For most of us buying a house is done mostly once in a life time hence one should be diligent enough and not make any hasty decisions. Buying a house also involves taking a home loan (unless you have won a lottery).
This is one of the tricky decisions you have to take after you have selected your dream house as most people will not have a good experience regarding home loans.let me share my home loan experience .
I had booked two flats (adjacent to each other) in 2008, for a under construction building and had decided to go for loan on one of them and for the second flat my father had decided to chip in.Since by end of 2010 the building would be ready, I decided to look for best home loans available.
Now, the scenario for home loans looked really unpleasant, based on the various online reviews and complaints, people had against all the banks.however I decided to take the plunge.One of my concerns was whether I should approach a private bank (HDFC, ICICI etc) or nationalized bank (SBI etc)? While the private banks have an efficient sales team and time bound procedures they tend to have hidden costs and unknown clauses which you would come to know afterwards while the latter tends to be more bureaucratic and slow.
After visiting different banks and discussing my options, I decided to go with Corporation bank (a nationalized bank) (though I didn’t have any previous dealing with them) for the following reasons:
1) Home loan for 10 years at floating interest rate of 7.75 % (base rate) for 1st year .8.25% for next 2 years and from the fourth year 1% pa above the then prevailing base rate with a daily reducing balance rate.
2) No processing fee or administrative fee due to festive season offer.Legal fees of Rs 5000 was charged.
3) No closure charge for pre-payment of loan ( only if you pay from our own resources).2% charge if loan is transferred to another bank.
4) Dealing directly with the bank Manager. hence, no false information or misrepresentation of facts.
5) Minimum paper work involved (Salary slip, IT return, and Address proof, copy of flat registration)
6) Daily Reducing balance rate.
7) Auto debt from account on a date of your convenience.
I got the loan sanctioned in three months after much follow ups and the loans were provided in two installments ( Oct and Nov 2010).
There was some issues regarding finance’s for my second house hence it was decided to for home loan on the second house too but most of banks were not ready to give it as I already had an existing loan under Corporation bank, here once again I approached Corp bank for a second loan and they helped me out and gave me a second loan within one month of approach .
A few hassles which I had to face :
1) Manager has to be taken to check status of work completed every time payment needs to be released.
2) Frankling for the various documents/agreements have to be done by yourself.
3) Lots of follow ups for the 1st loan.this was partially due to some issue with the flat registration papers, however the bank manager was responsive to all my queries and reasons for delay.
4) Rs 3, 500 was charged on Jan 2011 as insurance charge which was not informed earlier.
Though I admit all these loan terms are new to me and leave me a bit confused , so far I have not faced any major issues.I will update this page in case I face any :). I am still not sure if I have made the right choice but So far I can say that my home loan experience has not been bad compared to horror stories others have told me.
I am not saying that Corp bank is the best bank for housing loan cause there are so many banks claiming to offer the attractive home loan rates , less processing fee and so on , the trick is always look at the big picture.
These are a few things which one should always ask when approaching a bank for home loan or before finalizing a loan.
a.What is the total loan cost?
b. When will the successive loan rates kick in? Will you be notified? (Check interest reset clause on your loan agreement).
c. What is the processing fee, legal fee or any additional money which you would need to spend.
d. Is there a charge to shift your loan at any point during the loan tenure. ? (Check prepayment penalty clause in your loan agreement).
e. Is your loan on a reducing balance rate if yes is it annual, monthly or daily reducing rate.
f. copy of the amortization table. This will show how you will repay your EMI during the loan tenure.
In my opinion, it is better to get loan from a nationalized bank rather than a private bank for the following reasons:
1) you would not be dealing with sales agents who have targets to achieve and would not mind twisting the words for their convenience.You normally deal with the bank manager directly in case of nationalized banks. Remember NO Bank will give you the complete information its up to you to ask them.
2) If you are not able to pay that monthly EMI you will not have collection agents hounding you.
3) I do agree that Nationalized bank tend to be slow and bureaucratic but I feel that is better than getting rude shock when you get a notice to pay xyz amount due to a clause which you have never heard before.
A few tips which might help you:
1) Do not apply for a loan just for the sake of it! If your loan application gets rejected, its recorded in your credit report.
2) Do not get tempted by the teaser rates.look at what you will be paying during the entire loan period.
3) If possible, get the loans sanctioned in the festival period (Sept to Dec) as they have various freebies like waiver on processing fees, better teaser rates etc.
4) Ensure whatever is said to you is also mentioned in the loan agreement .There are numerous cases where loan agents might say things which you would want to hear but the same is not seen in the actual agreement.
5) Do not go for pre-approved home loans.it would be a heart beak for you to find out the dream house you selected cannot be brought due of some lack of paper work from the builders or some other reason due to which the bank cannot agree to your choice .
A few links which helped me understand the loan process better
deal4loans.com/home-loans.php
bankbazaar.com/guide/home-loan-rates-beware-of-arithmetical-jugglery/444/
deal4loans.com/home-loan-calculator.php (to calculate your EMI)
myloandetails.com/ViewAllBanks.aspx
(for home loan rate of Interest rates of various banks)
policybazaar.com/home-loans/home-loans-quotes.aspx
Hope this was helpful and happy home loan hunting :)
I think the review went a bit long....
Regards,
Rajiv