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Attractive home loan schemes with lower interest rates are on offer

The government’s efforts to persuade banks and housing finance companies to lower interest rates seem to be finally paying off, at least with housing loans. Two key players, State Bank of India (SBI) and LIC Housing Finance (LICHF) have reduced their home loan rates for new home loan borrowers recently.

SBI has launched two new home loan schemes: SBI Easy Home for loans up to Rs 30 lakh and SBI Advantage Home for loans above Rs 30 lakh.

Under this, for loans up to Rs 30 lakh, SBI will charge an interest rate of 8 per cent in the first year and 9 per cent per annum in the second and third years. That’s an EMI of around Rs 836 per Rs 1 lakh for a 20-year loan in the first year, and of about Rs 898 in the second and third years.

From the fourth year, customers can opt for a floating rate of two percentage points below the prevailing SBI advance rate (SBAR). The SBAR is the SBI’s prime lending rate. Or they can choose a fixed rate of one percentage point below the SBAR. The SBAR is 11.75 per cent currently.

Similarly, for loans above Rs 30 lakh too, SBI will charge an interest rate of 8 per cent in year one, and 9.5 per cent per annum in years two and three. Again the EMI is around Rs 836 per Rs 1 lakh in the first year and Rs 929 in the second and third years.

From the fourth year, borrowers can opt for a floating rate of one percentage point below the SBAR, or a fixed rate of 0.5 percentage points below the SBAR.

Meanwhile, under LICHF’s new Fix--Floaty scheme, a borrower can take a home loan of up to Rs 75 lakh at a fixed rate of 8.9 per cent per annum for the first three years. For loans above Rs 75 lakh, the rate is 9.5 per cent for the first three years. From the fourth year, the prevailing floating rate will be applicable.

LICHF’s current floating rate for new customers is 8.5 per cent for loans up to Rs 75 lakh and 9.5 per cent for loans above Rs 75 lakh.

Other banks too are offering fairly attractive rates. For instance, Central Bank of India is charging a fixed rate of 8 per cent for the first year for 20-year loans from Rs 5 lakh up to Rs 20 lakh. The rate is 9.25 per cent for the next four years, after which the borrower can decide between the existing fixed or floating rate. This scheme is valid till September 30.

“These are pretty good home loan rates to start off with. But what rate will you get after that is the key question,” says Amar Pandit, director, My Financial Advisory.

Borrowers could also do well to keep a few things in mind. For one, while comparing rates, Pandit advises borrowers to check the amortisation tables and see their total interest payout. “You should first know your total interest outgo,” he says.

Processing fees and pre-payment penalties are other important criteria, as is the lender’s servicing quality. For instance, private sector banks are typically less lenient about defaults or delays. “Check your comfort factor with the lender,” says Pandit.

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