Rate of Interest, charges, etc.

1. Why are administrative fees collected from a customer?
   
   Ans.: 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.
   
   
2. What is Pre EMI?
   
   Ans.: 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.
   
   
3. Why is Pre EMI required?
   
   Ans.: Incase 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.
   
   
4. What is a fixed rate loan? Should I opt for a fixed rate loan?
   
   Ans.: 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.
   
   
5. What is a variable rate loan? Should I opt for variable rate loan?
   
   Ans.: 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.
   
   
6. What kinds of costs are included under Hidden costs?
   
   Ans.: 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.
   
   
7. What happens to processing/administrative fees if I don't avail of the disbursement?
   
   Ans.: 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.
   
   
8. Are any Interest rate benefits available for a physically challenged person?
   
   Ans.: 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.
   
   
9. Can I convert my loan from fixed rate loan to variable rate loan & vice versa?
   
   Ans.: Yes, you can convert variable rate product into fixed rate product with applicable charges. However, to convert rate product to a variable rate product, most banks will charge a small fee. The swap can be done any number at any point of time.
   
   
10. What is the difference between monthly rest & annual rest?
    
    Ans.: In an annual rest the EMIs are calculated on an annual basis. The interest is calculated on the outstanding principal at the beginning of every year. In an monthly rest the balance is calculated on a monthly basis and the EMI is broken up every month to arrive at the opening balance of principal for the next month.