Planning to take home loan? Make sure you are on the best rate available

Many lenders nowadays waive the processing fee on home loan transfers

• Every six months home loan borrowers should compare the interest rate on their own loan with the best rates available in the market. 
• If the difference is 50 basis points or more, they should consider shifting.
• Many lenders waive the processing fee for customers who are transferring their loans from another lender.
• The most significant cost involved in transferring is the stamp duty, which in a city like Mumbai is 0.2 per cent of loan value.
• Many customers are still on home loans linked to the base rate, an older benchmark. 
• Such customers would be paying a higher rate of interest. They need to shift to an MCLR or repo rate-linked loan immediately.
• Borrowers should select home loan tenures carefully. 
• A longer tenure reduces the EMI burden but increases the total interest outgo
• A Rs 50 lakh loan taken at an interest rate of 8.35 per cent for 20 years will mean an EMI of Rs 42,918. Total interest outgo will be Rs 53,00,236.
• If for the same loan the tenure is increased to 25 years, the EMI comes down to Rs 39,757 but the total interest outgo rises to Rs 69,27,159.      
• To reduce interest outgo, borrowers should periodically prepay part of the loan amount, especially early in the loan tenure.