NHB- No prepayment penalty on home loans

NHB- No prepayment penalty on home loans 

The National Housing Bank (NHB), regulator in the realty finance sector, is expected to take a decision soon on whether or not there will be a complete waiver of all pre-payment charges on floating-rate home loans.
In a move that will make investors cheer this Diwali, NHB has asked housing finance companies (HFCs) not to levy any prepayment penalty fees on home loans when it is closed. Note that HFCs are regulated by NHB.
Not just that, NHB has asked HFCs to ensure that irrespective of when the loan was taken, all borrowers should pay the same interest rate.
The housing finance regulator said HFCs will no longer levy any fee on floating rate loans. In case of fixed rate loans, it has made a distinction and only those borrowers who pay from their “own sources”, such as savings or even loans from relatives, will be exempted from payment of penalty. In case borrowers shift to another bank or HFC, the penalty will be applicable.
While a similar advisory was issued last October, the NHB has said that any violation will attract penal action. The move will enable several borrowers to now shift their loans to banks or HFCs that offer home loans at a lower rate. Banks and HFCs levy pre-payment penalty of up to 4%, which often resulted in borrowers continuing to pay higher rates. “The idea is to protect the interests of borrowers. It will give them freedom to exercise their choice,” Verma said. HFCs, however, refused to comment on the issue, saying they were studying the matter The charges on pre-payment levied in some banks range between one per cent and five per cent of the loan due. As much as 98 per cent of loans given by banks come in the floating-rate category.