Force majeure clause for fixed-rate loans: The real estate credit contracts of many leading banks may include a clause allowing banks to change fixed interest rates in exceptional circumstances, such as sharp fluctuations in market rates and changes in the bank`s internal policies. The typical clause is: Definition of customer default: An intuitive definition of default for a home loan buyer may relate to his inability to pay his IME without notice. As simple as the definition may seem, the loan agreement may, in fact, indicate several other reasons that may amount to a customer`s default and give the lender the right to immediately terminate the loan. Warning: Check carefully the advance fees included in the credit plan and make sure they correspond to market practice as well as what has been communicated to you orally by the Seller. These fees would deter your refinancing of this loan with another lender if your existing bank charged you higher fees than market rates or raised interest rates beyond the market movement. Warning: this clause removes the essence of any fixed-rate credit. It does not contain a clear definition of changes in internal policies or extraordinary changes in money market conditions. Force majeure clauses should deal with major disaster situations; a definition that has been distorted by banks to protect their liability. As a customer, you have the right to negotiate with your lender to remove the clause and protect your financial liability, especially if you pay a higher interest rate for your fixed-rate loans.
Warning: this clause takes the essential benchmarking of a credit and clearly opposes the diktat of the RBI. As a customer, you have the right to negotiate with your lender in order to remove the clause at the time of signing the contract and protect your financial liability. Even if you don`t notice this clause when you sign the contract, you can still go to the bank mediator if your bank decides to increase the spread on your home loan on a nice day. In such cases, the banking ombudsman has made numerous judgments that favour customers. „Provided that, from time to time, the bank may change the interest rate at its discretion due to changes in internal policies or if unforeseen or extraordinary changes in money market conditions take place during the term of the contract, in an appropriate and prospective manner“ Warning: While most of these clauses protect the bank`s burden on assets. there is an urgent need for the borrower to understand the broader definition of default and to exercise due diligence to meet these conditions in order to avoid being considered a late payment. If, as a borrower, you are not satisfied with any of the above clauses, you can discuss and negotiate in time with the bank the necessary changes before signing the contract in order to avoid any unexpected turbulence in the future. Down payment fees: Fixed-rate loans remain subject to advance fees. Even some variable rate loans may be subject to such fees. These fees can range from 1% to 5% of the loan amount and are often negotiable at the time of use of the loan. Spread clause for variable rate loans: Variable rate loans are loans calculated based on the bank`s base interest rate and a spread at the base rate, depending on the type of loan and the customer`s profile.