Homing in on loans

Homing in on loans


I have been availing income tax benefit on both principle and interest up to Rs 1.3 lakh on a housing loan from the past four years. If I take a fresh loan from the same bank for repair and alteration, will the interest portion of the new loan be eligible for income tax benefit?

If the second loan is used for repair, renewal or reconstruction of the house property, the interest payable on such a loan is eligible for deduction under Section 24.
However, you will not get any deduction for repayment of this loan under Section 80C.  

I have purchased a flat for investment purpose on loan and have been paying EMIs regularly. Can I sell the flat while the loan repayment is not over?

Yes, you can. But you will need the bank’s consent for the same. This consent letter will typically provide an amount and on its payment, the outstanding loan will be fully paid off. This amount includes the pre-payment charge (if any) chargeable by your bank and should list the documents held by them, which will be released on payment of the stated amount. This amount mentioned in the certificate is typically calculated as on a future date to lend time to the buyer to arrange for the payment. You will first need to make this payment to the bank before it releases the title deeds of the flat.  

Can I take two loans at a time from two different banks?

You can get two loans if your income justifies both the loans but you cannot take two loans from different banks for the same property.  

I want to partially pre-pay my home loan. What are the advantages and disadvantages?

If you have surplus funds, you can pre-pay a part of the home loan as it will reduce the monthly EMI burden.

Quite a few banks do not charge pre-payment penalty if the loan is prepaid partially. The definition of what constitutes partial pre-payment varies from bank to bank.

This will ensure savings in pre-payment penalty and at the same time help you to save on high interest costs on a substantial portion of the loan. However, before you decide to pre-pay a home loan, it is in your interest to first clear off all unsecured dues like credit card dues and personal loans.

Also, make sure that you have some money set aside to meet contingency expenses. Tax calculation can change the view on pre-payment.

Can I transfer my existing home loan from one bank to another?

Of course you can. You may have to pay a pre-payment charge to the existing lender and a processing fee to the new lender.