RBI has increased the repo rate four times since May, due to which banks have also increased home loan rates.
The new retail loans that banks offer are linked to an external benchmark. In most cases, it is linked to the repo rate. This is the reason that any change in the repo rate affects the interest rate of the home loan. An increase in the repo rate increases your home loan installment. Also, it will also have an impact on old home loans linked to MCLR, Base Rate and BPLR. Since May, the repo rate has been increased by 190 basis points since May.
any installment has increased
If someone has taken a home loan of 10 lakhs for 20 years at 6.7 percent rate, then his installment in April was Rs 7,574. Today it has become Rs 8,741 at the rate of 8.6 per cent. The RBI had increased the repo rate by 40 basis points in May and 50 basis points each in June, August and September. Banks have also increased interest rates accordingly.
20 year loan to be repaid for 25 years
When loan rates increase, banks extend the tenure of the loan. That is, if someone had taken a loan of Rs 50 lakh at 6.7% in April 2019, then by April 2022 he would have deposited 36 installments. That is, the tenure of his loan was only 17 years and the outstanding loan amount was Rs 46.04 lakh. But at the rate of 8.6 per cent, he will have to pay more installments for 22 years and 10 months. That is, the number of his installments has increased by 60 i.e. five years.
If you want to keep the original tenure..
Banks decide the tenure of the home loan according to the retirement of the borrower. If it is not possible to extend the tenure, the borrower has two options. He can increase the installment or give a lump sum amount to reduce the principal amount. If you want to keep the original tenure then your installment will increase by Rs 5,177 or you will have to pay Rs 5.5 lakh.
