Is it legally correct to charge pre closure penalty on home loans by banks?

Q: I bought a flat in 2008 and took a loan from a renowned bank. But due to hike in interest rates, I am planning to shift to another bank with lower rates. They did not mention anything in writing about pre closure penalty but now they are asking for 2% as penalty. What do you suggest?

Anil Choudhary, Kolkata

22nd October 2011

Home Loan in Kolkata

preclosure penalty on home loans

Follow Discussion

Also see discussions for

Kolkata Home Loan Home Loan in Kolkata

Replies (1)

National Housing Bank has stated recently that housing finance companies should not charge pre-payment penalty on pre-closure of housing loans in case of certain matters. NHB also said that floating interest rate home loan can be pre-closed by borrowing from a bank while fixed interest rate home loan can be pre-closed only from the borrower's own sources.