Discuss Home loans

most of the banks have a prepayment clause of 2%..but as of 2009, there was a objection raised on the prepayment charges..and right now i think you can negotiate with your bank on the penalty charged.. (they cannot afford not to with the economic conditions)..better check it out. you can alway check out by sending a mail to the branch where your housing loan is from..

 

Thanks a lot priya and shanthi ji.That was indeed an useful information.Will talk to the bank persons and confirm.No prepayment penality charges is a great news for me.

 

hemalatha,

the prepayment charges could be negotiated to a lower amount is what i meant..i don't know for sure if the Banks are going to waive the prepayment charges..because i am sure it would be in your booklet and when it is the borrower, it is always the agreement, while it is the present rates when it comes to the lender...

 

I googled about this and found an article in indian express as follows

National Housing Board, issued a circular last October, applicable on housing finance companies like LIC Housing Finance and HDFC, wherein it said, “Pre-payment levy or penalty should not be collected from the borrowers when the housing loan is pre-closed by the borrowers out of their own sources. All HFCs are advised to ensure compliance of the above with immediate effect. Please note that non-compliance with the above advisory may attract penal consequences under the National Housing Bank Act, 1987.”
However, surprisingly banking sector regulator RBI is lagging behind NHB as far as guidelines on prepayment penalty is concerned as there is no rule by central bank that says that banks cannot charge foreclosure charges. There are some banks that do not charge any foreclosure charge, if it is done through one’s own sources. However, ICICI bank, country’s largest private sector bank, charges 2 per cent plus service tax as foreclosure charge on the outstanding amount of loan.

 

I don't know whether it is being followed practically at present.Just an useful information to all.

 

Prepayment penalty is abandoned by most of the major banks long time ago.

None of the major banks charge this. More over interest is calculated on daily basis.
So you can reduce your loan term by paying part-principal payments anytime.

 

Welcome K11.

Yes prepayment penalty has been abandoned by most banks.but i am told there are still some banks that do charge..not sure. that is the reason i said if the bank is charging you, ask, renegotiate, you have the upper hand.

again, part payment always helps as it reduces the principal amount.I have already said in one of my earlier post, even a 500rs/1000rs in addition to the emi against the principal will reduce the principal amount over a period of time, as the interest is calculated daily basis.

well we are in a re haul in home loan rules soon..

 

Around 10 yrs ago we took a Citi home loan. They had prepayment penalties.

My father pre-paid almost all of the loan and kept Rs.50 or Rs.100 in balance to avoid penalty. He used to send Rs.1 cheques every month for 1-2 yrs until they got frustated and closed the loan and sent the documents.

 

with ICICI bank there are fore-closure charges.but then if we are making part-payments and the loan amount is very less say 2-3 lakhs then v cam reduce the EMI and we have to pay it for 12 months consecutively.so say if you are making the part payments and this month the loan amout left is some 2 lakhs. so from this months onwards you shouldnt make any partpayment and divide the 2 laksh for 12 EMIs.if we pay up for 12 months consecutively there wont be any preclosure charges..this info is was given to me by a ICICI branch manager. could someone tell me if this is correct or not because i know ICICI HFC (home finance section) and ICICI bank are two diff things and the bank staff dont know much about the loans..