Q. I am going to take a loan to buy a flat and the bank has prepared a lengthy loan agreement. There are many points in it that I am not able to understand fully. Should I insist on reading the whole agreement before signing it?A. you can seek time to read the loan agreement before signing it. Though this may seem difficult, as a long agreement is usually a bulky document running into several pages. But this is important. No matter what you verbally agree with the lender’s representative while negotiating a loan, it would not be legally binding unless it is validated in writing in the home-loan document.In practice, home loan companies may ask you to sigh a blank loan document while taking a home loan to speed u the processing.The details may be filled in later and sent back to you by post. But you can ask to read a draft agreement before you signing it.Also be sure to check the details filled in your loan document s soon you receive the final version, to make sure that the terms are the same as the ones you agreed to.

Finally, when in doubt, protest. If you find any revision in interest rates or changes in the terms of your loan, get in touch with your home loan company immediately to clarity the issue.

 

 

RBI’s new directive

Q. what is the latest directive issued by the RBI to banks regarding property value? Hoe will it effect a common home loan taker?

A. The RBI recently brought in a ruling that will be considered effective from February this year, to stop property values from being inflated. According to the new rule, stamp duty, registration and other taxes such as VAT and service tax will be excluded when the value of a property is considered for determining the loan amount.

Now, this means that borrowers need to pay it as part of their down payment. This news, however, should not be taken in the negative light by the borrower. It’s actually a blessing in disguise. Because, the more the down payment, the lower will be the loan amount and interest cost.

In fact, borrowers should strive to increase the down payment as much as they can. This will not only help them save on interest cost, but will also reduce the time to repay the loan.

 

 

Can my wife claim exemption?

Q. I have taken a home loan of Rs.20 lakh from HDFC bank. My wife is a co-applicant in this home loan. The registration of house is in my name only. We both file income tax returns. House loan installments are paid from my salary account. My queries are:

1. Is my wife also eligible for income tax exemption for the repayment of home loan amount (principle and interest)?

2. If not, how can she claim exemption now?

 

1. 1. Your wife can claim income tax exemption if she is also the co owner of the property in question. If joint home loan takers are also joint owners of a property, the income tax benefit is available to both in the proportion in which they pay the EMIs. If you are the only one repaying the loan, then you can claim the entire tax benefit yourself (provided you are an owner or a co-owner).

As a rule of thumb, more EMIs should be paid by the person whose income is higher – this results in maximizing the tax breaks. However, we also need to consider the other investments made under section 80C by each one of you. Tax benefits are available to people taking join home loans only if the property is also registered in joint names. Thus, in your case, since the house is only in your name, you are right in claiming all the benefit for only your self.

2. Your wife is not entitled to take any benefit of income tax.