New lending rate calculation makes home loan cheaper

From April 1^st onwards, home loans are going to be cheaper. As part of the new rules announced by RBI, banks across the country will have to calculate their lending rate as per the marginal cost of funds. The country’s biggest lender State Bank of India has revised its home loan rate to 9.4%. This will see EMIs of customers falling down by Rs.300 for those availing Rs.50 lakh loan for 15 year.

Under the new formula, the banks will have to regularly calculate their cost of funds. If there is any change, the bank has to pass on the same to their borrowers by revising their existing benchmark.

Following suit, private lender ICICI Bank has also announced a one-year MCLR of 9.2% without announcing the mark-up on which they will provide the loans.  The interest rates on deposits above Rs.1 crore at ICICI Bank have been reduced by 55 basis points

As against base rate of 9.3%, HDFC Bank has also announced a one-year MCLR of 9.2%. However for HDFC Bank, since home loans are disbursed by its parents company HDFC, the cost of loans will be determined by prime lending rate (PLR).

Talking about this revised formula, Rajnish Kumar, MD, SBI says “SBI is the market leader in home loans with a portfolio of over Rs 1.9 lakh crore. This year, we have seen a year-on-year growth of 18% in home loans and we expect this growth to continue.” SBI is also revising the rates for other loans such as personal and auto making it more competitive. The existing borrowers can also switch to the new rates by paying a nominal fee.

Previously, the base rate was calculated as per average cost of funds. However, under MCLR formula, the rates will be revised every month as cost of new deposit changes. Although once a loan is availed, the rate of interest will be reset only after a year.

New borrowers will have a different situation. A person, if he avails loans on April 1^st, 2016 he will get loans at prevailing MCLR but for another borrower who takes a loan next month, the rates can be lower if the cost of fund declines. If the cost of funds changes every month, the bank will have 12 different sets of MCLR.

RBI, in its efforts to pass on the benefits of rate cuts to customers have asked all banks prepare a range of lending rates with varying maturities.

Home Loans for Women

Are you a working woman desirous of owning your dream home? Then you have reasons enough to cheer! In India, women are privileged in terms of the schemes and concessions given to them as borrowers of a loan. Especially in home loans, women enjoy greater benefits as compared to their male counterparts.

The financial sector in India as a whole provides special consideration to women seeking home loans as they are generally perceived to be more sincere in paying their dues and less likely to default. Women are offered home loans at cheaper rate of interest by several banks.

One of the most decisive factors while buying a home loan is the rate of interest. Even a small variation makes a huge impact on the EMI (Equated Monthly Installment) that you pay to the lender. Since a home loan is a large chunk of money, allowances on the interest rate helps one save big in the complete term of the loan period. However, it is important here to know that the woman can enjoy benefits of lower rate of interest only if she becomes the primary applicant or the co-applicant in the borrowing. Again, no bank or financial institution will lend to a woman or a man if the credit track record and documentation is not satisfactory.

Some major banks that offer preferential rate of interest to woman borrowers are State Bank of India and ICICI Bank. While SBI offers Her Ghar loan at 9.85 per cent, HDFC has Woman Power home loan at the same interest rate & lends at 9.90 percent for purchase of a plot. The Terms and conditions are similar for both the banks that require women to be the sole or joint owner and first applicant of the property. Any woman who is a resident of India or non-resident Indian can apply for this loan.

ICICI Bank has two options for woman home loan seekers. First, Floating interest rate, 9.85 percent for loans up to Rs75 lakh. And second, for loans up to Rs30 lakh, fixed rate of 9.85 per cent is charged for 10 years and from the 11th year I-Base + 0.10 per cent. For loans between Rs30 lakh and Rs75 lakh, fixed rate of 9.95 per cent for 10 years and I-Base + 0.20 per cent from 11th year.

Although these schemes and offers are not widely publicized by banks or NBFCs, they are usually enthusiastic about lending to women borrowers. In addition, some states in India also provide some relief to woman owners of properties in stamp duty and registration fees.