4 Facts You Should Know About Home Loan Rates

A home loan is a big investment plan. The amount of which could range over lakhs of rupees. The interest component along with the other charges generally charged by the financial institutions, thus become of utmost concern. A home loan, whether for a business or personal purpose is a huge investment and one must be conscious to take minute details into consideration while doing so such as the home loan rates in India.

Four facts you should know about home loan interest rates:-

1. Negotiate:

RBI allows the citizens of India to negotiate the interest rates offered by the housing finance company in India. It even gives you the liberty to negotiate your terms with the financial institutions with regards to the fees and charges they levy. One may even do so at the middle of one’s loan tenure at the time of recession and authentic financial crisis.

The RBI allows you to fight a case against the financial institute should they not agree to negotiate or waive any percentage of interest amount or charges provided the case is genuine and authenticated by a legal authority. Home loan interest rates and charges are subject to such negotiation above other loans especially as the loan amount is comparatively huge.

2. Fixed rate clause:

Some financial institutions that offer a fixed interest rate may include a clause they generally do not mention verbally stating that the interest rate is subject to revision. They mention it in the fine print of the loan papers and thus one should clarify regarding the same much in advance and make the required changes.

Home loan interest rates and charges are subject to such changes as the repayment tenure is comparatively long and if the inflation rates hike to a great extent, then the housing finance company may hike the housing loan interest rates as well.

3. Longer tenure that changing EMI:

Financial institutions suggest that you increase your loan repayment tenure rather than changing the EMI payable, when the loan amount is subject to higher interest rate. You must ensure to keep to the same tenure and change the EMI amount payable instead. A change in home loan interest rate and change in tenure shall result in you paying a higher interest amount than what you have actually planned. Thereby it is advisable to pay higher EMI than increasing your loan tenure.

4. Difference in interest rates charged:

You may wonder why the existing clients are charged a higher interest rate than the new clients by the housing finance company in India; it is because the loan rates are calculated on the base rate and a margin. The base rate may change, but the margins by the financial institutes do not alter the margin at which the institutions have offered the interest rates to its existing customers. This practise is not general and is subjective to the lender. Thus, one must negotiate home loan rates while understanding the concept well.

Financial institutions do not mention every clause of the loan scheme to their client; rather they provide them with the fine print. We usually skip through the fine print and sign, as it is comprised of technical points. One must keep to the points stated above and agree to the terms and conditions as per one’s understanding.