Thursday, May 31, 2018

What shall I do if interest rates go up?

Author: Sachin Gupta | Find me on Twitter

Sumit booked his apartment in a builder project in 2010 in Noida Extension. He booked a 4BHK unit measuring 2250 Square Feet at a base selling price point of Rs. 1950 per Square Feet. Prices were affordable and he was able to book the apartment within his budget:

Area of the Apartment (SqFt) 2250
Base Selling Price (Rs/SqFt) 1950
Development Charges (Rs/SqFt) 225
Car Parking (Rs) 150000
Club Charges (Rs) 100000
Interest free Maintenance Charges (IFMS) in (Rs/SqFt) 85
Final cost of the apartment (Rs) 5335000

Out of the required 53.35 Lacs, he arranged for 13.35 Lacs from his own sources such as cash, provident fund, and fixed deposits. Balance amount of Rs. 40 Lacs was availed from a leading bank in form of home loan. Home loan rates in 2010 were hovering at around 8 to 8.25%. Which meant his monthly payment in form of EMI was Rs 33458 for a period of 20 years. His home loan interest rates were of floating type. This meant whenever, RBI revises repo rates, home loan interest rates would go up or down depending upon RBI monetary policy.

Everything was going as per plan; however, as the inflation started to go up because of various macro economic factors, RBI started revising its monetary policy. The focus of RBI moved towards bringing inflation under control. And therefore, interest rates started moving up. From about 8% in 2010, the interest rates jumped to about 11% in 2014.



What it meant for Sumit was that his EMI outlays increased over a period of time. At one point of time, he was paying monthly payment of Rs 41288 in form of EMI. That’s an increase of Rs 7830 per month.

What can Sumit do to maintain his EMI under control?


  1. Stretch the loan tenure: Sumit had availed home loan for a period of 20 years. However, since, interest rates had moved up, he could sit with bank officials and seek to extend the loan tenure to 25-30 years. Thereby, he can bring his EMI under control.
  2. Move to another lender: Sumit can also move to another lender offering lower interest rates. In this case, he has to study and analyze the offers by various banks. And if there is a difference of about 0.5%, then, Sumit can switch to another lender to bring his EMI under control. However, he should check if there are any pre-payment charges with existing lender. As per RBI rule, customer can move from one lender to another without paying any pre-payment charges.
  3. Prepay portion of the Loan amount: Sumit can also prepay some portion of his loan amount to the existing lender. This way, his EMI would come within manageable limits.
  4. Avoid shifting to fixed loan rates: When interest rates are fluctuating, many people believe fixed rates are way to go about. However, fixed interest rates are more expensive and at the same time, one cannot take benefits of lower interest rates as and when RBI brings interest rates down. Therefore, Sumit should stick to points 1, 2, or 3 and should completely avoid point 4.


Thanks. Please share!



Have any Questions?

30 comments:

  1. Prices of 3 BHK flats in Noida Extension are high and are expected to increase further. Indeed, 3 BHK flats in Noida Extension present a fruitful investment opportunity in Noida.

    ReplyDelete
    Replies
    1. I am a private loan lender which have all take to be a genuine lender i give out the best loan to my client at a very convenient rate.The interest rate of this loan is 3%.i give out loan to public and private individuals.the maximum amount i give out in this loan is $1,000,000.00 USD why the minimum amount i give out is 5000.for more information contact us email financeloan71@gmail.com

      Your Full Details:
      Full Name :………
      Country :………….
      state:………….
      Sex :………….
      Address............
      Tel :………….
      Occupation :……..
      Amount Required :…………
      Purpose of the Loan :……..
      Loan Duration :…………
      Phone Number :………
      Contact email: financeloan71@gmail.com

      Delete
  2. Very nice blog for new buyers in real estate..Thanks a lot..Keep posting such a nice blog... In Bangalore ,investing in property is also a good decisions for residing and getting good returns. Valmark is also good reputed builder for investing in property. There are many Ongoing projects in Bangalore here.

    ReplyDelete
  3. Great Blog,
    Thanks for the info..
    Real estate market is steadily picking up from a slowdown. I’ll recommend this blog to my friend and families for the International Property Consultants In Bangalore . Thanks a lot author for bringing such useful information into our knowledge.

    ReplyDelete
    Replies
    1. I am a private loan lender which have all take to be a genuine lender i give out the best loan to my client at a very convenient rate.The interest rate of this loan is 3%.i give out loan to public and private individuals.the maximum amount i give out in this loan is $1,000,000.00 USD why the minimum amount i give out is 5000.for more information contact us email financeloan71@gmail.com

      Your Full Details:
      Full Name :………
      Country :………….
      state:………….
      Sex :………….
      Address............
      Tel :………….
      Occupation :……..
      Amount Required :…………
      Purpose of the Loan :……..
      Loan Duration :…………
      Phone Number :………
      Contact email: financeloan71@gmail.com

      Delete
  4. Real Estate Technology-Wiz Maps new real estate technology seeking business partners to launch new housing market forecast with real-time real estate maps & real estate trends.

