Home loan interest rates

The interest rates for housing loans from banks have been gradually decreasing in the last few years. This is to encourage people to invest in the real estate market. Interest rates have been ranging from 8.75% per annum to 7.25%. The rates at present are in the range of 6. 65 to 6.75%.

It is advisable to check with different banks and institutions before availing of a housing loan.

 Most borrowers now transfer their home loans to different lenders because there is a substantial difference in the interest rates . Banks/housing finance companies charge their old customers differently than the rate they charge for the new customers.

There might be a difference in rates between one lender or another lender.

A shift can be a good idea if there is a substantial difference.

Customers may have difficulty paying the higher EMI. They may ask the lender to extend the tenure or reduce the instalment. Customers can seek out another lender if their current lender refuses to reconsider the rates. Clients may be unhappy with the service they receive. This may not apply if the home loan is under a mortgage. Once you have taken the loan, you will only need the annual interest certificate to calculate your tax.

Let’s say that you’ve found a lender with a lower interest rate and want to transfer your home loan. It is best to meet with your current lender before you make any decisions. Due to fierce competition, lenders don’t want to lose customers. They might lower the interest rate or advise you to pay 0.25 to 0.50% of any charges to convert the higher rate to the current rate. This is the lower rate that is charged to new customers. This could be a better option than moving. When RBI increases the Repo rate, all lenders increase the interest on home loans and decrease it when it falls. Some lenders don’t reduce the rate of interest when RBI lowers its Repo Rate, which means that they have a constant high interest rate. These lenders can help you get a home loan.

How can you assess if the lender is charging the correct interest rate? 

First, look at the track record for the loan over the past year. This should be at least six months. You can request the foreclosure letter, which will show the principal amount of your home loan and the interest amount to a specific date.

If you plan to transfer your home loan to another lender, ensure you get the list of required documents from the current lender. The new lender will require photocopies of any documents issued by the banker. you should submit all these documents to the new lender.

 The new lender will then complete all formalities, including legal and property valuation and contact point verification of your residence and office. He will also go through the CIBIL record. The new lender will issue a demand draft for the closing of the loan account to your old lender after sanctioning a new loan. The original papers of the property will be released by the previous lender and deposited in the custody of the new lender. The new lender will assess stamp duty according to the State Stamp Act, processing fees and property insurance.

Repayment history

Repayment history is a key factor in loan transfers, so be sure to keep it clean. Let the banker know if there has been any default on your record. This situation means that loan transfer would be at the sole discretion of the bank manager. The loan margin is usually not an issue for the new lender, as the customer has already given the margin to the previous lender. If you have a housing loan outstanding of 25 lakhs, the new lender will accept 25 lakhs. A property currently under construction (normally a flat within a multi-storied building) should be on the list of preapproved projects by the new lender.

Transfer your loan to a bank that charges a lower interest rate than the current lender by at least 25-50 basis points.  To transfer loans with amounts less than or equal to the previous interest rates is not advisable. Ask the new lender questions about legal, valuation, and insurance charges. You can also negotiate for waivers of processing fees. Banks don’t now charge prepayment penalties for loans with floating rates of interest.

Alternate Option or Change at any time

Your home loan may be linked to the base rate or MCLR of your bank. This will likely result in a high-interest rate. All banks switched to the Reserve Bank of India’s external benchmarks (Repo rate) on October 1, 2019. This was for pricing new home loans. Most banks offer loans tied to the repo rates. EBLR (External Benchmark Loan Rate) is the name of this rate.

The rates must be reset by banks every three months. Your loan should be linked to the repo rates. After paying administrative or legal fees, existing borrowers can switch to external benchmark-linked loans if they are currently servicing MCLR-linked or Base Rate-linked loans. The terms and conditions for existing borrowers will be the same as those applicable to new borrowers. Many banks permit borrowers to change their loan after they have paid 0.25% as a conversion fee. Chat with your bank manager about lowering the interest rate before you transfer the loan.