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

Sanjay Kumar Singh
Last Updated at August 18, 2019 19:56 IST

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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.

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