What choices do borrowers with existing housing loans have?
Current HL customers can’t do much right now as loan rates are rising continuously due to RBI’s five back-to-back repo rate hikes. Go for a balance transfer only if another lender is offering a lower rate for your outstanding home loan and as per your credit profile.
Should PNB MCLR Rate borrowers switch to HL tied to the repo?
-The cost of capital for a bank determines the interest rates on MCLR-linked loans. A retail borrower cannot infer this internal criterion because it is unknown. Thus, switching to external benchmark-linked loans is the wisest course of action. As their external benchmark for home loans, the majority of banks have chosen the repo rate.
-Rate setting is much simpler and more transparent under the external benchmark regime than it is under the PNB MCLR Rate-based regime, which the RBI imposed for new variable rate house loans and other retail loans starting on October 1st, 2019.
– Independent of their bank’s cost of funds, borrowers of loans linked to external benchmarks receive faster transmission of changes in the repo rate or other underlying external benchmark rates.
Existing HL borrowers can switch to the external benchmark regime if they feel comfortable with lending rates changing more quickly, both up and down. However, be aware that switching to the external benchmark regime may include a one-time switchover fee from the banks.
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What typical refinancing fees might one anticipate?
-Because the new lender will view your HLBT request as a new home loan application, they will impose various fees, such as a processing fee, which typically varies from 0.35 to 1.5% of the loan amount.
-However, many lenders are marketing HLBT for existing borrowers over this holiday season in order to take advantage of the historically low HL rates that are currently available by offering cheap interest rates and processing fee waivers on HLBT cases. The accompanying expenses imposed by the new lender, if any, must still be taken into account when choosing the balance transfer option. Only proceed if the total amount of interest that will be saved outweighs the cost of transferring the balance.
Which banks offer the best rates?
-Numerous public sector banks like SBI, some big private sector banks like Axis and ICICI, and HFCs like LIC and HDFC have been offering competitive home loan rates starting around 8% p.a.
What other benefits do banks provide?
With the hliday season of Christmas and the New Year almost there, some lenders may push their credit growth by offering concessional rates for some period.
They may also waive off or lower the fees for some period to entice potential consumers.
Is it a good time to take HL and purchase a house if someone has been waiting to do so?
While home loan rates are currently rising after falling to all time lows in 2020-2021, you can go ahead if you are financially ready.
Furthermore, it is anticipated that the RBI’s recent decision to simplify risk weights and relate them to loan-to-value ratios for all new housing loans sanctioned up to March 31, 2022, will increase the appeal of home loans for both borrowers and lenders and boost the real estate sector.
-Home loan rates have fallen below 7% per annum at a number of banks and HFCs, including SBI, ICICI, Union, Axis, HDFC, LIC, Bank of India, and Central Bank of India.
Prospective house buyers should examine the home loans given by as many lenders as they can to find the best deal in accordance with their qualifying requirements, such as income, credit score, employment profile, etc. The best way to do this is to go to an online financial marketplace that allows users to compare different loan offers.
Is it wise to prepay HL if someone has money in FD?
When planning to prepay your debt, it’s crucial to take the returns from current investments into account. Although house loans, among retail lending products, likely have the lowest interest rates, their rates are often higher than the returns of the majority of fixed income instruments, such as bank FDs. To prepay the loan, a surplus that is kept in fixed income products like fixed deposits and is not designated for any specific financial aim may be utilised.
There are currently HL interest rates starting as low as 6.7%-7% p.a. for both a lot of public sector banks and a small number of private sector banks and HFCs, and the current range for bank FD rates is between 5% and 5.5% p.a. 5%-7% per year for private sector banks and 7% for public sector banks]
—A person should never prepay their mortgage with money from their emergency fund or assets set aside for important financial objectives. like a child’s college fund, a marriage fund, or a retirement fund. Redeeming your current investments made for such objectives may compel you to take out expensive loans later to achieve them.
Difference between a repo-linked loan/external benchmarked loan and an MCLR
-The cost of capital for a bank determines the interest rates on BOB MCLR Rate-linked loans. A retail borrower cannot infer this internal criterion because it is unknown. Thus, switching to external benchmark-linked loans is the wisest course of action. As their external benchmark for home loans, the majority of banks have chosen the repo rate.
-Rate setting is much simpler and more transparent under the external benchmark regime than it is under the PNB MCLR Rate-based regime, which the RBI imposed for new variable rate house loans and other retail loans starting on October 1st, 2019.
– Independent of their bank’s cost of funds, borrowers of loans linked to external benchmarks receive faster transmission of repo rate changes.
Existing HL borrowers can switch to the external benchmark regime if they feel comfortable with lending rates changing more quickly, both up and down. However, be aware that switching to the external benchmark regime may include a one-time switchover fee from the banks.