Outlook Money
The spike in home loan rates, now surpassing 9 per cent per annum, has cast a shadow over the financial landscape for many borrowers. Some major banks have increased their home loan rates. With increasing monthly installments, a sense of urgency to find relief is understandable.
The spread over the benchmark rate can significantly affect the rate of interest on home loans. If the credit situation has improved since taking loan, one can negotiate for a lower spread with lender, thereby reducing the rate of interest.
Refinancing is a powerful tool if one is burdened with interest rates considerably higher than the best offerings available in the market.
If loan remains tethered to an outdated benchmark, one can be overpaying. Transitioning to a repo-linked loan could not only streamline the mortgage with current economic realities, but also potentially lower interest burden.
Borrowers who have some amount of financial flexibility can resort to prepaying their home loan to significantly reduce their total interest cost, while simultaneously shortening the loan tenure.
Compiled by Syed Muskan