Cut home loan costs: Retain EMI, shorten tenure, consider prepaying

Borrowers can maximise savings when interest rates fall by retaining their EMI and reducing tenure, while also benefiting from repo-linked loans and selective prepayments

The Reserve Bank of India (RBI) has cut the repo rate by 50 basis points to 5.5 per cent. Since February, the repo rate has fallen by 100 basis points. Interest rates on new home loans, already below 8 per cent following the April cut, will decline further.

 

The latest repo rate reduction will lower EMIs on home loans. For instance, on a ₹75 lakh loan for 20 years with an initial rate of 8.5 per cent before the February cut, the EMI would have been ₹65,087. Once the latest cut is passed on, the interest rate will drop to