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Planning to take home loan? Read this first

September 23, 2019 08:30 IST

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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Sanjay Kumar Singh
Source: source
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