To meet the operating expenses of the loan amount through the tenure of the loan amount Administrative fees are charged to the customer. Expenses to meet the visits made by a technical team are also included under this charge.
You’ve chosen a property that’s yet under construction. So the HFI makes the disbursement in parts based on the progress of the construction of your property. However till the loan is fully disbursed you have to pay simple interest at the rate you have agreed upon with the HFI. This is known as the Pre EMI. And from the month following in which the full disbursement is made you will start paying your EMI.
In case of under- construction property the disbursement is made in parts as per progress of the construction of your property. The HFI conducts a visit to your property with a technical team and on inspection disburses the loan as per the stage of construction. Once you forward the Possession letter (mentioning the property is ready for possession) you receive from the developer to the HFI, only then is the final disbursement made. Till the entire amount is not fully disbursed the bank cannot accept repayment of principal. However the HFI expects you to pay Pre EMI, which is simple interest on the amount disbursed at the rate contracted.
A Fixed rate of interest is one where the rate charged by the HFI on the loan is constant over the tenure of the loan. It is advisable to go in for a Fixed rate if you feel that the rate of interests in the market have touched rock bottom and the rates can only move upwards.
A variable rate is one where the rate charged by the HFI on your loan keeps changing with respect to the rates in the market over the tenure of the loan. Typically, the rate charged by the HFI is on the basis of their cost of funds and the prevailing market rates. These rates change periodically. Accordingly the tenure increases or decreases or alternatively the EMI increases or decreases based on whether the rates move upwards or downwards. Every HFI decides whether to change the rate of interest or change the tenure at the time of sanction. It is advisable to go in for the Variable rate if you feel that the interest rates have reached its peak and can only go downwards.
Normally, the hidden costs include the fees charged towards processing and administrative fees, the increase in the effective rates of interest due to the annual reducing balance method, pre payment charges, delayed payment charges, etc., if any. Some HFIs also charge legal fees and technical fees from the customers while others may include charges for stamp duty and registration of the mortgage deed, if they are going in for a Registered mortgage.
Most HFIs refund the fees that you pay to them if you cancel the loan after taking the offer letter from the HFI. However, some HFIs may hold back the processing charges paid by you either fully or partly.
Yes, some HFIs do provide for differential rates of interest if you are physically disabled or handicapped. You will have to provide for a certificate from your medical advisor for the same, which will be validated by the HFI. Normally, 0.5% discount is offered to physically challenged customers.
Yes, you can convert variable rate product into a fixed rate product with no extra charges. However, to convert a fixed rate product to a variable rate product, most banks will charge a small fee. The swap can be done any number of times and at any point of time.
In a monthly rest, the interest is calculated on the outstanding principal at the beginning of every month. Once the interest is calculated at the rate applicable to you for the month it is deducted from the EMI received during the month. The balance component of the EMI forms the principal paid during the month. This amount is then deducted from the opening balance of the principal (i.e. the amt on which the interest was calculated). The balance amount is carried forward as the opening balance of the principal for the next month.
In an annual rest, the interest is calculated on your outstanding principal at the beginning of every year. Once the interest is calculated at the rate charged to you for the entire year it is deducted from the EMIs received during the year. The balance EMI is taken as principal repaid during the year. This amount is deducted from the opening balance of principal (i.e. the amt on which the interest was calculated). The balance amount is carried forward as the opening balance of principal for the next year.
The Fixed Rate of Interest normally remains fixed over the tenure of the loan. This rate remains constant after the final disbursement has been made. It is ideally suited for situations where you expect the rates of interest to go up in the future and this fluctuation in the rates does not affect you adversely. In certain cases of Home Loans the disbursement takes place as per the stages of construction of the property i.e the disbursement is spread out over a period of time. In such cases it is quite possible that during this period there is a possible change in the interest rate in the market. Irrespective of the fact that you are either under the fixed rate or the variable rate scheme, the new rate of interest would apply to the extent of undisbursed portion of the loan amount. The rate of interest would remain fixed at the final weighted average rate at which the loan was disbursed.