Tag Archives: home loan

No Pre-payment penalty on home loans – SBI Announcement

Starting Nov 21, 2011, SBI will not charge pre-payment penalty on its home loans. RBI has been pushing banks to drop the penalty for a while and finally, some one stepped up to the plate.

There were two kinds of pre-payment that customers did- paying off from their own funds or through a loan from another bank. Some charged penalty only if you paid off your loan from another bank. But now SBI has said NO penalty to any kind of pre-payment.

This is good news, as pretty soon other banks will have to follow suit to keep up with the competition.

Is your mortgage/EMI greater than the current value of the house?

If property prices drop right after you buy, this could be the case. In such situations, unlike in US or many other countries where the bank doesn’t bother you as long as you pay the loan, in India, the bank can ask you to pay up.

Indian banks expect you to pay the difference in price immediately- no you don’t have much time. The banks don’t want your outstanding loan amount to be greater than the current value of the house. It doesn’t matter whether you have a job or have the ability to pay your loan, you will always have to keep your loan amount less than the value of the house.