Home loan borrowers cheered on 29 September as the RBI slashed its lending rate by 50 basis points (bps). An immediate fall in interest rates as banks passed on the benefit to borrowers was what they were looking forward to. However, the latest rate cut meant RBI has lowered its policy rate by 125 bps since the beginning of this fiscal.
In contrast, banks have reduced their base rates by only 50-55 basis points so far. Given the inertia on the part of the banks, it makes sense for to take proactive steps and negotiate a better rate of interest for their housing loans.
What are your options
Gaurav Khurana, CEO of Dialabank. com, an aggregation site, feels repricing your housing loan is a good option because it not only gets you a lower rate of interest but also saves you the hassle of going through the documentation process all over again.
"Banks are actively repricing housing loans as otherwise customers will move to another bank. No bank wants to lose the asset on its book," he says. As a home loan borrower, you can wait a few days to allow all banks to announce their new base rates. You can then start negotiating. Typically, banks reprice rates to what they would offer a new customer. There is no additional documentation required. Once the bank sets the new rate for your loan, it will send a communication indicating the same.
Let's assume you took a 20-year (240 months) home loan of Rs 60 lakh last month at 9.85%. If your bank resets the rate to 9.50%, your loan tenure will come down to 224 months. You will also save Rs 9.19 lakh towards interest repayment over the entire tenure. If you get a better deal still with some other bank, you should switch.
However, ensure you get at least a 15-20 bps point lower rate when you balance transfer your loan, says Sukanya Kumar, Director at RetailLending.com. Factor in ..
However, ensure you get at least a 15-20 bps point lower rate when you balance transfer your loan, says Sukanya Kumar, Director at RetailLending.com. Factor in ..
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