We are fetching your credit score from the credit bureau.
You have to answer few questions as we need some more information to generate your credit score.
How Does Home Loan Interest Rate Work?
Base rate – Base rate is the rate arrived by a bank based on its Cost of Funds and various other factors incl., risk premium, employee cost, operational cost, infrastructure, other costs, etc.,
Base rate is linked to the RBI’s key policy rates and is subject to change every quarter as per RBI’s new monetary policy. Base rate is different from bank to bank.
Base rate & Loan Interest rate – Banks add a spread to the base rate to calculate applicable rates on new Home loans. E.g., if Base rate is 9.00% and the spread is 0.75% (75 bps) then the effective rate for Home loan is 9.75%.
The spread is always a constant and is pegged to the base rate. However, the base rate may change on a quarterly basis as per RBI’s policy changes or bank’s Cost of Funds.
Yet, the bank may set a higher or lower margin for new loans from time to time and this is why sometimes a new customer may be on-boarded at a better rate on his Home Loan, than that of an existing customer.
How to manage Home Loan Rate of Interest against fluctuations –
Compare Base rates & Spreads across banks against that of your Home Loan. If you see substantial scope to reduce the Interest amount on your Home Loan, then you may consider the below options:
Refer to the above tool for how 1% (100 bps) lower Interest Rate can affect the total Interest payable on a loan.