With sky-high house prices and rising home loan interest
rates, owning a home has become 'increasingly unaffordable'
for a lay man. The RBI
stand as far as home loans in India are concerned has
deterred both new and existing shoppers for home loan
The continuous hike in home loan interest rates is certainly
astonishing for everyone. Taking a look at the rate in the past
years, it was 7.5% on January 1, 2005, increased to 8 per cent
on July 1, 2005 and then shot up by another .5 points thereby
marking 8.5% on January 1, 2006. On April 1, 2006, they rose to
9%.
Staying in step with expensive home
loans in India, the dearer Equated Monthly
Installments (EMIs) are putting off potential home buyers,
who are hoping for major corrections. This has left millions of
home loan borrowers pondering over to devise ways to manage the
EMIs and their monthly budgets. Such a scenario has made it difficult
for people to enjoy the money they earn.
So, what should be the way to trim the bulging EMI in
such a situation?
A consumer can look up to several options, of which,
paying the increased EMI on the borrowed home loan is a better
one. If this poses a danger of breaking the bank, get the tenure
increased. It will ensure savings on monthly budget.
If this is also unfeasible, then the consumer may have to use
his/her savings to pre-pay a part of the loan to such an extent
that the EMI and the tenure don't change. The statistical rule
of thumb says that for every 1% increase for a 20 year loan, the
borrower requires to pre-pay around Rs 6,500 per lakh of loan
to keep the EMI and the tenure constant.
Since home loan interest rates are hitting the sky; a number
of people are giving second thoughts to their plans to shop for
home loans. Contrary to the old adage in loan market, 'one should
not try to time the market when one is buying a home for own residential
purpose'. While everyone today is expecting for major corrections
in property prices, the phrase seems to have lost its significance.
