YOUR QUERIES: LOANS- No pre-payment charges on home loan with floating rate of interest

The life cover is required as you do not want the family to be burdened with repayment of the loan, if something happens to you.

By CHAITALI DUTTA

We want to change the loan account to another bank. Will the bank put any charges on us?
—Sai Vignesh Sharma
Under normal circumstances there are no pre-payment charges on the home loan if the loan was on a floating rate of interest. However, if your loan was sanctioned with the affixed rate of interest, it may levy charges for prepayment. Generally, only the loan outstanding is repayable. This can be done either from your own sources or by availing of another loan (balance transfer loan) from another institution.

We took a home loan in APGVB bank but we want to change the bank now. The bank is saying it will levy a takeover charge. Is it true? How can we move to another bank without paying any takeover charges?
—Sunil Kumar
Please go through the loan sanction letter in detail, unless it is mentioned particularly that the loan cannot be repaid before tenure, you should not have any issues. As I have mentioned earlier, in the case of a floating rate of interest loan, the bank should not be charging any prepayment charges. You should be free to get the refinancing done by another bank or financial institution.

I plan to take a home loan after six months. Should I take a life or a non-life insurance with the home loan?
—Jiteendra Sharma
Ideally, you should take both. The life cover is required as you do not want the family to be burdened with repayment of the loan, if something happens to you. The amount should be equivalent to the loan amount. The general insurance is to insure the property against natural calamities, fire and terrorism. The property being the security to the bank, it will ask you to get this cover as well.

Next year, I plan to buy a second home. At present, there is a principal outstanding of about Rs 10 lakh on my first housing loan. Should I repay the first loan and then go for the second?
—Somesh Agarwal
From the financial point of view, the rate of interest is the only element you should look at. If the old loan is cheaper, continue that. The bank will calculate your eligibility based on outstanding old loan. You may avail a smaller new loan to the extent of Rs 10 lakh, which will raise your margin money in the new property.

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