Home Loan: Recent data shows that retail inflation has once again surged to its highest level in 14 months. The RBI has maintained the repo rate at 6.5 percent in the past ten MPC meetings. People anticipating lower home loan rates have been surprised in this scenario. SBI has already stated that the interest rate for the MPC meeting in early December is likely to be decreased. The upcoming MPC meeting is scheduled for December 4th to December 6th.
If you wish to pay off your home loan early, what steps do you need to take?
It is anticipated that it will stay at 6.5 percent again this time. The RBI’s repo rate hike from May 2022 to March 2023 has led to an increase in the EMI or loan duration for numerous individuals. While some individuals have made arrangements to avoid being affected by this, others are holding out for a decrease in interest rates. If you have obtained or are planning to obtain a mortgage for your home, you must pay attention to certain details. If you wish to pay off your home loan early, what steps do you need to take?
Experts recommend keeping your loan tenure short to decrease the interest cost. A longer loan term results in paying more interest because of compound interest. For instance, borrowing Rs 50 lakh at a 9% interest rate over a 10-year period would result in an interest payment of Rs 26 lakh. However, when the duration is extended to 15 years, the amount to be paid rises to Rs 41 lakh. Simultaneously, the 20-year loan accrues an interest payment of Rs 58 lakh.
Young home buyers may find it difficult to handle a short loan tenure. In reality, often EMI exceeds their budget by a significant amount. However, if you opt for a tenure of 15-20 years, it is recommended to gradually raise your EMI as your income grows. Raising the EMI by 5% annually shortens the term of a 20-year loan by roughly eight years. By raising the EMI by 10% annually, the repayment period for a Rs 50 lakh home loan at 9% interest will be shortened to 10 years.