Isn’t it true that the majority of borrowers think of comparing interest rates as their first and most important step when considering getting an Indiabulls home loan or switching lenders? After all, the interest rate serves as the primary stabilizing factor for the total cost of your mortgage. But that is the issue.
There are other factors besides interest rates to keep in mind while comparing different house loan providers or even when transferring home loan. Are you aware of which ones? As you compare interest rates from mortgage providers for a new mortgage or a balance transfer, allow me to go through some less well-known elements you should take into account.
When loans are regularly paid back
Regarding how frequently Indiabulls home loan interest rates will change under the repo rate or other external benchmark system, which was implemented a few years ago, the RBI has provided thorough information. Banks tend to reset their rates about once in every quarter. Because the interest rate on your house loan is likely not going to change right immediately following any announcement, at least not until the next reset date comes around, your EMIs won’t be affected right away thanks to the pre-set loan reset dates for the previous Axis Bank MCLR regime. This helps to reduce interest rates or, at the very least, prevents them from climbing rapidly.
Simply put, you will have extra time to determine before the loan’s subsequent reset date if the reset period should be extended. Banks are permitted to issue loans with reset dates associated with either the date of the loan’s initial disbursement or the date of the Axis Bank MCLR Rate review, even if doing so is against RBI regulations. To ensure that the borrower is aware of the loan reset date—which is more crucial—this information must also be included in the Indiabulls home loan agreement.
the method now used to compare lenders
Commercial banks in India can ask the RBI, the nation’s central bank, for loans if they are having problems finding short-term borrowing at the repo rate. As a home loan borrower, you should thus first understand how lenders establish their loan setting rates. By doing this, you’ll be able to draw the best conclusions possible and avoid making decisions based solely on incomplete or biased information.
Remember that in addition to the repo rate, a variety of other factors also have an impact on the MCLR Rate. Banks also factor in operating costs, cost of capital, and tenor premium when establishing their lending rates. Along with the repo rate, these three factors also have an effect on the interest rate for mortgage loans.
When providing internal loans, a bank is not allowed to reduce the Axis Bank MCLR, which serves as a benchmark interest rate. Under the MCLR Rate-based system as opposed to the base rate system, changes in the RBI’s policy rates are more advantageous to borrowers.
Keep in mind that, in compliance with the RBI’s directive, all banks are required to assess and report their MCLR on a monthly basis for all MCLR tenures, such as three months, one year, etc. Banks may impose a markup (spread) above their MCLR depending on the size of the Indiabulls home loan and the customer’s credit profile, which includes the customer’s credit score and repayment capacity.
As a result, the MCLR Rate and any applicable markup would be used to calculate the effective rate of interest, or the rate the borrower would actually be forced to pay for the loan. Existing homeowners should be aware that even if interest rates are rising, their EMIs won’t change immediately away; rather, they won’t be impacted until the loan’s reset date.
Balance transfer decisions are done quickly.
In a low-interest-rate environment, like the one we presently live in, home loans perform well. After all, who wouldn’t want to benefit from low mortgage rates and realize their dream of home ownership? It is essential to take into account interest rate estimates as well as the past, present, and future state of the economy while deciding whether to act.
If the RBI changes the repo rate and there’s a chance that the lender’s rates could change as well, you shouldn’t opt to move your money out of the current location right once. Remember that the Axis Bank MCLR is influenced by more than just the repo rate. The lender’s MCLR does not always rise as a result of a rise in the repo rate.
Even though the MCLR for home loans has increased and your current home loan’s interest rate is set to climb as the Indiabulls home loan reset date approaches, you should take into account the “total savings in interest cost” before accepting the lender’s offer of a lower rate.
Before you change your equilibrium, be mindful of this.
Before choosing a loan, buyers can examine the rates given by other organizations to see if there are any potential interest savings. When comparing it to a mortgage, they should consider many aspects besides only the lender’s cheap interest rate.
Before filing an application for a balance transfer, take into account any applicable fees and charges. The new lender will normally treat your request for a balance transfer as though it were a completely new mortgage application, thus they may apply fees and charges such loan processing fees, administrative fees, etc.
Also Check: Best Home Loan Interest Rates
In addition to the overall interest savings, take into account the following benefits of transferring your balance:
A new lender offers better loan features: Given that a balance transfer request may result in superior loan features in addition to a cheaper home loan rate, why not take advantage of this benefit? And that’s not all.
If you want to reduce your EMI payment, you can ask the new bank or HFC to extend the loan payback duration.
Change from the base rate regime to the MCLR Rate regime: If you are currently servicing mortgages under the base rate regime—which is extremely unlikely but could happen—you should take immediate action and choose a balance transfer to switch to the MCLR Rate or an externally benchmarked rate, like a mortgage based on the repo rate. In terms of transmission and rate-setting transparency, repo rate regimes outperform base rate regimes, while MCLR linked regimes barely do better.
