Why the latest home loan rate cuts are a double bonanza for homebuyers

May 12, 2017, 2:46 PM
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If you were looking for a good opportunity to buy your dream home by opting for a home loan, then this may be a good time to do that. For, home loans are at their more than 10-year low at present, and residential prices are also at their lowest levels in many years, making it a double bonanza for buyers.

If you were looking for a good opportunity to buy your dream home by opting for a home loan, then this may be a good time to do that. For, home loans are at their more than 10-year low at present, and residential prices are also at their lowest levels in many years, making it a double bonanza for buyers.

Take, for example, State Bank of India (SBI) which has become the first bank to cut its home loan rates twice in the year 2017. The bank has recently cut home loan rates by 25 bps, as a result of which the rates have come down to 8.35% (p.a.) from 8.60% (p.a.) effective from 9th May 2017. On 10th May 2017, IDBI Bank also announced 3 and 6 months MCLR rate cut, as a result of which the home loan rates now range from 8.30% per annum to 8.35% per annum, which make their home loan interest rate lowest in today’s time. However, Bank of Baroda’s (BoB) home loan rate was already 8.35% per annum and SBI and IDBI Bank have now joined the affordable home loan rate cut group.

“Talking about the rate cut by SBI, under this new scheme, the new rate reduction of 0.25 per cent for women is for salaried borrowers only whereas the non-salaried women borrowers will get a 20 bps cut. For male borrowers, the rate cut is for the limited period only valid till July 31 and the reduction for the salaried is 20 bps to 8.40% and for non-salaried 15 bps. Also, SBI home loans under Rs 30 lakh qualify for affordable housing. For loans ranging from Rs 30 lakh to Rs 75 lakh, the bank has cut rates by 10 basis points. All the new women customers can now enjoy the home loan rate of up to Rs 30 lakh at 25 basis points less after an effective 50 basis point cut that led other lenders to cut home loan rates,” says Rishi Mehra, CEO of Wishfin.com.

The eligible home loan customers can avail an interest subsidy of Rs 2.67 lakh under the Pradhan Mantri Awas Yojana scheme. It also said that it had come out with special offerings for construction finance to builders of affordable homes. “Post this rate cut by IDBI Bank, Bank of Baroda (BoB) and SBI, home loan borrowers can surely see a major difference between the old and new EMI. Having said that, this for sure is the best time to apply for a home loan and buy your dream home. You get to save on your new home loan from SBI or IDBI Bank and also on the balance transfer. So, let us have a look at the benefits of choosing any of the two options at these banks,” says Mehra.

Benefits on Home Loan Balance Transfer to SBI
Let us suppose that you already have a home loan from a bank wherein the interest rate is 10%. Now, if you transfer your home loan to SBI, you can get a much lower rate of 8.35% per annum and save a lot on your payment. Have a look at the calculation below:

Bank

Interest Rate (p.a.)

Loan Amount (₹)

Tenure (in years)

EMI (₹)

Yearly Payment (₹)

Total Saving on Yearly Payment (₹)

Existing Bank

10%

30,00,000

25

27,261

3,27,132

36,072

IDBI Bank

8.35%

30,00,000

23

24,255

2,91,060

You must also know that presently there are no processing fees (limited period offer till June 2017) on the home loan balance transfer at SBI. Hence, you get to save Rs 36,072 on your home loan at SBI, which is a great saving option available for you now.

Benefits on Home Loan Balance Transfer to IDBI Bank
Let us suppose that you already have a home loan from a bank wherein the interest rate is 10%. Now, if you transfer your home loan to IDBI Bank, you can get a much lower rate of 8.30% per annum and save a lot on your payment. Have a look at the calculation below:

Bank

Interest Rate (p.a.)

Loan Amount (₹)

Tenure (in years)

EMI (₹)

Yearly Payment (₹)

Total Saving on Yearly Payment (₹)

Existing Bank

10%

30,00,000

25

27,261

3,27,132

37,236

IDBI Bank

8.30%

30,00,000

23

24,158

2,89,896

(Source: Wishfin.com)

Thus, you get to save Rs 37,236 on your home loan from IDBI Bank, which again is a good saving option. No need to say that you are likely to gain the most if you transfer your home loan to these banks and others offering similar rates. However, before doing so, you also need to check the track record of the concerned bank as well as their terms and conditions so that you don’t have to repent later.

Source – Financial express

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