Due to the Coronavirus outbreak, Indian banks have agreed to cut home loan interest rates to an all-time low to boost consumer confidence to invest in real estate.
Why Should You Go for a Home Loan Now?
The repo rate is the lowest it has been over the last two decades and therefore, it is simply advantageous for people to borrow from banks right now as a low repo rate has been translating into low-interest rates.
The current low home loan interest rates, especially among banks that have benchmarked their loans to the RBI’s repo rate, provide an opportunity for borrowers servicing home loans under the MCLR or base lending rate regimes to refinance their loans to repo-linked loans and save on interest.
Thus, if you’ve been thinking about buying a house and have the requisite down payment cash, a credit score of at least 750, and appropriate repayment capacity, now is the perfect time to buy a home with the help of a home loan.
Here’s Why Should You Take a Home Loan Now
You Will Be Able to Save a Significant Amount of Money
Choosing a lender who is offering you a low home loan interest rate will help you save money on interest costs. Even a 1% difference in interest rates can result in savings of a few lakh rupees when taking out a home loan or having it refinanced from another lender at a lower rate.
Your EMI Value Will Be on the Lower Side
A lower interest rate equals cheaper EMIs and reduced interest payment throughout the loan. The EMI, or equated monthly instalments, is computed using three important parameters: the loan amount, the interest rate, and the loan term. Any reduction in the interest rate or loan amount leads to a direct reduction in EMIs. On the other hand, reduced loan tenor leads to higher EMIs.
You Will Certainly Benefit in the Long Run
In the long run, the low-interest-rate environment is beneficial to the borrower. In the early years of a house loan, interest makes up a larger amount of the EMI. As a result, the current low-interest-rate environment will keep your interest costs low, and even if rates rise in the future, your interest burden will be significantly reduced.
How Can Borrowers Who Already Have a Home Loan Take Advantage of the Current Low-Interest Rates?
Even though many banks and housing finance businesses offer house loans, the interest rates they charge are vastly different. Thus, you may find yourself paying a higher EMI just because your loan is not from a competitive lender. If you haven’t compared your interest rates, now is the time to do so and see if your lender is charging you a higher rate. Since most house loans are on a flexible rate basis, there are no penalties for switching.
You can contact your bank to get your loan converted to the new regime or refinance the loan with another lender after carefully weighing the refinancing expenses and possible interest savings. This facility is known as the Home loan balance transfer.
Criteria for Getting a Home Loan
- Current Age and Remaining Working Years: The applicant’s age is a significant factor in determining home loan eligibility. In most cases, the maximum loan period is 30 years.
- Self-employed individuals must be between the ages of 21 and 65.
- Self-employed individuals must have Rs.2 Lakh per annum as minimum business income.
- 30 years is the maximum loan term.
- Financial Situation: The applicant(s)’ current and future income have a substantial impact on the loan amount.
- Credit History and Scores in the Past and Present: A good payment history is regarded as a plus.
- Other Financial Responsibilities: Existing obligations
*These are just a few of the fundamental criteria; the requirements may change from bank to bank.
Now is the best time to opt for a home loan as the interest rates are at the lowest. Furthermore, most lenders provide additional 0.5 % discounts to female borrowers who stand to benefit if the home loan is in their name. So if you’re a woman wanting to buy a home for yourself and your family, now is the perfect time.