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