It’s time to look at the loans that you are already paying, if you are struggling with EMI on home loans. Most of the banks are now offering reduction in base rates and home loan rates. Getting better deals from the banks may possibly save some cash.
Consider that you have Rs.40 lakh as remaining loan amount and 15 years of outstanding tenure. The present floating rate may be 11.5%. The new rate of interest will be 11%, if the base rate is minimized to 50 basis points. Thus, you can save an amount of Rs.2,27,520 in the remaining period of the loan repayment.
It is known that the banks will not make any changes in EMI and decrease the loan repayment period. Therefore, the tenure period will be decreased to a year. Though the base rates are reduced, your EMI amount will be constant all the year. In a long term, you can save little money from the interest. The repayment period can be reduced, if you have the capability to pay high EMI amount. It is better that you can inform the bank, if you want to pay low EMI. You should be in a position to start some extra paperwork in order to make alterations in ECS order etc. Some banks may ask for additional fee for this mandate.
More recently, you can also decrease the interest rate of home loans irrespective of the changes in the base rate. When compared to other bankers, SBI provides the home loan with best interest at 10.15%. If you are a new borrower, then you are eligible to get the bank loan with such reduction rates. As the prepayment fees are cut for the floating rate loans, it is possible for you to shift to new banker that provides lower interest rates. The result can be made after the analysis of cost benefit process.
Additional expenses like processing fee should be taken into account, if you are shifting to different banks. Majority of the banks charge 2% of pre-closure penalty when the loss for pre-payment is done with floating rate loans. If you are making conversion within the bank, then the charges will vary from 0.5% to 2% on the remaining amount of loan.