The festive months are a season of joy and happiness in the minds of Indian consumers and retailers. People buy or invest in new things with the belief that starting them on an auspicious occasion will bring prosperity in their lives.
Buying a house is also a similar decision. Since most people rely on home loans to buy property, banks and non-banking finance companies (NBFCs) come up with concessional offers, processing fee waivers or special repayment plans to attract buyers.
While a lender aims to increase sales through such offers, home buyers can take advantage of the opportunity to save money on the loan. Since these offers are short-term, as a home buyer, here’s what you need to know about how to take advantage of them.
Types of Offers
Interest rate cut: Many lenders reduce their loan interest rates by 0.50 percent to 1 percent during the festive season. Interest rate reduction can help you repay your loan sooner, and you will save substantially on the repayment amount.
processing fee waived: Since the processing fee is not included in the loan amount, the lender can waive the processing fee partially or completely.
Exemption from pre-payment charges: Lenders charge prepayment charges if you want to repay your home loan before the original tenure. During the festive season, a lender may choose to waive home loan prepayment charges completely to encourage customers to close off pending dues.
EMI waived: Some banks also offer reduction in the number of equated monthly installments. However, in this situation, they do not let you repay the loan early.
How does a low interest rate help a home loan borrower?
If you take advantage of the low interest rate offers during the festive season, you can save your money to a great extent on the repayment amount. For example, suppose you have taken a home loan of Rs 50 lakh at an interest rate of 10 per cent for 20 years, your monthly EMI is Rs 46,607. You will pay Rs 61.85 lakh on interest, and the total amount you pay in 20 years will be around Rs 1.11 crore.
But if you get the same loan at an interest rate of 9 percent during the festive season, then your EMI will be Rs 44,391. You will pay Rs 54.14 lakh on interest, and the total loan repayment will be Rs 1.04 crore. Just 1 percent interest rate difference can help you save Rs 7 lakh over a period of 20 years.
How does a waiver on processing fees save you money?
Most major banks and NBFCs charge home loan processing charges between 0.50 per cent to 1 per cent plus taxes. However, there is a limit on the processing fee and it can go up to a certain limit.
The lender may also charge legal and technical verification fees from the borrower. If a lender waives these charges during the festive season, it can save you money, which you can use to repay the loan early. Before extending your home loan application, research the lending rates, processing fees, type of loan (floating or fixed) and prompt repayment charges offered by various lenders. This will help you get the best deal.
Terms and conditions of low interest rates
During the festive season, a lender may also offer to convert your loan from floating to fixed. In floating interest home loans, the lender is forced to move the interest rate upwards or downwards due to changes in the repo rate of the Reserve Bank of India.
For fixed rate home loans, the interest rate remains the same throughout the tenure, regardless of changes in the policy. Here again, proper research is advised on what types of fixed interest rates banks offer and to what extent.
Will a good credit score make you eligible for higher discounts?
A high credit score proves your creditworthiness to the lender. If your score is 700 and above, you can expect to get the best interest rate offer from the lender.
When you’re applying for a loan, missing a credit card bill deadline can lose up to 100 points to your credit score, which can increase the interest rate you’re offered by up to 2 percent. Lender.
The atmosphere of the festive season gives you a reason to leave your worries behind and make a fresh start. People absorb the change by buying new things, including houses. Lenders take advantage of the opportunity by increasing offers on home loans. A borrower can do due diligence to avail the offer and save substantially on his repayment amount.
Home loan offers from various lenders
Currently, State Bank of India is offering a concession of up to 65 basis points on regular home loans, flexipay, NRI, non-salaried, privileged and. upon homeTill 31 December 2023.
Bank of Baroda has also waived processing charges on home loans and is offering them starting at 8.40 per cent per annum till December 31, 2023.
As part of the ‘Festive Home Loan Offer’, Bajaj Housing Finance is also offering a low home loan interest rate of 8.45 per cent per annum for select salaried applicants. As part of this offer, potential borrowers taking home loan advances benefit from EMIs starting at only Rs 729/lakh. This offer is valid only for loans disbursed between September 13 and November 12, 2023.