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EMIs increase as banks hike home loan interest rates; here’s how much extra you could end up paying

The Reserve Bank of India (RBI) increased the repo rate by 35 basis points (bps) to 6.25 per cent this month. Because of the rise in repo rate, various public and private sector banks have been hiking the home loan interest rates. Borrowers are the worst impacted section because of the rise in repo rate. Existing borrowers, who have taken loans on floating rate basis, are going to witness their equated monthly installments (EMIs) increasing further because of the present repo rate hike. Various lenders like the State Bank of India (SBI), HDFC Bank, Indian Overseas Bank, Bank of India, and Bank of Baroda have raised their interest rates on home loans in tandem with the RBI’s move to contain inflation.What can borrowers do to deal with the rising interest rates?There are some options that home loan borrowers can try to lessen the burden of high interest rates. These options include refinancing with your lender, refinancing with another lender, and prepayment of loan via annual bonus or other source of income.Calculation of EMI after RBI’s repo rate hikePresently, the home loan interest rates for SBI, HDFC Bank, and other banks stand between 8.4-9 per cent. For the purpose of calculations, we are going to assume that the loan was previously granted at 7 per cent, and the new rate is 8 per cent. So, a home loan of Rs 20 lakh offered at a rate of 7 per cent for 20 years would have resulted in an EMI of Rs 15,506. But at 8.5 per cent interest, the present EMI will be Rs 17,356 if the tenure has not been increased. This is a hike of Rs 1,850 per month or Rs 22,200 per year.If you had taken a home loan of Rs 30 lakh earlier at the rate of 7 per cent for 20 years, then your EMI would amount to nearly Rs 23,259. But 8.5 per cent, the current EMI is going to be Rs 26,035 if the tenure has not been revised. This is a jump of Rs 2,776 per month or Rs 33,312 per year.As per the above calculations, the average hike in home loan interest rate is nearly 1.5 per cent, while the increase in EMI stands somewhere between Rs 1,800 and Rs 3,700 per month or between Rs 20,000-Rs 45,000 annually.Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.

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Published on : 2022-12-12 08:03:35

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