Monday, 11 March 2013

No Penalty on Pre-Closure


The Reserve Bank of India (RBI) has directed all nationalised banks not to impose penalty  for pre-closure of housing loans. The notification issued by the RBI has brought some smile of middle class families who now have the opportunity to shift their costly and high interest loans to other banks, particularly HUCO, a public sector entity.

RBI strictly disallowed banks from charging foreclosure charges / pre-payment penalties on
home loans on floating interest rate basis. “The removal of foreclosure charges/prepayment
penalty on home loans will lead to reduction in the discrimination between existing and new
borrowers and competition among banks will result in finer pricing of the floating rate home
loans,” RBI said in a notification to banks. Though many banks have, in the recent past,
voluntarily abolished pre-payment penalties on floating rate home loans, “there is a need to
ensure uniformity across the banking system,” an official said.

We also advise you to apply for housing loans in the public sector banks. Banks like HUDCO
offers loans at 10 per cent rate of interest up to Rs 26 lakh. Moreover, public sector banks
charge less consultancy fee than private banks in the country. But seek suggestions from
financial experts before obtaining loans either housing or any other loan.

One has to think ten times while fixing the size of the house loan. Larger the size of the loan,
more interest rate burden as well more monthly repayment. Like size of a house required
differs from one family to other, the amount of loan is also differs from one to other family.
Therefore, before buying property, it is advisable to appoint a solicitor to inspect the original
title documents of the property being purchased and later apply for housing loan.