Plan your prepayments, switch to tackle rise in home loan rates

New borrowers must avoid over-leveraging; prepare to cough up more as down payment

The Reserve Bank of India (RBI) hiked the repo rate from 4 to 4.4 per cent on Wednesday. Home loans from banks are linked to the repo rate. This hike will translate into higher equated monthly instalments (EMIs) on new home loans (compared to pre-hike levels).

For existing borrowers, the tenure will increase, which will translate into a higher interest burden.

But if the limit on tenure — usually retirement age for salaried employees and 65 years for the self-employed — gets breached, their EMI could also rise.

Rates headed up

Interest rates are headed upward.

“The RBI’s rate hike signals an imminent end to