Make the Most of Lower Home Loan Rates
Jul 23, 2019 Home Loan
The homebuyers across the country have been joyous with the home loan interest rates being cut down. The banking regulator of the country, Reserve Bank of India has reduced their repo rates and has urged the banks to pass the benefits to the home loan borrowers. This is the third time in a row that the RBI has reduced their home loan rates which now stand at 5.75 percent.
The banks have started offering reduced home loan interest rates. The biggest bank of the country, the State Bank of India has the home loan interest rate at 8.40 percent. Punjab National Bank and Central Bank of India are offering the interest rates at 8.40 percent and 8.50 percent respectively. Private banks such as ICICI Bank is offering the interest rate at 8.65 percent.
Homebuyers who have been waiting for the price correction to get into the real estate and invest in property are finding it the right time take the plunge. The tax deduction on the interest component for the property worth Rs 45 lacs have been increased to Rs 3.5 lacs which has come as a major relief for the investors. However, the provisions provided are good; one must take enough caution to make sure that the investment only gives fruitful result in the future.
1. The impact of home loan rates:
As the bank is providing a reduction in the interest rate, one must keep in mind that the rates will go higher in future. When the banks charge the borrowers less money, the borrower is left with the extra amount which he then invests in the market or other investment areas. This causes a liquidity crunch within the banks. To make sure the banks have enough money, they increase the rates again causing inflation.
2. Banks getting cautious lending money:
As the lending rates are low, the banks get too many applications for the home loan. To deal with it, the banks take extra caution lending the home loan. They make sure that your credit score is good enough for you to take the home loan. If your credit score is poor then there is a slim chance of your getting your home loan approved.
3. Choose for a fixed rate of interest:
The chances of home loan interest rate reducing further are slim. Hence choosing for a fixed rate of interest will only help the borrower. If you choose the floating rate of interest, your interest rate will increase when the banks increase their interest rates.
4. Prepay the home loan:
Use your savings to prepay the home loan. Taking a hefty sum from the banks seems like a good option but the burden of the home loan can be tiresome. It is better to prepay some of your home loan with your savings.
5. Alternative to tax saving:
Taking a home loan comes with many tax benefits as well. However, one should not entirely be dependent on tax saving but should also invest in other places to make the most of the investment and savings.
The banks have started offering reduced home loan interest rates. The biggest bank of the country, the State Bank of India has the home loan interest rate at 8.40 percent. Punjab National Bank and Central Bank of India are offering the interest rates at 8.40 percent and 8.50 percent respectively. Private banks such as ICICI Bank is offering the interest rate at 8.65 percent.
Homebuyers who have been waiting for the price correction to get into the real estate and invest in property are finding it the right time take the plunge. The tax deduction on the interest component for the property worth Rs 45 lacs have been increased to Rs 3.5 lacs which has come as a major relief for the investors. However, the provisions provided are good; one must take enough caution to make sure that the investment only gives fruitful result in the future.
1. The impact of home loan rates:
As the bank is providing a reduction in the interest rate, one must keep in mind that the rates will go higher in future. When the banks charge the borrowers less money, the borrower is left with the extra amount which he then invests in the market or other investment areas. This causes a liquidity crunch within the banks. To make sure the banks have enough money, they increase the rates again causing inflation.
2. Banks getting cautious lending money:
As the lending rates are low, the banks get too many applications for the home loan. To deal with it, the banks take extra caution lending the home loan. They make sure that your credit score is good enough for you to take the home loan. If your credit score is poor then there is a slim chance of your getting your home loan approved.
3. Choose for a fixed rate of interest:
The chances of home loan interest rate reducing further are slim. Hence choosing for a fixed rate of interest will only help the borrower. If you choose the floating rate of interest, your interest rate will increase when the banks increase their interest rates.
4. Prepay the home loan:
Use your savings to prepay the home loan. Taking a hefty sum from the banks seems like a good option but the burden of the home loan can be tiresome. It is better to prepay some of your home loan with your savings.
5. Alternative to tax saving:
Taking a home loan comes with many tax benefits as well. However, one should not entirely be dependent on tax saving but should also invest in other places to make the most of the investment and savings.
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