Bargain your housing finance

By Staff Reporter

Housing Finance sector is booming. Housing Finance Companies (HFC) are offering various finance schemes to satisfy many type of demand for housing finance.

They are also offering different interest rate slab to different clients. A salaried person in a MNCs or in listed limited company or in a PSU or in a government department, has best bargaining power for his housing finance.

HFCs looks into risk factor and then offer the interest rate in PLR. The Prime Lending rate (PLR) has additions of certain percentage, no sooner you are out of their favourite lending sector.

Although the land call for 7.5% p.a. or less than that tempt you to be there, the rates are applicable only for few first years of the loan tenure.

Some leading HFCs, are charging interest to the tune of 95% of the Emi you pay. For example if you are paying Rs. 100/- as your EMI, Rs. 95/- is interest portion and remaining will be deducted from your principle sum.

For a loan of 15 years. The HFC is recovering interest for entire 15 years in first 8 years of loan tenure. After 8th year, the interest portion gradually decreases and your principle will be lesser by more margins through EMI.

Four years back, when housing finance was not very much in aggression mode, NRI were negotiating with HFCs for lesser interest rates.

You may also bargain not only interest but processing fees, insurance, mortgage stamp duty, valuation charges etc.

HFCs are offering great discounts to group of people ready to go for housing finance. Loan against property, discounting of receivable rents, home renovations are some of the products, which are having flexible interest rates. Although fixed interest rates cannot be bargain but one can do it by proxy. Some of the HFCs are having facility to transfer PLR in to Fixed rate of interest.

Majority of HFCs and bank have not transferred the advantage of decreased PLR to customers. The rates dropped from 11.75% to 8% was not intimated to customers, nor any revised EMI demanded.

Some of the well-informed customers got their right EMI in time and many of them opted to jump from one HFCs to another to take advantage of reduced interest rates.

The hidden costs of EMI differ from HFC to HFC. Therefore the EMI amount differs although the period, interest and basis of calculation remains the same.

Previously when one of the foreign bank charged its customers @ 16.5%, the final tally was reaching almost 31% p.a. of interest. The same gimmick employed to home loan section, as it was successful to credit card sector.

The bank was famous for its notorious type of recovery in car finance sector is now venturing into home loan sector with the same tactics. An intelligent borrower must ask for complete table of his loan tenure, sum up, and calculate the accurate amount of interest he will be paying.

Transparency in dealing with these “Mahajan” or money lenders must be tested before entering into an agreement with them.

Not that all HFC and banks have hidden cost. Majority of them are transparent and honest to their customers. The aggression should not be treated as gimmicks. After all, these HFC are holding on the real estate market for new heights, everyday.

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