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Housing Loan – 5 Weird Reasons to Finalize the Bank or HFC

Housing Loan is a long term commitment. Even if you go by an average tenure of 8 years, still housing loan can impact your finances if your choice is wrong. Let me be very honest and candid on reviews of home loan providers. You will not find consensus good reviews about any of the Housing Loan providers. At the same time, it is a personal experience and depend on a lot of factors. I shared pre home loan review of top 5. Now you must be wondering, how to finalize a housing loan provider. I suggest you go through the “Home Loan” section on this blog. Through various posts, i have shared the points to be considered by potential borrowers. All points are situational in nature and there is NO standard process. You always need to compromise on few points depending on case to case basis.

Based on my experience, i can say that time pressure plays an important role in the selection of housing loan provider. After the token money is paid or sale agreement is signed, the seller gives max 2-3 weeks time to the buyer to process housing loan. It is not a sufficient time to take the right decision. Therefore, the borrower is running against the time & may take a hasty decision. In my opinion, the buyer can try to close the deal as soon as possible. On papers, he should insist on at least 45 days to 60 days time to process housing loan.

I come across multiple reasons from my readers for availing a Housing Loan from a particular bank or HFC. My personal favorite reason is a reason given by the borrower who availed housing loan from LICHFL. The reason given by him was that since he had LIC Life insurance policy, therefore, he availed loan from LICHFL. It is not his mistake but the salesperson of LICHFL told him that loan is easily approved for borrowers with LIC policy :). Personally, i find some of the reasons very weird or illogical. Though the borrower may be right in his/her approach but personally i feel that every decision should be logical and well thought through. I am listing down five such reasons.

Housing Loan – 5 Weird Reasons to Finalize the Bank or HFC

1. Processing Fees is waived off: In my opinion, this is the biggest marketing gimmick. I always suggest looking at bigger picture. The processing fees is normally 0.5% – 1% of loan amount or Rs 10,000+taxes. Some banks charge Rs 5,000+taxes and balance in other heads. Therefore, including all the home loan hidden charges total is between 20k to 25k.

As a marketing promotion, the bank will waive off processing fees. Trust me, waiver of processing fees has high perceived value in the mind of a borrower. Let me fix this misconception. Assuming, i am availing housing loan of 50L at 9.55% for 20 years. My EMI will be approx Rs 46,750. You can do these calculations through EMI Calculator.  Assuming my home loan run for the entire tenure. On a housing loan of 50L, i will pay an interest of whooping Rs 62,34,396 i.e. 62L. In other words, my interest payout will be more than the loan amount. As i am going to pay 62L interest, therefore, should i bother about the processing of Rs 10,000+ to finalize a home loan provider. The processing fee is not even a fraction of total interest. I should be concerned about more imp factors like markup, base rate, service, historical interest rate movement etc that will impact my interest outflow i.e. 62L.

Last but not least, always remember that there are NO FREE lunches in this world. If the bank has to charge Rs 20k from me then they will definitely charge. Processing fees will be Zero but there will be legal fees of 5k, Login fees of 4k, valuation fees of 2k and so on. At the end of the day, total will match to 20k. Therefore, processing fees should not be a criterion to finalize the bank or HFC.

2. Balance Transfer in Future: You can term it as either a casual approach or a consoling factor to justify the decision. In many cases, a borrower is aware that he/she is not making the right choice but they always think that they will balance transfer in future. Always remember that balance transfer means cost, time and efforts. As i mentioned that decision is always situational in nature. Therefore, it might be easy for me to comment but only a borrower is in a right position to take a decision. I observed this reason in the case of a leading HFC that charges fixed interest for 2 years. After 2 years, the interest rate is between 11.5% – 12%. Though borrower is aware that after 2 years there is no choice but to balance transfer but due to current compulsions, they select particular HFC. A balance transfer in future is the highly illogical reason for the current decision.

