Qualifying for a lower interest rate on your home loan will save you money over the long term. A lo er rate of interest can also lower your monthly payments, which may help get you out of a financial bind if unexpected hardship strikes. If you find yourself falling behind in making your mortgage payments, being honest with your bank or financial institution may get you a lower interest rate without you having to refinance a new loan. It can also be to your advantage to refinance to a lower mortgage interest rate even when you are managing your finances well.

Proactive borrower

This is the first and the most essential requirement from a borrower in order to have control over the money that is paid as home loan repayment. The borrower will have to be alert to situations such as change in the interest rates and new policies of the RBI and the lending institution in order to make the best use of new policy that comes into effect. The introduction of the base rate linkage to the home loan rate has introduced some degree of transparency into the system. Many housing finance companies still discriminate between existing and new customers, providing additional benefits to attract new customers while neglecting the interest of the existing ones.

Express concerns

In case at any point of time a borrower finds that he is being charged a higher rate of interest then he should approach the bank and express concerns. Owing to the increased levels of competition, all housing finance companies will address your concerns promptly in order to avoid a negative feedback from a customer. This is applicable in case you find that the new home loan customers are being offered a better rate than the existing customers.

Negotiate

This is the ultimate tool available in the hands of the home loan borrowers in order to get the bank to readjust interest rates if one feels they are unjustified. The new policy issued by the RBI gives the customer a right to negotiate the best possible deal. If the bank still doesn’t listen to your concerns then it is advisable to approach the banking ombudsman or another financier to transfer the loan. In most cases, if the concern is genuine, the current bank itself will adjust the rates.

Readjustment of interest

It must be understood that any downward readjustment of the interest rate is of significance only when this takes place in the early years of repayment. In a 20-year loan, lowering of interest rates after the first 10 years is not of much consequence since major part of the interest component has already been paid in the first 10 years.

It’s crucial to balance the tenure

Remember your tenure while you are sitting at the negotiation table. The customer gets more benefit if tenure is more than 10 years. When rate of interest decreases, then don’t cut the EMI of the loan, instead lower the tenure. Thought of lowering your EMI must be good as it decreases the pressure on your monthly budget, but it increases the rate of interest and the term of the loan. Don’t think you can lower your rate of interest free of cost. Instead, you will be charged for it. It can vary from 0.5% to 1.5% of your loan amount. Switching to another bank is more costly as it involves a lot of documentation.

Be proactive about your loan repayment

You need to be proactive about your loan repayment and check the interest rate. The RBI has abolished the prepayment penalty levied by banks and housing finance companies. So, shifting to another bank is not as costly as it used to be. Banks are willing to negotiate, especially if the borrower has a good repayment history. If a bank refuses to budge, a mild threat of shifting the loan to another lender can work wonders.

Documentation

Gather together any documentation you have that proves you are suffering a hardship. For example, present a letter to your lender that states that your income has been reduced or lost due to a layoff. Show medical bills and hospital appointment slips if you are falling behind in your mortgage payments because of your own or a family member’s illness.

Your payables

Collect your most recent pay stubs for when you talk to your bank. List all your expenses so that the bank can consider the other bills that you must pay each month. Be prepared to show proof of any savings or other assets that you have.

The author is CEO-Distribution, Destimoney Enterprises Pvt Ltd. The views expressed in this article are his own

Comprehensive motor insurance policy without add-on covers, in reality is not comprehensive in its true sense. If motor insurance policy holder has to pay from his wallet (partly or fully) for replacing rubber or metal parts in case the car met with an accident, then the entire purpose of insurance gets defeated. One can overcome this if motor insurance is bought with some useful add-on covers like engine protection, road side assistance, protection for no-claim bonus, nil depreciation, return to invoice and personal belongings. Furthermore, spare parts in high-end cars are very expensive. It is recommended that cars valued upwards of Rs 8-10 lakh should have add-on covers as part of the motor comprehensive policy. This reduces the financial impact on the car owner in the event of a claim.

