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Aug 10, 2012, 02.45 PM IST
A lot of people who took teaser rate home loans in 2009 – 2010 or in the early part of 2011 have finished the period of fixed interest rates and are now paying floating rates of interest.
A lot of people who took teaser rate home loans in 2009- 2010 or in the early part of 2011 have finished the period of fixed interest rates and are now paying floating rates of interest. The typical floating rate interest that they are paying is around 11.5- 11.75% whereas new home loan consumers are able to get the rate in the range of 10.25- 10.75%. Clearly whatever their savings may have been in the teaser period, today they are paying 1%- 1.25% higher than what they would have paid if they were on floating rate today.
Of course they have an option to shift the loan from their existing lender to another lender at the lower rate of 10.25%-10.75%. The lower end of the rate band is offered by SBI for loans up to Rs. 30 lakhs and some foreign banks for large value cases. They will not have to pay any prepayment charge to their existing lender if their teaser rate loan has already converted into a floating rate loan. NHB has clarified this vide its circular and this applies to all Housing Finance companies such as HDFC , LIC Housing Finance, etc. If their teaser rate loan is from a bank such as SBI, ICICI, Axis, IDBI, Citibank, Standard Chartered, HSBC, etc. then RBI (which regulates all banks) has also clarified that there will be no pre-payment charges if the teaser rate loan is shifted to another lender after it turns into a floating rate loan.
All you customers, before you shift from your existing teaser rate lender, check with him if he is willing to shift you to a floating interest of 10.50% at the maximum. It is better to pay him a small fee (normally around 0.56% of the outstanding loan amount) as a one time fee and shift to this lower floating interest rate loan of 10.50% p.a. instead of going through the entire process of shifting your loan from one lender to another. But if the shifting fee is higher than 0.56% or the rate being offered by your existing lender is higher than 10.50%, you should shift your loan to another lender. If you have a loan in excess of Rs. 50 lakhs coupled with a good credit record, you should be able to get an interest rate of 10.25% p.a. from several foreign banks.
Whichever course of action you follow make sure you shift to a floating rate loan and at a cost not greater than 10.50% and preferably more like 10.25%.
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