Buyers of home loans have been hardest hit by the RBI’s back-to-back rate increases to control India’s increasing inflation. For the past two years, both new and seasoned borrowers have had to pay higher interest rates on their mortgages. The cost of high-cost house loans has been transferred to the borrowers, either through extension or higher interest rates.
The RBI has raised the benchmark repo rate by a total of 250 basis points six times since May 2022 in an effort to reduce inflation. Higher home loan rates are another effect of the change. Some people’s home loan terms have even been extended until they reach retirement age. The following options are available to borrowers, however, in order to lower loan interest rates.
Choose a different bank
Banks are lowering their loan rates to entice clients in the new fiscal year, despite the fact that house loan rates have increased. Borrowers may consider moving their home loans to other banks by considering their loan tenure, the loan rates offered by other banks, the processing charge, and forecasts of an impending rate increase.
The money loan borrowers pay to the new lending bank you are transferring to is known as the processing charge. It typically amounts to 0.5% of the loan amount. Despite rising interest rates, Bank of Maharashtra and Bank of Baroda reduced the rates on their home loans. The Bank of Baroda has also eliminated the costs for processing loans. One of the lowest in the industry, the Bank of Maharashtra last week reduced its home loan interest rates by 20 basis points to 8.40%. Similar to these two banks, a number of other banks have lowered their lending rates in an effort to entice additional borrowers to use their services.
Converse with the current lender
Borrowers might also attempt to bargain with their current lenders to lower loan rates if there are no appealing options available from other lenders. Home loan borrowers must preserve their higher CIBIL score in this situation in order to negotiate favourably with the lender.
Convert loans
In addition to negotiating with banks, debtors can look for any conversion schemes on their bank’s website. By paying a fixed sum of money known as a conversion fee, current borrowers can lower the interest rate on their home loans with the current bank under a conversion programme. Typically, the conversion fee is 0.25 to 5% of the outstanding loan. To receive the best house loan rate, it is preferable to bargain with a banker even during loan conversion before paying the conversion fee.
Refinancing a Loan
Another option to avoid the effects of a drastic rate increase on your mortgage is to choose loan refinancing. By using this technique, debtors can switch out their current loan for one with better terms, such as lower interest rates and a shorter period. Borrowers are required to pay a processing charge of 0.5% in this instance as well.
An existing customer of a bank with a house loan takes out a new loan to pay off the old one during refinancing. For customers who want to refinance their debts, banks frequently are willing to offer better terms.
