Fine Print in Home Loan Documents

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Zeroing in on the ideal home and getting just the right amount to finance its purchase is every Indian's dream. However, buying a house is a big decision and one that typically entails availing of a huge loan with a lengthy repayment period of 10-15 years. The sheer size and long-term nature of this debt should make one think long and hard before signing on the dotted line since it will impact your finances for several years. However, chances are that many don't.

There is a tendency to assume these are standard contracts that do not warrant enquiries beyond the interest rate or the repayment schedule. But it's critical to read at least the sanction letter, if not the entire contract along with the annexures to comprehend the other nitty-gritties. For instance, the bank may charge consultation or inspection fee, apart from the more commonly known processing fee. Or, you may be billed for any tax paid on the interest amount. Some home loan contracts also require the borrower to keep the bank informed about any change in his/her status of employment, business or profession. The bank may insist that you should send a communication within seven days of such a change.

It could also stipulate that in the event of the borrower quitting the current job or opting for retirement, the entire amount would become due with immediate effect. Further, it could state that any amount that the borrower is to receive from his/ her employer will have to be directed towards the repayment.

Usually, however, banks refrain from resorting to such means to recover dues and restructure the repayment schedule instead. At your end, it's best to read all the clauses in your loan agreement carefully to avoid shocks later. In fact, even before making a loan application, you can procure a draft copy of the home loan agreement to understand the possible terms and conditions. The branches of the lending institution should be able to make an unstamped copy available to you. A thorough understanding of the fine print will help you stay alert and take action if the bank crosses the line.

If you feel your bank is in breach of any clause in the loan agreement, you can approach the Banking Ombudsman or the consumer courts. However, before that, make sure that you have exhausted all the redressal mechanisms that the bank has put in place.

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