Your questions: Loans | Additional real estate loan to be used only for the extension/repair of the house

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For Loan against Property, Loan against Deposit or Personal Loan only, end use of funds is at user’s discretion.

By Chaitali Dutta

I plan to take out an additional loan to my existing home loan. Do I have to present a document for the end use of the funds taken as an additional loan?
—Abhishek Suman

The additional loan must be used for the extension of the house or the repair of the house. The end use of such a loan must be related to housing because the interest rate of such a loan is one of the lowest on the market. For Loan against Property, Loan against Deposit or Personal Loan only, end use of funds is at user’s discretion. These loans are therefore more expensive than a mortgage or an additional mortgage.

My brother had taken a housing loan from HDFC Bank and he got a PMAY grant. He passed away in September 2021. Now the bank is asking us to reimburse the PMAY grant on the grounds that our building has not received the certificate of occupancy (CO). The building has a certificate of completion (CC). What should I do?
—Ratna Mohite

PMAY refund is not related to OC or CC. As the beneficiary has died, the unused grant must be reimbursed.

I have a personal loan and a car loan. As I have some cash on me, which loan should I prepay?
—Naveen Kumar

The personal loan will attract a higher rate of interest. Repay the personal loan first. Then, if you still have excess funds, pay off the car loan. Obtain duplicate Form 35 RTO lien removal along with the NOC and loan closing letter. Complete the closing of the car loan by going to a bank branch.

I want to take home loan for Rs 12 lakh and apply for PMAY. I want to prepay Rs 3.5 lakh in first year apart from regular EMI to reduce interest expense. After the first year, I want to pay according to the bank’s EMI. Is it possible to prepay like this?
—Ajay Mishra

Upon PMAY approval, your loan amount is reduced and therefore your EMI is also reduced. Whether you want to prepay will depend on the details of your loan. If you also had an additional unsubsidized loan on the property, your repayment will be reduced by the unsubsidized portion. If your PMAY grant is for the full loan amount, you must repay the present value of the grant used on the repayment amount, for the remaining term of the loan.

The author is the founder, AZUKE Personal Finance Advisory (www.azukefinance.com). Send your questions to [email protected]

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