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Commentary

NHB removes pre-payment penalty by Housing Finance Companies

If you have a loan from a housing finance company like LIC Housing Finance or HDFC, you will feel a little bit better knowing that the HFC regulator – National Housing Bank or NHB – has removed pre-payment penalties from such housing loans.

If you have a floating rate loan, you will not pay a pre-payment penalty.

If you have a fixed rate loan, you get a charged a penalty only if you refinance from another financial institution. That means if you earn the money, or even borrow from your parents and pay it back (from your “own” sources)- you don’t need to pay a pre-payment penalty.

Since NHB has no regulation on banks, this rule won’t be applicable for banks. But don’t be unhappy – I’m sure the RBI will follow suit soon, and it has already proposed it.

Also read: The Unnecessary Prepayment Penalty

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