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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

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Home Loan

Sanjay Kumar Singh 



house, home
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  • Every six months 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 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 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 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.


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First Published: Fri, August 16 2019. 13:50 IST

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