Owning a home is a dream of almost every individual, whether they are working in the corporate sector, government sector or running their own business. And we are also aware of the very fact that buying a home requires a lump sum amount of money because the amount is invested in one go. Although for a middle-class person, investing a big amount requires immense courage, but what if, you don’t have the entire money at a time.
Don’t worry banks and other financial institutions are there to help you in realising your dream by offering their support through Housing Loans. As time has elapsed, different private sector banks, non-banking financial companies (NBFCs), housing finance companies (HFCs), and online lenders are brought into action apart from government banks.
There are a lot of options when you look for housing loan offers. You can choose the one that suits your needs and budget the most. One of the main factors to be considered when choosing the best home loan offer is the interest rate. However, it keeps changing according to the Reserve Bank o India’s (RBI) changes in its monetary policy and fluctuating marginal cost of funds based lending rate (MCLR).
Still, there are some banks which offer home loan facility at lower interest rates than their competitors, despite a constant hike in basis points by RBI. For example, ICICI Home Loan interest rate of 8.70% per annum, and many other banks offer low-interest rates on home loans.
Do you know that even a little increase or decrease in the interest rate can have a significant impact on your equal monthly instalment (EMI) outgo?
RBI increases its Repo Rate (interest rate charged from the bank for lending funds when banks are having a shortage of funds). So, if there is an increase in the Repo Rate, banks increase their rate of interest charged from the customers (those who have taken a loan or are planning to take one). It results in an increased amount of EMIs.
The RBI will keep changing its Repo Rate, however, banks want to expand their business, and hence some of the lenders keep their interest rates competitive to attract their customers.
When you apply for a home loan, make sure you are well aware of the interest rates charged by every lender so that you can lock the best deal. That is because even a difference of 0.25% in the home loan interest rate can save you a significant amount of money.
Let’s understand this better with the following example –
| Home Loan Amount (in Rs.) | Rate of Interest | Tenure (in Years) | EMI | Total Interest
Paid (in Rs.) |
|||
| Case 1 | 30 Lakhs | 8.5% | 20 | 26,035 | 32,48,327 | ||
| Case 2 (interest increased by 0.25%) | 30 Lakhs | 8.75% | 20 | 26,511 | 33,62, 717 | ||
So, this is how a slight difference in the rate of interest can impact your overall budget.
If you have availed a home loan when the interest rates were high, and you are paying a big EMI amount since a few years, you can Avail Home Loan Balance Transfer facility and transfer the outstanding loan amount to another bank that offers home loan at the lower interest rate. This is the best way to save interest cost on your housing loan.