I recently got a home loan and wanted to share the experience.
Please get clarification on following points if you are planning to take housing loan. Your agent can promise you to give loan on less ROI but this can be increased by bank any time based on your initial terms and conditions.
The floating rate of interest is based on 2 factors: the Prime Lending Rate (PLR)/Floating Reference Rate (FRR) and margin points.
Floating rate of Interest = PLR or FRR +/- margin points.
Whenever there is a change in PLR/FRR, the rate of interest automatically changes for all the floating rate customers and the effect will be applicable from the first day of the next quarter.
Margin points are the points that BANK offer under various schemes from time to time (Initial false promise).
e.g. When you’ll avail the loan, the margin points offered is: (-2.25 %).
So, the Rate of Interest applicable is current PLR +/- applicable margin points i.e. 10.75%+( -2.25% )= 8.5%.
However, if you wish to increase your margin points thus reducing the rate of interest, there would be a conversion fee of 0.5% on the principal outstanding plus a service tax of 10.2% on the same.
The following is the new ROI:
Tenure Rate of Interest.
1-20 years 8.00%(floating)
1-20 years 9.00%(fixed)
To change your rate of interest, you have to visit your nearest Home Finance Company branch with the following documents and contact the Customer Accounts Manager (CAM) there
Cheque for Switch Fee
Loan Agreement Copy
Covering letter mentioning your requirement