Why this is the right time to take a home loan?
Thinking of buying that deluxe apartment but unsure if your salary is sufficient to match the high interest rates on Home Loans? With lending rates on a downward slump, its time for you to learn how you can save lakhs of rupees in the long term and get the home of your dreams faster.
Home Loan borrowers have several reasons to cheer demonetization. Home Loan interest rates are at their lowest, and banks have fuelled the trend with a string of rate cuts, which has further brought down the Home Loan rates. In October 2016, the Reserve Bank of India cut the repo rate from 6.5% to 6.25%, keeping the cash reserve ratio (CRR) unchanged. According to analysts, this rate cut provides a conducive borrowing environment.
The Evolution of Home Loans in India
From 1970s, the housing finance market in India has come a long way. The amount of Home Loan that banks disbursed to borrowers three decades ago was less than half the purchase value of the asset. Today, the demographics have changed drastically with borrowers who are much younger going home with up to 85% of the home’s value as credit.
Home Loan Repayments
The ease of getting a Home Loan sanctioned today significant repercussions for homeowners. Incomes have gone up and borrowers want to realize their dream of purchasing a home for their family and themselves sooner. If you are looking for a Home Loan, you will notice that the Home Loan interest rates have been gradually declining in the last few years. And if you are an existing Home Loan borrower, you have probably noticed this too. If you want to pay lower EMIs in tune with the current low rate of interest, it is time to take smart steps to save your money.
First check what your EMI on your Home Loan can be by using Home Loan EMI Calculator.
Once you know what your EMI can be, you can apply for a Home Loan today to take advantage of the slump in interest rates. If you are an existing borrower, you can use either of these two options to decrease your EMI and increase your savings:
Choose an MCLR-Linked Loan with Your Existing Lender
All loans with flexible interest rates, including Home Loans, which are taken after April 1, 2016, are linked to a concept called MCLR. Short for marginal cost of funds based lending rate, MCLR can help you reduce your Home Loan interest rate to reflect the decrease in rates more quickly and efficiently. Simply approach your lender and ask to switch you to a Home Loan linked to MCLR, which will be more sensitive to RBI’s rate revisions and thus be cheaper for you. The cost of transferring your loan to this system is zilch as you are absolved from paying any processing expenses.
Opt for a Home Loan Balance Transfer to a Lender with Lower Interest
Another answer to make the best of low Home Loan interest rates in the current scenario is to switch your loan to a lender offering a more competitive interest rates. This will increase your repayment abilities and may even help you pay off your Home Loan earlier than you had imagined. Go about choosing your new lender with care by comparing various loans and lenders online and picking one that suits you best. Be aware that transferring your Home Loan to another lender means shelling out money for processing fees and a pre-closure penalty. So make sure the gains you stand to make from the transfer exceed the cost.