Will you benefit from the home loan rate cuts?


RBI asks HDFC Bank to stop digital launches and credit card...

The Reserve Bank of India (RBI) has asked the country's largest private sector lender, HDFC bank to stop all launches of its digital business...

Assam’s Dibrugarh University Teacher Arrested For Sharing Porn Video: Police

During interrogation, the accused confessed to the crime. (Representational)Dibrugarh: An assistant professor in Assam's Dibrugarh University was arrested today for allegedly uploading pornographic content...

Process to avail full refund on Lockdown Air Tickets

The Supreme Court approved the Directorate General of Civil Aviation's (DGCA) proposal on air tickets refund and credit shell on flights booked prior and...

Why was CDS Gen. Bipin Rawat’s attending China-owned MG Motor event;...

US Ambassador Kenneth Juster greets CDS Gen Bipin Rawat with elbow bump | Watch ...

Explained: How new H-1B visa regime will impact Indians, Indian firms

In yet another policy stance change on H-1B visa within six months, the US administration on October 6 said it was announcing an “interim...

SBI has reduced home loan rates to 6.7% for loans up to 75 lakh, while Kotak Mahindra Bank‘s offer starts at 6.65%. SBI has a further 5 basis points concession for women borrowers. HDFC has reduced its retail prime lending rate by 5 basis points from 4 March. Mint decodes.

How will borrowers gain from the rate cut?

A cut in interest rate brings down the cost of borrowing. For instance, if a person has availed a home loan of 50 lakh at 7% for 15 years, the EMI will be 44,941, with an interest outgo of 30.89 lakh over the loan tenure. If the interest rate is reduced to 6.75%, the EMI will be 44,245, while the interest component, or the cost of the loan, will be down to 29.64 lakh. The borrower can also opt for reducing the tenure in case of a rate cut, and keep paying the same EMI to close the loan account early. Keeping the EMI same and reducing tenure will lead to higher savings compared to reducing EMIs in case of rate cut.

Who stands to benefit from the low rates?

The rates have been cut for new borrowers, and is not applicable to existing borrowers. Existing borrowers can only benefit in case the RBI cuts the repo rate, as the central bank has mandated banks to link their home loan rates to external benchmarks since 1 October 2019, and most banks have opted for repo rates as the external benchmark. Repo rate-linked home loan is calculated on the repo rate, plus the spread or margin of the bank. So, home loan rates will move automatically with a change in repo rates as the margin remains fixed, unless a borrower’s credit assessment undergoes a substantial change.

View Full Image

Steal deal

Who will be eligible to avail the lowest home loan rate?

Banks have an eligibility criteria for the lowest home loan rate. For example, State Bank offers the lowest rate of 6.6% to salaried women for loan applications of up to 30 lakh on the YONO app. For salaried men, it is available at 6.65% on the YONO app, and 6.7% otherwise. A borrower’s credit score also determines home loan rates.

What are the picks for current borrowers?

If your lender is charging a higher loan rate, you can opt for a balance transfer after calculating the savings. Balance transfer is mostly advisable in case the differential in rate offered is at least 50 bps and the tenure is 10 years and above. However, before opting for a transfer one must also look at the charges, including stamp duty and processing fee, which can be as high as 1% of the outstanding loan amount. Some lenders also charge documentation, legal, valuation and technical fees. Stamp duty charges vary across states.

Should you opt for a bank or an NBFC?

Some non-banking financial companies are offering competitive rates to home loan borrowers and generally have less stringent criteria compared to banks. However, NBFCs offer home loans based on the prime lending rate (PLR) and the interest rates are not linked to any external benchmark. Therefore, the interest rate changes may not be as swift and transparent in case of an NBFC when compared to home loans offered by banks. That said, NBFCs may suit borrowers with low credit scores.

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

Source link

Latest News

Rupee Gains To 74.93 Against Dollar Amid Easing Crude Oil Prices

<!-- -->Rupee Vs Dollar Today: The rupee settled at 74.93 against the dollarParing losses from its early session, the rupee gained 12 paise against...

Skoodle plans toy lab to enhance ‘play-and-learn’

Skoodle, a toys and school and office-stationery brand, is planning to set up a toy lab in India to enhance play-and-learn value in children...

Assets under NPS rose to 38% YoY till March 2021: PFRDA

The Pension Fund Regulatory and...

Charges collected on digital transactions in zero-balance accounts have been refunded: SBI clarifies

CBDT had advised Banks to refund the charges collected, if any, on transactions carried out using the digital mode.State Bank of India (SBI) has...

Wipro Q4 Results: Net Profit Rises 28% To Rs 2,972 Crore, Revenue Up 3.9%

<!-- -->Wipro Q4 Results: The company's revenue stood at Rs 16,334 croreIT services company Wipro on Thursday reported its consolidated profit at Rs 2,972 crore...