Well, the New Year started with some good news for loan borrowers. Since the banks saw unprecedented inflows through cash deposits following the demonetisation of the old Rs. 500 and Rs. 1,000 currency, they have begun to reduce the lending rates.
Additional Reading: Why Your Home Loan EMI Is Still High
State Bank of India has slashed Home Loan rates by 50 basis points (bps) for loans up to Rs. 75 lakh.
Additional Reading: SBI Home Loans
Home Loans are available from State Bank of India at 8.65 % instead of 9.15 % for all borrowers.
Women borrowers get extra benefit
Women borrowers availing Home Loans from State Bank of India can enjoy an additional reduction of 5 basis points. Woot!
Benefits for new borrowers
Are you a new borrower? You have reason to celebrate! The 50 basis points drop in interest rates will increase the eligibility of new borrowers.
Wondering how? Let’s take an example, shall we? A borrower with an income of Rs. 1 lakh was eligible for a Home Loan of Rs. 55 lakh for a tenure of 20 years if the lender capped the EMI at 50% on the borrower’s monthly income. The same applicant can now get Rs. 58 lakh for a Home loan.
Need a loan with a longer tenure? For a loan with a tenure of 25 years, the eligibility increases to Rs. 62 lakh from Rs. 59 lakh previously.
Additional Reading: Did You Know About These Tax Benefits On Home Loans?
Got an existing loan?
Here’s how existing customers will benefit from the revised interest rates. The dip in the interest rate can significantly reduce the tenure of the loan.
When there is a change in the interest rates, the bank will not revise the EMI on a loan. They will make a revision to the payment tenure of the loan.
Additional Reading: When Is Home Loan Refinancing A Good Idea?
Have an MCLR-linked Home Loan?
A Home Loan that is linked to Marginal Cost of Funding Lending Rate (MCLR), will not be revised immediately.
There is no set time period within which banks need to revise MCLR linked loans. Some banks may revise the rates on a quarterly basis, others may revise rates after a span of 1 year.
If the rates see a dip, borrowers won’t get the benefits immediately. But wait. When the interest rates are on the upswing, this will result in a delay in resetting the interest rates.
The word going around on the grapevine is that in the current scenario, it is a better idea to choose a Home Loan from a bank that offers revision of MCLR on a quarterly basis.
Haven’t you heard that popular saying “Strike while the iron is hot”? There was never a better time to cash in on the multitude of benefits offered with a Home Loan. Get one today, why don’t you?
|New 1-Year MCLR Rate
|State Bank of India
|50 basis points
|Bank of Baroda
|55-75 basis points
|Bank of Maharashtra
|30 basis points
|Sundaram BNP Paribas Home Finance
|Indian Overseas Bank
|Punjab National Bank
|State Bank of Travancore
Bonus Read: Home Loan Handbook: All Questions Answered