDFC in DEC 2013, repayment- 20 years at 10.40% interest rate then. The disbursed amount till date is Rs. 25 L. There were subsequent hikes in the interest rate and eventually it went up to 10.75% and I was paying this till April 2015. HDFC then reduced the interest rate to 10.55 % in May 2015. I keep paying pre-payments in between. My current outstanding amount is Rs. 14 Lac approxmitaley. My question is is it beneficial to convert my loan to a lower interest rate. Conversion fee being requested is 7482 (as stated by HDFC) and NEW interest rate being offered is 9.90%.
My project is not part of SBI’s list of approved projects, so I am not sure if I can transfer my loan there.
My last installment for the project for approx. Rs. 7 Lac is not expected any time before next year i.e. June, 2016.
Kindly guide If I should go for conversion within HDFC.
If any other suggestions, please advise. Thanks.
Regards,
Amit Arora
You can pay conversion fees and reduce ROI but negotiate for lower interest rate as there is recent cut in interest rates.
Dear Nitin , Many thanks for article. It clearly show that how normal people are being fooled by everyone including so called government who suppose to help the Mango man. Now my question is with LICHFL. My out standing loan amount is 46,70,000 and we started to pay the EMI in May-2013. After two years of fix period of 10% ROI, now ROI has been jacked up to 11.75 % which is atrocious. while checking online information , I found out that they have increased my duration without informing me. I am sure I will get same answer of paying 0.5 outstanding , if I will approach them so need your suggestion about moving to lower ROI bank. I have existing loan from ICICI and they are giving 9.75% at this point.
Do you think it would be wise decision to move to ICICI or SBI with 15 yrs. tenure ?
i think it will be financially wise decision.
Hi Sachin,
LICHFL is charging any penalty for your transfer.
And please let me know the procedure to transfer the loan from LICHFL to ICICI.
Thanks and regards,
Prem
I m offering you balance transfer @9.55% send your no.
Superb article about how we are taken for a blind ride by housing loan operators. My son availed loan of Rs.13 lakhs from HDFC in 2009 @ 8.75% interest. The interest rate grew upward upto 11.75% till April 1975. In may it reduced by 0.20 %. Though government and RBI reduced the rate of interest at frequent intervals, surprisingly this benefit has not been passed on to my son, under the category existing customer. It is quite unbecoming of a financial institution to fool the borrowers. RBI should step in and help the needy. When enquired last week, as you said, they asked for some amount, as conversion charges.
Paying conversion fees and reducing ROI is advisable from financial perspective.
Hello Sir,
I have a Home Loan of Rs. 15LAC from LICHFL, which i have taken on july, 2013 at a interest rate of 10% with 2 years fixed period. Now they are incresing my interest rate to 11.75% which is much higher so Now i want to shift that loan from LICHFL to My Parents. (I want to close
loan from LICHFL By taking the loan from my parents) so that I will pay
the EMI to my parents.
I want to know what steps i need to take to achieve above and how will i get the tax benefit on the home loan from parents and what procedure i need to follow for the same.
Thanks.
You need to sign a Home Loan agreement with your parents similar to Home Loan agreement with financial institutes. You can avail tax benefit.
Thanks Nitin Sir,
Can u provide me some small template of the agreement, which i can use to prepare mine. also what are the document i need for availing tax benefit.
So here in my case i can take a loan from my parent and repay it to LICHFL.
Do i need to take check in my name or LICHFL Name, if in my name can i ask them to do NEFT/RTGS transfer to my account in-place of check.
Agreement copy is available on paid basis. You can repay LICHFL loan.
Hello Nitin Sir,
I have taken LICHFL Rs.6.00 lakhs in the year 2009 @ 8.90% fixed for three years and then floating rate. Now rate of interest is 12%. I asked the LICHFL and they are saying on negotiations 10.50% with a processing fee of 0.50% on the outstanding balance of 4.35 lakhs. Initially LICHFL concluded that floating rate will be implemented. Most of the customers like me don’t know that they are reducing the rates. I am paying Rs. 6792/- per month installment.(total 7 years tenure is balance out of 12 years.). Shall I continue with reducing rate of 10.50% with 0.50% fee or shall I close the same. In addition to this they are asking to pay 2% for prepayment. Is there any particular policy for floating interest from govt. to control LIC HFCL When they concluded for floating rate, will it not applicable automatically ? Why it should be asked/requested by the customer ? The NHB General Manager instructed to implement the same rate of interest to both old and new customers with immediate effect on 19-10-2011.
Best suggestion requested please.
As your loan is not on floating interest therefore prepayment penalty is not applicable. LICHFL is only desisting you against Home Loan closure. I suggest you to prepay or transfer to SBI or ICICI Bank.
Hi Nitin Bhatia,
I have taken Home loan of 31 lakhs from LICHFL with 10% ROI for 2 yrs fixed(Women offer). Now after 2yrs the interest rate hiked to 11.75 %. I am now planning to transfer the balance of 30 lakhs to HDFC(10 yrs fixed with 10.05%)or ICICI(10 yrs fixed with 10%). Not preferring SBI because of their lengthy process. Please advise.
I suggest floating interest Home Loan.
I m offering @9.55% to hdfc
HI Nitin Bhatia,
Really impressed with the information & the response given by you.
We have taken a joint loan of 64,00000 (64L) in Dec 2012 from LIC HFL for 20 years. Our current outstanding amount is 60L. Every year we are planning to do prepayment of atleasr 3-4L so as to close the loan in 10 years. Out current ROI is 10.5% after paying around 16K for loan reduction & EMI is 65000. Also because of spread rate, now ROI cannot go below 10.5% ever. HDFC is providing loan at ROI 9.85% (woman applicant) floating rate.Right now thay are not charging processing fee as well. Mostly out transfer will be done in 12,000Rs(including charges from both HDFC & LIC HFL). We can take loan from SBI only after khata transfer probably after 2 years. Will it be good to transfer the loan to HDFC (60L loan, 9,85% ROI & 15 years tenure) .
Thanks
It will be wise decision to transfer home loan.
I can help you for balance transfer I m offering you BT @9.55% so you can contact me
I have taken a loan for 16L in 2007. Even after RBI has reduced the rates drastically, still LIC HFL is charging 12%. I had approached them at least 6 to 7 times, every time they say it will be done soon. How to proceed legally on them so that my Rate of Interest shall be reduced from a back date. I am totally frustrated by their behaviour.
Go to NHB website and lodge your grievance, you will get a prompt reply in a week. Also If you have any written proof of your earlier request attach them.
You may transfer your Home Loan to SBI or ICICI Bank.