Home Loan: No pre-payment charges on closure; can clear your loan at one go

February 23, 2021 1:20 AM

If you can earn a better rate on the surplus than what you are paying on the car loan, you should go ahead and invest. I assume you have a time horizon of fewer than five years as part of the loan is paid off.

Pre-payment charges are no more valid but come with certain conditions, which vary from bank to bank. Check out the details with your bank first.Pre-payment charges are no more valid but come with certain conditions, which vary from bank to bank. Check out the details with your bank first.

By Chaitali Dutta

I want to clear my home loan within a year. Should I clear at one go or can I pay every month some money? Will the bank charge a penalty?
—Ashish Kumar
If you have the money ready, then paying the loan in one go is advisable. However, if you have a small surplus every month, please go on paying part loan every now and then. Do look at the fine print in your sanction letter, whether multiple pay-offs are possible. Pre-payment charges are no more valid but come with certain conditions, which vary from bank to bank. Check out the details with your bank first.

My brother has a housing loan of Rs 20 lakh. He wants to sell the property. Can I take a loan to buy that property?
—Tushar Singh
Yes, it is possible provided you do a proper sale agreement. If the sale docu-ment quotes a sale price of less than the circle rate, you will anyways have to pay the stamp duty as per the higher circle rate. Moreover, your brother will have to show the sale proceeds as equivalent to the circle rate, for the purpose of capital gains. I suggest doing the agreement as per the going market rate in the area.

I am taking Rs 10 lakh from my brother to clear my loan. I have to repay it. Should I show it in my ITR as ‘Exemp-ted Income’ or should I do a loan deed?
—Tushar Chaudhari
Since you intend to pay it back to your brother, show it as a loan in your books and your ITR. Similarly, your brother should show it as a loan given to you. That way when you pay the installments back to him, it will not be considered income for him. It will be a good idea to sign a gift deed for this transaction.

I took a car loan last year for five years. Now I have got some money from life insurance maturity. Should I pay off the loan amount or invest the money?
—A R Rao
If you can earn a better rate on the surplus than what you are paying on the car loan, you should go ahead and invest. I assume you have a time horizon of fewer than five years as part of the loan is paid off. In such a short time, safer debt investment would be advisable. But then you will not be able to earn more than the loan interest rate. This may be possible only if you invest in equity. Valuations however are at a peak, so a measured monthly exposure to equity is better.

The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance. com). Send your queries to fepersonalfinance@expressindia.com

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