3. Convenience: It is one of the imp consideration. Borrowers prefer the least documentation. Therefore, borrowers prefer housing loan from a bank or HFC that has pre-approved the project. In a recent case of one of the clients, the project was approved by the SBI but housing loan from PNBHFL was rejected. Quite surprising. When the client checked the reason, he came to know that builder interchanged few blocks with common area/children’s park as per approved plan. SBI was not aware of the same as the project was approved 2 years back. Always remember, a convenience at this stage may cost heavily in future. Therefore, if you are looking for a convenience factor and least documentation then it is better to postpone property purchase decision. The fact of the matter is that it is quite a hassle to buy property and avail housing loan.

4. Seller Recommendation: Normally seller prefers that buyer should avail housing loan from the same bank from which the seller availed or has a running housing loan. The housing loan is processed fast in this case. Seller has a selfish motive behind the same. It has its own pitfalls like the buyer will never get to see the original documents. In a similar case, i observed that banks lost two original documents. Now the person B who bought from person A had a loan from the same bank as person A. He was not able to prove at what stage the original documents were lost by the bank. Therefore, it is important to check all the original documents at the time of purchase. Personally, i will not suggest this arrangement.

5. No other option: Last but not the least, As i always highlight that you should buy in a project approved by at least couple of leading banks and HFC’s. Most of the projects on outskirts of the city or on panchayat land are approved by only one or two housing loan provider mostly a very small player. Trust me, no other bank or HFC is willing to lend in such cases. It is always advisable to avail housing loan from one of the top lenders. If they are not willing to lend then it’s a red flag that something is wrong. In such cases, you can altogether drop the idea of buying a property that particular project.

I tried to cover some of the reasons that are not logical reasons to avail housing loan from a particular bank or HFC. As i shared that you should not act in a haste and buy sufficient time from seller to do your homework. A seller will always be in a hurry but remember, a hurry at his end might cost you dearly. For any doubts or confusion, you can always ask me through following comments section. Hope you liked the post.

Copyright © Nitin Bhatia. All Rights Reserved.

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Siddhartha Saha
Siddhartha Saha
8 years ago

Dear Sir,
I am a regular reader of your blog and go through the every blog minutely.

Already, I have informed to you that I had availed a Home Loan of Rs 25.60 Lakh from LICHFL on 07.03.2014 @ 10.25% ROI and EMI is Rs 25,600/-.. Now after 07.02.2016, 2 Years Fixed Tenure is going to be over and now I would like to Transfer the Balance Amount of Rs 20.00 Lakh to SBI @ 9.50% ROI. LICHFL is now charging 11.45% ROI. In SBI, if I transfer Rs 20.00 lakh , EMI @ 25,600 P.M., then Tenure of the Home Loan is 10 Yrs.

I had come to know from your blog that if Remaining period is more than 5 yrs and difference of ROI is more than 2%, then Transfer of Home Loan is always beneficial.

The cost of Transfer stated by SBI as of now is: Legal fee- Rs 4000/-, Valuation Fee-Rs 1500/-, Processing Fee-Nil

You had already advised me that prima facie the transfer is beneficial.

Now, as per Sl No. 2 of the above post, I have got little bit confusion. Is transfer is really beneficial?

Please advise me in this regard one time more.

Thanks

Nitin Bhatia
Nitin Bhatia
8 years ago

You may use EMI calculator on following link to calculate the benefits. I have explained the same in the post.
https://www.nitinbhatia.in/home-loan/emi-calculator/

Shreyas Umamahesh
Shreyas Umamahesh
8 years ago

Hi Nitin,

Thanks for all the information which you have thoroughly shared through your blogs. We are looking to buy a resale flat and wanted to know the preferred home loan provider among SBI, HDFC(HFC), ICICI banks. Also which one is more preferable among the latter two (HFC vs Bank). What about Syndicate Bank ?

Nitin Bhatia
Nitin Bhatia
8 years ago

I will prefer bank. Among banks, SBI will be first choice followed by ICICI Bank.

Tom
Tom
8 years ago

Hi Mr Bhatia, We are an NRI couple who availed an SBI home loan for a Sobha project. We are glad that we had studied your blog many times before taking the plunge.A loan condition is that the moratorium period for EMI to start is 18 months during which period we only have to service interest. By this point in time,we would have availed about 65% of the total loan sanctioned. Problem is that the completion date as per the builder is 3 years plus few months ! Could we seek extension of the moratorium period to match the completion date ? Our idea is to start earning some income from the property to help us pay the EMI !

