When home loan rates fall, most people get it right that it benefits them. If you are an existing borrower, then you can ask your lender to reduce your rates or transfer your loan to another lender. If you are a new borrower, then you get directly benefited by the fall in rates.
But what exactly is the impact of the falling rates? And we are not just talking about falling EMIs here.
Let’s do some basic mathematics to understand what are the real benefits that very few people talk about.
Suppose you wanted to take Rs 50 lac home loan for 20 years. Before, the rate being offered was 10.75%. But post demonetization and further rate cuts by RBI, the current loan rate is about 8.9%.
Let’s see how this change impacts new borrowers:
For Home Loan at 10.75%
EMI – Rs 50,761
Interest Paid – Rs 71 lacs
For Home Loan at 8.9%
EMI – Rs 44,665
Interest Paid – Rs 57 lacs
We agree with you that EMIs have fallen. By almost six thousand! But focus on the interest you are paying. There is a whopping difference of about Rs 14 lacs! If you compare this with actual loan amount, it translates into 28% savings on just the interest paid! That is massive.
This is the real benefit of fall in loan rates. You can save several lacs. Ofcourse the actual savings might different from one case to other. But this is what happens and there is maths now to prove it. You don’t need to ask anyone about it as you know the real benefits too.
So if you have been sitting on the sidelines for some time to take a home loan, this might just be the right time to think about it.