Will Interest Rate Changes Impact Home Loan EMIs?
Accumulating the funds to purchase a home can take quite a few years and you may still not find the collected corpus to be enough with inflated real estate prices.
However, by availing a home loan, you can commit to a purchase basis current real estate prices.
You can then repay your home loan in the form of EMIs and live in the comfort of your own home instead of having to pay rent and maintenance costs for a flat with an expiring lease.
While a home loan offers these benefits, it also comes attached with a rate of interest that forms part of your EMIs during repayment.
These interest rates are set considering different internal and external factors and may also vary across lenders.
However, the slightest difference in the interest rate can tilt the scales in your favor or against it.
Read on to know how big of an impact an interest rate has on your home loan EMIs.
The Impact of Interest Rates on Your EMI
Any loan’s interest rate defines its affordability. If the interest rate on your home loans is too high, EMIs are high, repayment can become difficult, and there can be chances of a default leading to accumulated debt.
As interest is charged on the amount you borrow, it can be even more expensive if you are trying to buy a home in metro cities with a number of amenities.
The true impact of an interest rate can be spotted when you use the housing loan EMI calculator.
For instance, log on to the EMI calculator and enter a loan amount of Rs.60 lakh for a tenor of 20 years at a home loan interest rate of 10%.
Based on these values, you will see your EMIs amounting to Rs.57,901. This is the amount you will need to pay each month.
However, just increase the home loan interest rate by 0.9%, making it a rate of 10.9% and see how your EMI amount shoots up.
At this interest rate for the same tenor and amount, your EMI will amount to Rs.61,523.
This means, with an addition of just 0.9% to your home loan interest rate you pay Rs.3,622 more each month.
By virtue of this calculation you can gauge the consequence of an interest increase or decrease.
Thus, the lower the interest rate the more affordable your home loan will be.
Why Now May Be the Best Time to Apply for a Home Loan?
With the repo rates decreasing twice in this calendar year, standing at 6% after a deduction of 50 bps, commercial banks can now borrow from the RBI at a more affordable rate.
As lenders pass these benefits down to their own customers, the interest rates on loans are likely to drop.
Lower interest rates make for lower EMIs, which certainly makes the credit more affordable.
Further, lenders offer nominal interest rates on home loans of up to Rs.5 crore. You can also enjoy a Flexi Hybrid facility that allows you to borrow according to your needs and pay interest only on the used amount and not the whole sanction.
So, while you remember to check home loans eligibility, go a step further and use the housing loan EMI calculator to ensure you are opting for the best home loan interest rates before you apply for a home loan.
Category: Debt
