Borrowers should select home loan tenures carefully, suggests Sanjay Kumar Singh.
Illustration: Uttam Ghosh/Rediff.com
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.
| Rates and charges -- Home loan | |||
| Public Sector Banks | |||
| Floating Interest Rate | EMI (Rs)* | Processing Fee | |
| State Bank of India | 8.35-9.2% | 42,918-45,631 | Upto 0.35% of loan amount |
| Bank of Baroda | 8.45%-9.7% | 43,233-47,262 | Upto 0.5% of loan amount |
| United Bank of India | 8.4%-8.55% | 43,075-43,550 | Upto Rs 11,800 |
| Canara Bank | 8.5%-8.75% | 43,391-44,186 | Rs 1,500-10,000 |
| Union Bank of India | 8.6%-9.25% | 43,708-45,793 | Upto 0.5% of loan amount |
| Private Sector Banks | |||
| Floating Interest Rate | EMI (Rs)* | Processing Fee | |
| Axis Bank | 8.9%-10.6% | 44,665-50,255 | Upto 1% of loan amount (Minimum Rs 10,000) |
| ICICI Bank | 8.7%-9.3% | 44,026-45,955 | 0.5% of loan amount |
| Citi Bank | 9.35%-10.35% | 46,118-49,416 | Application fee: Upto Rs 5,000 Booking fee: Upto 0.4% of loan amount |
| Kotak Mahindra Bank | 8.75%-9.1% | 44,186-45,308 | For Salaried Individuals: Upto Rs 10,000 For Self employed: Upto 0.5% |
| Housing Finance Companies | |||
| Floating Interest Rate | EMI (Rs)* | Processing Fee | |
| HDFC Ltd. | 8.4%-9.35% | 43,075-46,118 | Upto 1.50% of loan amount |
| IIFL | 10.25% onwards | 49,082 onwards | Upto 1.75% of loan amount |
| LIC Housing | 8.8%-9.15% | 44,345-45,470 | As applicable from time to time |
| Indiabulls Housing | 8.8%-12% | 44,345-55,054 | For loan amount upto 30 lakhs-Upto Rs 10,000 For loan amount above 30 lakhs- Upto 1% |
| *Loan amount: 50 lakh,Tenure: 20 years | |||
| Source: Paisabazaar.com | |||
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