Were you surprised to find that RBI lowered the key rates, your home loan EMI amount did not come down? The banks did respond to the rate cut, but the response was insignificant. Does it mean no respite for you? No, it does not! The first thing you have to know is how to calculate home loan EMI. There are many easy to use online calculators that give you results in an instant.
Read on to find out even if banks have not lowered interest rates; you can still lower your EMIs!
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Reasons for Derailment of Rate Cuts
You need to understand why banks have not reduced the home loan interest rate significantly. Here are some of the reasons for that:
No Direct Correlation
The repo rates are applicable for banks only when they require to borrow from the RBI during a liquidity crisis. So, under normal circumstances, bank rates are not affected by any changes in the repo rate.
CASA Rates
When it comes to deposits, the current accounts and savings accounts which are popularly known as CASA form the major portion comprising 30 to 40% have seen no changes in interest rates.
Small Savings Schemes
Post office savings schemes, better known as small savings schemes, are competitors when it comes to banks. The reduction in the benchmark rates by the RBI has not seen any reduction in rates offered by small savings schemes.
Loan Deposit Mismatch
Though you will find numerous floating rate loans but not many floating rate deposits; they are mostly fixed in nature. It may cause a problem for banks as the fixed deposit rates can only be lowered after the maturity of the deposit.
Interest Rate on a Home Loan
A home loan interest rate will vary from bank to bank. For your information, the average rate is 8.5%. It is linked to MCLR or marginal cost of funds-based lending rate.
Measures to Lower Your EMIs
Even with banks not lowering their rates, here is how your home loan EMI can be reduced:
- Discuss options with another bank and go back to your lender
- Negotiate with your relationship manager for a better deal.
- You should shift only if the difference between your bank and others is at least 1%. Otherwise, you are not lowering your EMis
- If your lending rates are based on base rate or prime lending rate regime.
- Take into account all the costs you will incur if you shift.
Keep in mind that the aim is to lower your EMI amount, and hence, you should use the home loan EMI calculator to judge if the shift is the right move for you. If the tenure is less than a year, financial analysts strongly advise negotiating terms with your current lender.
Now that you know how to lower your EMI and where to go, what are you waiting for? Get the loan for your dream home today!
Keep in mind that the aim is to lower your EMI amount, and hence, you should use the home loan EMI calculator to judge if the shift is the right move for you. If the tenure is less than a year, financial analysts strongly advise negotiating terms with your current lender.
Now that you know how to lower your EMI and where to get the best deals on home loans from, what are you waiting for? Get the loan for your dream home today!