    ReplyDelete
  5. Video Converter for Mac Total Video Converter for Mac is your best video converter for Mac to convert all videos to iPad, iPhone... Best all-in-one Video Converter for Mac.

    ReplyDelete
  6. Get Eid discounts and offers on buying residential property at Top builders in Mumbai in your budget.

    ReplyDelete
  7. Great goods from you, man. I have understand your stuff previous to and you are just extremely fantastic. I actually like what you’ve acquired here, certainly like what you are stating and the way in which you say it. You make it enjoyable and you still take care of to keep it smart. I cant wait to read far more from you. This is really a terrific website.





    Shakti Prash | Hanuman Chalisa Yantra | 5in1 Air Sofa | Zero Addiction |

    Hot Shaper | Allah Barkat Locket | Step Up Height Growth | Body Buildo

    ReplyDelete
  8. We are a Professional property management services in Chennai and providing the entire range of property management services. Helps you to find reliable tenant for all your commercial and residential property needs. Property Management Services

    ReplyDelete


  9. Great Blog,
    Thanks for the info..

    Thanks a lot author for bringing such useful information into our knowledge.Property in banagalore, 2BHK property in banaglore,
    property in bangalore for sale ,
    property in bangalore for rent ,

    ReplyDelete
  10. I like to read your posts because of it's good quality.

    Visit architectural design studio!

    ReplyDelete
  11. I am a private loan lender which have all take to be a genuine lender i give out the best loan to my client at a very convenient rate.The interest rate of this loan is 3%.i give out loan to public and private individuals.the maximum amount i give out in this loan is $1,000,000.00 USD why the minimum amount i give out is 5000.for more information contact us email financeloan71@gmail.com

    Your Full Details:
    Full Name :………
    Country :………….
    state:………….
    Sex :………….
    Address............
    Tel :………….
    Occupation :……..
    Amount Required :…………
    Purpose of the Loan :……..
    Loan Duration :…………
    Phone Number :………
    Contact email: financeloan71@gmail.com

    ReplyDelete
  12. I am a private loan lender which have all take to be a genuine lender i give out the best loan to my client at a very convenient rate.The interest rate of this loan is 3%.i give out loan to public and private individuals.the maximum amount i give out in this loan is $1,000,000.00 USD why the minimum amount i give out is 5000.for more information contact us email financeloan71@gmail.com

    Your Full Details:
    Full Name :………
    Country :………….
    state:………….
    Sex :………….
    Address............
    Tel :………….
    Occupation :……..
    Amount Required :…………
    Purpose of the Loan :……..
    Loan Duration :…………
    Phone Number :………
    Contact email: financeloan71@gmail.com

    ReplyDelete
  13. I am a private loan lender which have all take to be a genuine lender i give out the best loan to my client at a very convenient rate.The interest rate of this loan is 3%.i give out loan to public and private individuals.the maximum amount i give out in this loan is $1,000,000.00 USD why the minimum amount i give out is 5000.for more information contact us email financeloan71@gmail.com

    Your Full Details:
    Full Name :………
    Country :………….
    state:………….
    Sex :………….
    Address............
    Tel :………….
    Occupation :……..
    Amount Required :…………
    Purpose of the Loan :……..
    Loan Duration :…………
    Phone Number :………
    Contact email: financeloan71@gmail.com

    ReplyDelete
  14. I came across through your blog. Thanks for sharing the nice information.
    Real Estate Developers in Chennai

    ReplyDelete
  15. Hi this is the Pretty Good Information Regarding this topic,,, its helps me better and I also like your all post which helps me even more better,,,
    I Also Have Some Information for you Hope you like it and it also helps you to do more better
    ambience creacions price list

    ReplyDelete
  16. Seethesh Beyond Technologies, [28.08.18 11:27]
    Shreyas Enterprises home loans in Vizag
    Shreyas Enterprises Vizag is engaged in offering Home Loans to the clients In Visakhapatnam. A crew of experienced personnels works with enthusiasm for rendering best services

    ReplyDelete
  17. Shreyas Enterprises home loans in Vizag
    Shreyas Enterprises Vizag is engaged in offering Home Loans to the clients In Visakhapatnam. A crew of experienced personnels works with enthusiasm for rendering best services

    ReplyDelete
  18. Shreyas Enterprises home loans in Vizag

    Shreyas Enterprises Vizag is engaged in offering Home Loans to the clients In Visakhapatnam. A crew of experienced personnels
    works with enthusiasm for rendering best services

    ReplyDelete
  19. IF you do search for the best loan Against Property then you should visit at
    www.antworksmoney.com Great Deal - Big Saving. Apply for Mortgage Loan Today. Secure Loan. Loan against Home.

    ReplyDelete
  20. nice blog,Thanks for sharing the nice information,
    BramhaCorp offers 2 BHK & 3BHK flats in Kharadi Pune , extension, Nearby EON IT Park with all Amenities and Conveniences Flats in Kharadi .

    ReplyDelete