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The repo rate has been raised by 140 basis points between May and August. When lending rates rise, banks typically lengthen loan terms. If there is no financial hardship, you might prefer to lengthen the loan’s term rather than increase the EMI amount. You can control the interest expense by limiting the tenure, which will result in significant savings. After increasing the repo rate of RBI, one after the other, from banks to housing finance companies are increasing the interest rates. After SBI, now HDFC has also increased the home loan interest rates.
In the same example, if interest rate remains at 7.55 per cent and the prepayment tenure increases by 3 years, the interest burden will be hiked by Rs 5.39 lakh. The Reserve Bank of India has recently increased the repo rate by 50 basis points to tame rising inflation in the country. With the latest hike, the repo rate is back to the pre-pandemic level of 5.40 per cent.
Limit your EMI
Leading private sector lender HDFC has hiked the retail prime lending rate by 0.50% with effect from October 1, 2022. The increased interest rate will reflect in the monthly EMI of customers from the next reset date. Regular prepayment will significantly lower the outstanding loan amount. The most popular duration for loan repayment that borrowers opt for is 20 years. However, if one wants to lower EMIs, she can extend the tenure of loans. The downside of availing this is that she would have to pay a bigger interest amount.
Since HDFC home loan repayment is a long-term commitment, we come across several situations where we might want to change Home Loan EMIs. Remember that, that there are additional costs involved in the process such as processing fee or penalty to transfer the loan balance from one lender to another. So, borrowers need to calculate the advantages and disadvantages and savings before opting for balance transfer. “The increase in repo rates by the RBI will in turn increase the interest rates for different products like home loans, etc.
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For instance, you have taken a Rs 30 lakh home loan at 7.55 percent interest per annum, with a tenure of 25 years. After the latest rate hike by the Reserve Bank of India, the revised interest will be 8.05 per cent. At the new rate, you have to shell out Rs 23,254 for EMI, considering So your EMI will jump by Rs 987 per month.
Read today’s latest news, live news updates, most reliable Hindi news website News18 Hindi. Make sure you have an emergency fund so that your EMI payments are not impacted in case you face such a situation. Taking a home loan during your Twenties or Thirties gives you sufficient time to pay off your loan before retirement. Is there any limit to which I can increase the monthly EMI. From what I know, there’s no process to increase EMI in HDFC online. You can refer to the above answer from Parvinder to know about the overall procedure.
What is Home Loan EMI?
Let’s say you have taken a loan of Rs. 25 lakh for a tenure of 20 years at 8.6% interest. Being a homeowner is one of the most fulfilling experiences for most people. Since this requires a large capital outlay, it makes sense to take a home loan to meet the purchase value of the home. This not only does away with having to wait for years to accumulate the necessary amount to purchase your home, a home loan also provides attractive tax benefits. Go through the list of documents required and keep them ready before starting your home loan application process.
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Refinance your Loan for a Lower Interest Rate
Housing Development Finance Corporation Limited has changed its Retail Prime Lending Rate on home loans. With the increase in the interest rate on the home loan, the monthly EMI of the loan will also increase. HDFC’s interest rate will now start from 8.65 per cent for those with a credit score of 800 and above. You have the option of transferring your home loan to a lender with lower interest rates. It is important to research and compare interest rates among various lenders before you decide to refinance your loan. There is also a nominal conversion fee to be paid to your existing bank or lender.
An online EMI calculator is easily accessible online from anywhere. You can try various combinations of the input variable as many times as required to arrive at the right home loan amount, EMIs, and tenure best suited to your needs. At present, the EMI for a home loan of Rs 20 lakh for 20 years at 8.65 per cent interest rate was Rs 17,547. But the new home loan rate will be 9 per cent, after which an EMI of Rs 17,995 will have to be paid. Most of us think of a housing finance company when we want a home loan – and it’s only logical to...
EMIs are a significant part of our life till the housing loan is closed. We took an HDFC home loan last year and now I think about paying EMIs while eating, drinking, and sleeping. I mean to say, every important decision of family members revolve around this income “guzzler”.
Since bank is going to loose out on overall interest, they may suggest you to invest the additional amount in some other instruments and continue with regular EMI . I suggest if you are not looking at Tax benefits and planning to close your loan early, then make lumpsum payments every quarter or so. I want to increase the EMI to 1 lakh per month for an year. Please suggest if it is a wise option or shall i wait for an year or few months to deposit lump sum amount. However, I recommend you opt for the EMI amount that you can afford. Though a shorter loan tenure will lead to a lower absolute interest payout, it’ll also increase your EMI burden.
However, the high interest rates can add up to almost double the amount of your loan, even if your EMIs seem low. A smart financial strategy would involve a plan to recover the interest paid on the home loan EMI so that you have more savings at the end of the day. If paying more EMI is not a problem, one can be prudent and increase her monthly repayment installment. This would help her repay the loan faster, which means she would have to pay lesser interest. The EMI calculator helps you arrive at the right home loan amount that best fits your monthly budget, by helping you decide the loan EMI and tenure most suitable to your financial position.
Now that you are convinced about the benefits of taking a home loan, what about home loan repayment, you may ask. There are a number of home loan repayment options that you could consider. However, before we discuss this, let’s understand how home loans are repaid. Your home loan is repaid through equated monthly instalments, or EMIs. This is a fixed amount you need to pay your lender each month till you complete repaying your home loan.
Furthermore, according to HDFC, only customers with credit scores of 800 or higher will be eligible to take advantage of the new rate of 8.65 per cent. According to the statement, this rate is the lowest in the sector. As a result of the most recent RPLR increase, the minimum rate will be 8.65 per cent starting December 20.
To mitigate the impact of rising interest rates, the existing home loan borrowers can either their equated monthly instalments or their loan tenures. “Note that opting for the tenure increase option would result in higher interest cost than the EMI increase option," Kukreja added. The monthly EMIs that will be debited from your bank account also increases as the interest rate on your home loan increases. Note that the interest rates are subject to the credit/ risk profile as assessed by HDFC based on certain parameters such as credit scores, segments, repayment of other loans, etc.
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