The recent reduction in interest rates, resulting from several repo rate cuts, coupled with festive season offers have made home loans cheaper and more accessible.
Further, for the greater part of the last decade home prices in India have remained stable and, in July -September 2020, as per Knight Frank India, housing prices fell by 2-7% YoY in 6 major Indian cities including Delhi-NCR, Chennai, Pune, Mumbai, Ahmedabad, and Kolkata. These trends paint a pretty picture of the housing landscape, financially speaking, and there may be no time like the present to buy your dream home affordably.
Bajaj Housing Finance Limited (BHFL), a wholly owned subsidiary of Bajaj Finance Limited too has announced a reduction in its Home Loan acquisition rate. The new home loan interest rates start at 6.90%*, making 2020’s last quarter a good time to secure the best home loan interest rates in the market. Rate cuts such as this help you borrow more cost-effectively, as the housing loan interest rate is among the chief loan components that decide your monthly and total interest outgo.
Here are some ways in which the drop in the home loan interest rate can benefit you.
1. Service smaller EMIs and pay less home loan interest
The new housing interest rates available in the market are among the lowest home loan interest rates in India that homebuyers can wish to get. Further, the decrease in the housing loan interest rate impacts the EMI and the net interest outgo directly, making home loans more budget-friendly and less of a long-term burden.
Any change made to the current home loan interest rates affects the cost of the loan and to know your EMI and total interest outgo you can use a home loan interest calculator. Below is a table illustrating EMI and net interest calculations, and from it you can see how marginal changes to the home loan interest rate have large long-term consequences.
| Loan amount | Tenor | Interest rate | EMI | Total interest |
| Rs.1,00,00,000 | 30 years | 6.90% | 65,860 | 1,37,09,606 |
| Rs.1,00,00,000 | 30 years | 7.00% | 66,530 | 1,39,50,889 |
| Rs.1,00,00,000 | 30 years | 7.10% | 67,203 | 1,41,93,150 |
2. Pick a shorter repayment duration as per your convenience
With low-interest home loans, you can also afford to tweak the principal and tenure to arrive at an EMI structure that favours your debt-to-income ratio. Normally, shorter tenures are preferred as they reduce your total interest outgo, but these leave you with large EMIs. However, now, with the reduction in the home loan interest rate you can service your loan over a shorter tenure without worrying too much about inflated EMIs.
With the home loan interest rates today being lower, you can consider solutions like the Bajaj Housing Finance Limited Home Loan, which offers funding up to Rs.3.5 crore for a flexible tenor of up to 30 years and pick the tenor and loan amount as per your convenience.
3. Make prepayments to save more on total interest
With a new home loan or a floating rate home loan, you benefit greatly when the interest rate drops. In fact, with less EMI outgo, you may find yourself with surplus money, which you can funnel towards, say, an annual part-prepayment. The advantage of clearing a portion of the principal early is that each part-prepayment has a ripple effect, the result of which is huge interest savings in the long run. Moreover, there are no prepayment charges on floating interest rate home loans taken by individual borrowers.
4. Take a top-up loan or carry out a balance transfer
Lenders like Bajaj Housing Finance Limited extend Top-up Loans at rates marginally higher than the present home loan interest rates. With low home loan rates across the board you can apply for funding over and above your home loan to meet personal, housing, or business goals on cost-effective terms.
Likewise, if you are seeking to lower your outgo with the new home loan interest rates, you can consider a home loan balance transfer after conducting a cost-benefit analysis.
In addition to the reduction in the home loan interest rate, remember that with Bajaj Housing Finance Limited, you can also claim PMAY interest subsidies on fresh Home Loans, as per your eligibility and, as a borrower, you can reduce your tax liability by claiming an annual home loan interest tax benefit.
With lower EMIs and the possibility of repaying your home loan faster, you should consider taking a housing loan for your dream home now.
Bajaj Housing Finance Limited offers interest rates starting at 6.90%* and to get a Home Loan you can apply online today!
*T&C apply
This is a partnered post.
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