How to take advantage of lower mortgage rates

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Banks are competing fiercely to win over customers by cutting interest rates, anticipating increased demand in the real estate market over the coming holiday season. Big banks such as State Bank of India (SBI), Kotak Mahindra Bank, Bank of Baroda, HDFC Bank, among others, have cut mortgage rates.

But how can you take advantage of the drop in interest rates? More importantly, is it really worth it?

Experts suggest that it is not always what it seems when it comes to loans. It is best for borrowers to contact their lenders and discuss their eligibility and other conditions attached before switching to a lower interest rate.

It is necessary to understand that more than often, lower rates would only occur if borrowers meet several other criteria as well.

For example, an employee would always get loans at lower rates than a self-employed person. Here, an individual’s CIBIL score plays a key role here, as banks judge a borrower’s ability to pay debt on this basis.
Ratan Chaudhary – Head of Home Loans at Paisabazaar.com said CNBC-TV18 that another way for an existing borrower to switch to a lower interest rate plan is to opt for a loan balance transfer.

That said, however, borrowers should also take into account the additional costs to be incurred in the balance transfer process, Chaudhary added.

“The new lender will treat the balance transfer as a new loan and, therefore, charge a processing fee, administrative fee, etc. when processing the request. Therefore, borrowers should only benefit from balance transfer if it achieves significant savings on interest charges after taking into account the fees and effort involved.. “

In addition, a borrower should not ignore the fact that there can be multiple reversals of the interest rate regime during the life of the loan, especially in the case of home loans and other expensive long-term loans.

Therefore, potential borrowers should refrain from making borrowing decisions solely on the basis of the prevailing interest rate regime, especially for those considering resorting to variable rate loans, Chaudhary warned.

“Instead, loan seekers should broaden their search for loans and go for the best deal available on their credit profiles. They can prepay loans in the future anyway to lower their interest cost. global, ”he said.

Meanwhile, the country’s largest lender, the State Bank of India (SBI) has launched a bunch of offers for potential home loan clients. On the other hand, Kotak Mahindra Bank reduced the mortgage interest rate from 0.15% to 6.50%.

PNB has reduced the interest rate on home loans above Rs 50 lakh from 0.50% to 6.60%. Bank of Baroda offers a 0.25% exemption on existing applicable rates for home loans.

The opinions and investment advice expressed by the investment experts on CNBCTV18.com are theirs and not those of the website or its management. CNBCTV18.com advises users to consult with certified experts before making any investment decisions.

(Edited by : Ajay Vaishnav)


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