How add-on covers can help get the most out of your car insurance:

No Claim Bonus protection

No Claim Bonus (NCB) is an incentive for those policy holders who have not taken any claim against their car insurance policy in the previous years. Over a period of time, NCB can be accumulated maximum up to 50%. However, even one claim on the policy can bring this down to zero. The NCB cover ensures that even if a claim is made, NCB earned remains protected at the existing eligible percentage, instead of becoming zero. This should be a must get ‘add-on’ for all vehicle users. After all, one bad day on road should not spoil your safe driving record of years!

Return to invoice

Generally this benefit can be availed only in the first or second year of buying a car. In the event of a total loss following an accident or when the insured vehicle is stolen and not recovered, the insurance company will pay the financial shortfall, if any, between the insured amount and the purchase price of the vehicle or current replacement price of the new vehicle, whichever is less. It is wise to be prepared.

Nil depreciation

This ensures full claim settlement without any depreciation on the value of spare parts that are replaced after an accident. Like, if bumper gets completely damaged and it costs Rs 20,000 to replace it, the insurer may have to pay around Rs 10,000. However, with nil depreciation cover, the car owner gets the entire amount back. It is mostly available for vehicles that are less than three years old. So, your car parts may depreciate, but your claim value need not!

Roadside assistance

This is to receive basic support in case of any roadside emergency. This includes fuel assistance, flat tyre, battery, towing or an alternate car for a certain period. Emergency roadside assistance is all about buying peace of mind.

Engine protector

During heavy rainfall if a vehicle is submerged in water/flood, on starting, the engine could break down. This occurrence is known as hydro-static lock and it is frequent during monsoon. Many car owners make the mistake of starting their vehicle when it is submerged in water. The repair cost is very high and therefore an add-on cover which protects the engine from such occurrence could help.

It is, therefore, recommended to buy add-on covers while buying the motor comprehensive insurance policy. A good combination of add-on covers will truly make your car insurance a “comprehensive” one.

The author is vice-president — Retail Sales, SBI General Insurance. The views expressed in this article are his own

Thank you for your reply published in The Tribune on January 13 with respect to my query. I wish to submit that it has been partially answered. Please clarify:

a) Should I consider equity shares and mutual funds corpus as moveable or immovable assets?

b) When one sells equity shares through market after paying STT, can one avail capital gain exemption if shares are held for more than a year?

c) How about capital gain aspect if the above assets are gifted to mother? In our case, my son, now an NRI, plans to gift shares and MF corpus to his mother, a senior citizen. — Krishan Dev Uppal

Equity shares, units of mutual funds are in the nature of a movable property.

a) Yes, you can avail the exemption in respect of such a capital gain.

b) Your son can gift the shares etc. to his mother. The period for which these movable assets were held by your son would be taken into consideration for computing the period of one year and in case the period exceeds one year, the capital gain arising on the sale of such movable property would be exempt in the hands of his mother provided the sale is of equity shares or units of equity-oriented mutual funds and is effected through the stock exchange and STT is paid thereon.

My wife, a housewife, by virtue of being a nominee in few fixed deposits of some banks/term deposits in post office (made by her deceased sister) got a few lakhs on the maturity of those deposits. She has not filed any I-T return to date since she had no income from any source. But she has a PAN card. Please advise how to account for this gifted money by her elder deceased sister in the I-T return for financial year 2013-14 (AY 2014-15). Can this be treated as gift money and free from tax?

a) If not so, how to save tax? — Dr JK Chawla

a) The amount received by your wife after the demise of her sister is not taxable. However, the interest accrued and due on such deposits from the date of her sister’s death to March 31, 2014, would be taxable as her income for the Assessment Year 2014-15.

b) The amount received by a nominee on the death of a person does not necessarily become the property of the nominee. He or she is accountable to the legal heirs of the deceased for the amount received as a nominee.