The bank verifies the authenticity of the sale agreement as well as the title deeds. A sale agreement is a contract between the builder and the purchaser.
By Chaitali Dutta
Q1. I booked a flat in 2010 in NCR and the builder has still not given possession. I am paying EMI as well as rent. Should I stop paying the EMI as it is the duty of the bank to have verified the builder? – Nischay Sharma
A home loan is a contract between the bank and the home-owner. The bank verifies the authenticity of the sale agreement as well as the title deeds. A sale agreement is a contract between the builder and the purchaser. However, if the builder defaults on the construction quality or delays/fail to deliver possession of the property, the bank cannot be held responsible, as the two contracts are separate and individually enforceable. One solution is to approach the Consumer Dispute Redressal Commission. Try to get other aggrieved parties in the same project, to sign this petition along with you.
Q2. If I prepay my housing loan, then I will not get any income tax benefit. What should I do and what will be the effective home loan interest rate as my bank is charging 9.1% and I fall in 20% tax bracket? —Bhupinder Singh
Let me answer second part of the question first. Since you are saving 20% of the interest in your income tax, your effective rate on the home loan is 7.28%. On the first part of your query, your decision to pay off the loan should be based on two conditions. First, the rate at which you can grow your money, if invested elsewhere, rather than paying off the loan. If the differential is at least +2%, then you should not repay the loan. Second, if you are keen to get debt-free, it is best to repay the loan at a faster pace.
Q3. I am planning to buy a property from my mother-in-law. Can I get a joint home loan from a bank along with my wife? —Prakash Kumar
Yes, it is possible under the following conditions: a sale deed is to be registered with due consideration, and both you and your wife as purchasers. If the sale consideration is lower than the market valuation, you may have to pay registration charges and stamp duty as per market rates. Also, the bank will do its due diligence and calculations to arrive at your loan eligibility. Your mother-in-law will be liable to pay the applicable capital gains tax.
The writer is founder of AZUKE Personal Finance Advisory (azukefinance.com). Send your queries to email@example.com