WHY NOT Buy a bigger flat?
With RBI announcing a 50-basis-point repo rate cut earlier this week, home loan rates will reduce simultaneously raising eligibility levels
One of the golden rules of buying real estate is that no home search should begin without finalizing a budget. This is largely determined by the home loan eligibility amount, which is calculated by lenders keeping the applicant’s repayment capacity and prevailing interest rates in mind. It is this last, crucial factor that determines their repayment amount and therefore, eligibility sum as well.
Any possibility of rates rising makes fence sitters take two steps back, while a status quo encourages them to take the plunge. However, a reduction in rates can actually encourage those who are house hunting to go in for a slightly bigger home. It could be an extra ‘half’ bedroom or larger sized rooms, extra space becomes a possibility when rates reduce.
Great news
So the Reserve Bank of India (RBI) announcing a 50-basis-point repo rate cut earlier this week is really good news for home seekers. The impact was immediate as several banks lowered their base rate with others set to follow suit shortly. State Bank of India (SBI), cuts its base rate by 40 basis points from 9.70% p.a. to 9.30% p.a. effective October 5, 2015. Arundhati Bhattacharya, Chairman, SBI said, “The proposal to reduce the risk weights on low cost housing loans will incentivise the banks.”
Higher volumes
Rishi Mehra, Co-Founder, Deal4loans.com, pointed out that in a surprise move, the Reserve Bank of India (RBI) cut the repo rate by 50bp to 6.75%, compared to consensus and our expectations of a 25bp cut. “RBI has proposed to lower risk weights on individual housing loans in the affordable segment (currently minimum risk weights in housing loans is 50%) to boost low cost housing. This will help in meeting the government’s target ‘Housing for all’ by 2022. Along with rate cuts, this means housing loan market should see a pickup in volumes. Home loan rates should fall by 0.50 basis points. Expect home loan rates to come at 9%,” he estimated.
Long overdue
Getamber Anand, President, Confederation of Real Estate Developers’ Association of India (CREDAI) National, said, “The industry is welcoming RBI Governor’s announcement of rate cut by 50 basis points, this was long overdue. RBI Governor has previously stated that while rate cuts have happened, it has not translated into reduction of home loans. CREDAI appeals to all the banks to pass on this rate cut to property buyers who avail home loans. This is now imperative and it must be done to benefit the end user. All in all, the industry is extremely upbeat and we feel the Golden Era for Indian manufacturing and businesses has begun. RBI Governor had also stated that they will be working in absolute tandem with the government dream for growth of our country and we are in full support for the same."
Direct impact
So how would this impact you as a home seeker going forward? Well, it is quite simple actually. Basically, a reduction in home loan interest rates would impact your home loan repayment at two levels.
The first is a reduction in the equated monthly installment (EMI) amount. The second, consequent advantage is an increase in loan eligibility level.
Just log onto the website of most leading banks and you will find tools marked ‘EMI calculator’ and ‘eligibility calculator.’ Then input your financial details and the current rate of interest offered and the answer will be right there.
Now input the same details and reduce the interest rate by even one percentage and see the difference in both, EMI and eligibility amounts.
Other factors
Do keep in mind that this is just one side of the calculation. The lending institution will also base its eligibility decision on the value of the flat you are purchasing. Based on the eligibility amount, you can figure out the approximate budget of the house you should be searching for (by adding about 25% more) and that will help you streamline your home search procedure considerably.
Consider buying Spacious 2 and 3 BHK flats at Ghodbunder Road, Thane at Prestige Residency. Live a life like a King in your KINGSIZE Home only at Hillview.
With RBI announcing a 50-basis-point repo rate cut earlier this week, home loan rates will reduce simultaneously raising eligibility levels
One of the golden rules of buying real estate is that no home search should begin without finalizing a budget. This is largely determined by the home loan eligibility amount, which is calculated by lenders keeping the applicant’s repayment capacity and prevailing interest rates in mind. It is this last, crucial factor that determines their repayment amount and therefore, eligibility sum as well.
Any possibility of rates rising makes fence sitters take two steps back, while a status quo encourages them to take the plunge. However, a reduction in rates can actually encourage those who are house hunting to go in for a slightly bigger home. It could be an extra ‘half’ bedroom or larger sized rooms, extra space becomes a possibility when rates reduce.
Great news
So the Reserve Bank of India (RBI) announcing a 50-basis-point repo rate cut earlier this week is really good news for home seekers. The impact was immediate as several banks lowered their base rate with others set to follow suit shortly. State Bank of India (SBI), cuts its base rate by 40 basis points from 9.70% p.a. to 9.30% p.a. effective October 5, 2015. Arundhati Bhattacharya, Chairman, SBI said, “The proposal to reduce the risk weights on low cost housing loans will incentivise the banks.”
Higher volumes
Rishi Mehra, Co-Founder, Deal4loans.com, pointed out that in a surprise move, the Reserve Bank of India (RBI) cut the repo rate by 50bp to 6.75%, compared to consensus and our expectations of a 25bp cut. “RBI has proposed to lower risk weights on individual housing loans in the affordable segment (currently minimum risk weights in housing loans is 50%) to boost low cost housing. This will help in meeting the government’s target ‘Housing for all’ by 2022. Along with rate cuts, this means housing loan market should see a pickup in volumes. Home loan rates should fall by 0.50 basis points. Expect home loan rates to come at 9%,” he estimated.
Long overdue
Getamber Anand, President, Confederation of Real Estate Developers’ Association of India (CREDAI) National, said, “The industry is welcoming RBI Governor’s announcement of rate cut by 50 basis points, this was long overdue. RBI Governor has previously stated that while rate cuts have happened, it has not translated into reduction of home loans. CREDAI appeals to all the banks to pass on this rate cut to property buyers who avail home loans. This is now imperative and it must be done to benefit the end user. All in all, the industry is extremely upbeat and we feel the Golden Era for Indian manufacturing and businesses has begun. RBI Governor had also stated that they will be working in absolute tandem with the government dream for growth of our country and we are in full support for the same."
Direct impact
So how would this impact you as a home seeker going forward? Well, it is quite simple actually. Basically, a reduction in home loan interest rates would impact your home loan repayment at two levels.
The first is a reduction in the equated monthly installment (EMI) amount. The second, consequent advantage is an increase in loan eligibility level.
Just log onto the website of most leading banks and you will find tools marked ‘EMI calculator’ and ‘eligibility calculator.’ Then input your financial details and the current rate of interest offered and the answer will be right there.
Now input the same details and reduce the interest rate by even one percentage and see the difference in both, EMI and eligibility amounts.
Other factors
Do keep in mind that this is just one side of the calculation. The lending institution will also base its eligibility decision on the value of the flat you are purchasing. Based on the eligibility amount, you can figure out the approximate budget of the house you should be searching for (by adding about 25% more) and that will help you streamline your home search procedure considerably.
Consider buying Spacious 2 and 3 BHK flats at Ghodbunder Road, Thane at Prestige Residency. Live a life like a King in your KINGSIZE Home only at Hillview.
No comments:
Post a Comment