Cheaper Home Loans if borrowers bring 25%

May 1, 2007:According to the new guidelines that will be effective from March 2009, if you can bring in Rs 6 lakh for a property worth Rs 24 lakhs and seek only Rs 18 lakh as loan you will get a lower interest rate as opposed to seeking Rs 20 lakh and bringing only Rs 4 lakh of your own money.

The new guidelines were issued on Friday, April 27. These are the final guidelines for banks operating in India to conform to the Basel II norms. The Basel II norms are international guidelines for banking decided as per the second Basel Accord.

However, if the value of the loan is more than 75 per cent of the value of the asset — in this case the price of the house being bought — the risk-weight will be 100 per cent irrespective of whether the loan is below or above Rs 20 lakh.

Recently, the Reserve Bank has reduced the risk weight for loans below Rs 20 lakh to 50 per cent. This has promised to provide some relief to borrowers, however, no immediate relief has been announced by the banks.

Over the last few years, banks have been offering a minimum of 85 per cent of the value of the property as loan. For approved and new properties many banks even go up to 90 per cent and often offer other kinds of top up loans to cover almost 95 per cent of the value of the property.

Source: hindustantimes