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Prepare for your home loan balance transfer NOW!

Last updated on: March 15, 2013 11:36 IST

Prepare for your home loan balance transfer NOW!

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Rajiv Raj

Paying higher EMIs on your home loan? Don't fret. Don't think of your home loan as a burden. Here's a simple way to get lower interest rate on your home loan.

It is time for the transfer of your outstanding home loan. Though many home loan borrowers had high hopes from budget, not much came their way. In the Budget, the finance minister tweaked a few things. Contrary to the popular expectation of the extant deduction of Rs 150,000 towards the interest paid on your home loan to go up to Rs 300,000, only an increase of Rs 1 lakh has been allowed with some conditions.

This increase is applicable on the first home purchase of an individual in FY2013-2014 on home loan amount of Rs 25 lakh. Though, there is nothing more than this for home loans, do not lose heart. There is another possible trigger that can fetch you benefits in the form of low interest rates by transferring your outstanding home loan at a lower rate.

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.



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The trigger being softening of interest rates by the Reserve Bank of India (RBI). This would make home loans more attractive. The RBI meets for the mid quarter monetary policy review on March 19. There are various facts that have set the stage for cut in interest rates.

Though the Wholesale Price Index inflation has rose to 6.84 per cent in February, much higher than the anticipated 6.54 per cent, core inflation softened to 3.8 per cent against January's 4.1 per cent. Also, even if the Index of Industrial Production (IIP) has recorded a decent growth to 2.4 per cent for January against 0.6 per cent for the month of December the RBI is expected to go for a rate cut on March 19.

The Finance minister has chosen to be faithful to his mandate of keeping the fiscal deficit numbers to 5.2 per cent for the current financial year and has given guidance of 4.8 per cent for FY2013-2014.


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These steps taken in the direction of fiscal discipline can convince the RBI to consider a cut in interest rates. So, to put it simply, the stage is perfectly set for a cut in interest rate in the wake of low inflation and the economy slowing down. Banks will surely respond with a cut in interest rates. In such case, it is an opportunity for you to shift your existing home loan to a new lender if your bank does not pass on the benefit of a lower interest rate to you.

For a loan of Rs 20 lakh for a 20-year term at 11 per cent rate of interest equated monthly installment (EMI) works out at Rs 20,643. But for the same loan if you reduce the interest rate to 10.5 per cent it works out to Rs 19,967.


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As the macro-economic situation is expected to be more conducive for such a balance transfer for home loans and new home loans, you just cannot sit calm dreaming about a better future. It is the time to prepare your home loan file.

Approach your bank and obtain a loan repayment certificate along with the amortisation schedule. Most private sector banks offer it online. This will help you quantify your outstanding principal on home loan and the prevailing rate of interest. Also check your credit score on CIBIL website. You can access your credit report by paying Rs 470 online. Position yourself right so that you can take home all the benefits at the opportune time.


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