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Posted On :- 01/04/2008
 
Question Asked :-  
 
Recently i had read an article that RBI might intervene in to the fact that the interest rate for existing home loan customers is not reduced and its only applicable for new customers. Currently my interest rate is 11.5% and the competitor bank might offer me 9.5%. Can you please suggest if i should wait for RBI to take actions against my current bank ? or should i go for the home loan transfer ? and also even if after RBI intervention if my bank reduces the interest rate, will it be that less?  
 
Answer :-  
 
Since you have taken a home loan at a floating rate of interest, it is anyways subject to change. You should explore the option of changing your home loan lender as you should be able to get an interest rate of around 10% to 10.50% if you have maintained a good track record of repayment on the loan. If you have surplus funds and you can also pre-pay a part of the home loan as it will reduce the monthly EMI burden. Quite a few banks do not charge pre-payment penalty if the loan is prepaid partially. The definition of what constitutes partial pre-payment varies from bank to bank. This will ensure savings in pre-payment penalty and at the same time help you to save on high interest costs on a substantial portion of the loan. However, before you decide to pre-pay a home loan, it is in your interest to first clear off all unsecured dues like credit card dues and personal loans. Also, make sure that you have some money set aside to meet emergency expenses. Tax calculation can change the view on pre-payment. You can also check the 'Should I switch my loan' calculator on Apnaloan.com to check whether it makes sense to change the lender: http://www.apnaloan.com/loan-advice-india/switch-my-loan.html  
 

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