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Tom

It depends on the risk assessment of the bank. A bank cannot extend home loan beyond a point therefore decide moratorium period accordingly. Secondly, it is not beneficial for a borrower. Longer moratorium period means increase in interest outflow thus increase the overall cost of the property. You may discuss with the bank and decide keeping financial implications in mind.

Shantanu
Shantanu
8 years ago

Among Axis Bank (9.5%), ICICI Bank (9.4%), State Bank of Patiala (9.75% with OD account – Maxgain), which one to go for home loan.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Shantanu

ICICI Bank

SWAPNIL NARKHEDE
SWAPNIL NARKHEDE
8 years ago

I am in the process to apply for SBI home loan . i collected all doc. But my Question is Home loan agent is asking me for 3 cheque , 1. for advocate amount is 4000 , 2. this cheque he want for there name amount is 850 and 3. with name of state bank which he want blank cheque .. Is such cheque really required. can i go with agent or i can contact to direct bank.

Nitin Bhatia
Nitin Bhatia
8 years ago

I always suggest to approach the bank directly rather dealing with agencies and 3rd party agents.

Rushikesh Deshpande
Rushikesh Deshpande
7 years ago

Hi nitin sir,
I am following your blog from quite some time. I live in Kalyan just had discussion with the release property owner he is asking me my loan eligibility. For that he asked me to avail for the pre approved loan. Now my question is I have about 12 Lac in hand & property which I prefer to buy or will buy if not this property are in range of 50 to 56 Lac so now my question is which home loan shall go for HDFC/SBI or any other as I might need more than 80% loan of agreement value.
Can you please help me in the same.

Regarda

Rushikesh

Nitin Bhatia
Nitin Bhatia
7 years ago

You may opt for 2nd rung players as they are flexible on home loan eligibility. You may check with DHFL, PNBHFL, Aditya Birla Finance Home Loans or Gruh Finance. Please check my following post on tips to increase home loan eligibility
https://www.nitinbhatia.in/home-loan/home-loan-eligibility-amount/

Tom
Tom
7 years ago

Nitin sir,

We have been sanctioned an SBI home loan through maxgain scheme for an under construction flat and they have disbursed almost 80% of the loan amount to the builder. No issues there,but wonder if the bank would release the entire loan amount before the registration is done ? Whether as a practice banks would hold back the last installment till they get hold of the mortgage documents ! Idea is not to get caught at the last moment and run around for raising funds !

Tom

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Tom

It seems that you opted for construction linked payment plan. It is standard practice. The registration will be done at the time of possession and by that time almost 95% will be released.

rohit gupta
rohit gupta
7 years ago

I am planning to take home loan from kotak bank. the DSA is asking me to sign the home loan agreement while giving the sanction letter when i said that u just give me sanction letter then I will decide but he is arguing that to get the sanction letter I should sign the agreement can you please suggest what should I do

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  rohit gupta

Sanction letter should be issued first. It contain important terms and conditions.

Nilesh Tirlotkar
Nilesh Tirlotkar
7 years ago

Hi sir, my query is related home loan
I availed home loan of 17.5L in april 2013 from DHFL, current interest rate is 9.95.
There is some convrse rate of interest in which I have to fill a form and pay around 3000 then interest rate will be 9.65
Is it advisable? Will it benefits me?

Nitin Bhatia
Nitin Bhatia
7 years ago

You may negotiate for 9.35% interest rate as offered to new borrower by DHFL and pay conversion fees.

Suresh Babu G
Suresh Babu G
7 years ago

Hi Nitin,
can you let me know what is the best way to transfer my home loan from HFL to any reputed bank pls?my HFL is Repco , ROI is 9.6%, will hfl allow?

many thx,
Suresh

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Suresh Babu G

HFC will allow but i suggest you to first approach your HFC to reduce home loan interest rate.

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