Switch home loan only to repo rate pegged interest rate

Published: November 26, 2019 12:14:51 AM

The loan will depend on the purchase agreement.

income, income taxThe bank will provide a single Interest Certificate with both your names, as it appears in the sanction letter.

By Chaitali Dutta

Should I switch my home loan as I am paying 9% interest to HDFC for my 20-year loan of Rs 50 lakh.

– Atul Singh

Switching a loan in today’s scenario will make sense only if you move from your existing floating rate pegged to PLR to an institution where the loan interest is pegged to the repo rate.

I have given guarantee on a home loan taken by a friend. Now, he has defaulted on it. Will I be affected because of this?

—K S Sharma

Yes, absolutely. Ideally, guarantees should be given for people you are really close to and for whom you are ready to pay EMI/lump sum in case of default. This being a home loan, the bank has the last resort to the property, which may be auctioned to pay off the loan. But that said, the bank will come to you for payment to regularise the loan.

Are both husband and wife entitled to income tax benefits on both components (principal and interest) in case of joint home loan of up to `2 lakh?

—Vikash Mishra

Yes, that is true. The bank will provide a single Interest Certificate with both your names, as it appears in the sanction letter. Individually, you may claim the benefit of interest paid, under Section 24B, up to a limit of `2 lakh. Ideally, your wife should also contribute to the EMI payments to be able to claim this benefit.

I plan to buy two small flats and merge the two. I have applied for bank loan. It is saying it can only give me loan for one flat despite my higher income. What should I do?

—S Nambiar

The loan will depend on the purchase agreement. If you have two purchase agreements, there can be two loans. But if initially, you are buying only one flat, then the bank will consider one loan against mortgage of that flat.

I had taken an education loan for my son. I have some spare money to clear it. But two years later I have to take anoth-er education loan for my daughter. Should I clear the loan or invest the money so that I can borrow less later?

—Anurag

Without the loan amounts and your spare money amount, it would be difficult for me to give you an accurate analysis as to which is better. However, my general advice is always to reduce liability if some additional funds are available.

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

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