Looking at the fine print-- Dont look at the discount-- but at the absolute

This is a really important post-- real life experience discussion.

Over the last few weeks I have been trying to negotiate a home loan for myself. I had two- three companies in mind and wanted to evaluate what each of them were offering.

Mostly the rate of interest were the same -- 8.25% for a period of 2 yrs-- then floating. However no one was clearly mentioning what the floating rate was potentially going to be or how it was going to be calculated.

Each of the lenders used their own benchmark rate--- ICICI called it FRR , HDFC-- PLR. Each of them gave a no  from their Benchmark rates. ICICI said it would be FRR- 5.5% ( WoW!) and HDFC -- PLR- 4.75%

From the first cut-- it looked like ICICI was going to be where i would take my mortgage from. However on further analysis and probing with the banker , I understood

ICICI-- FRR- 5.5% = 9.25% rate presently

HDFC- PLR- 4.75%= 8.,75% presently

So now-- which one would you go for? HDFC is the right answer..

on a Discount basis ICICI looked great-- but on an absolute no-- HDFC was 0.5% cheaper!!

Now HDFC charged me a good processing fees ( which i asked for a discount -- but did not get) while ICICI was willing to charge half the processing fees ( discount which i got)

However on a longer term basis --- HDFC will prove to be less costly for me.

So HDFC it is.

The moral of the story-- look at the fine print-- Understand the terms -- if you dont understand it-- ask the questions ( after all its your money!)

as a friend of mine says... "Poochne mein kya harz hai " -- " whats the harm in asking"

Happy investing...