Home loans are an easy way towards fulfilling your dream of owning a house. It is a medium that has helped lakhs of people move out from the hassles of rented houses to the comforts of their own sweet home. And why not? Home loans are customer-friendly, governed directly by RBI to ensure that the rights of borrowers are protected. Periodically, home loan rules and regulations are updated to maintain the balance of the economy and benefit the borrowers.
If you are planning to apply for home loan or are servicing one, here are some home loan updates you must definitely know about.
- Repo linked interest rates
Earlier, the home loan interest rates were based on the Marginal Cost Of Fund-based Lending(MCLR). However, RBI has issued a directive where the home loan interest rates would be now based on the repo rate. With this amendment, the borrowers would get the benefit of repo rate cuts by RBI, faster. If you have a loan, you must check with your lender if they adopted the new regime. If they have, you could benefit from the recent cut in the repo rate in the form of reduction in interest rates and thus your EMI amount. Repo linked interest rates is also expected to make the loan transactions transparent, the transmission of repo rate cut faster and comparing loans easier.
- Rationalisation of risk weightage
Recently, RBI has announced the rationalisation of the risk weightage, where it will link them to loan to value ratio for new housing loans up to March 2022. As per this update, the loans sanctioned up to March 2022 would attract a risk weightage of 35 per cent if the LTV is less than 80%. Similarly, for the LTV of less than or equal to 90%, the risk weightage has been set to 50%. This move is expected to bring down the interest rates for borrowers and make home loans cheaper.
- Foreclosure charges
Lenders cannot charge a prepayment or foreclosure fee on the floating interest rate home loans. As per the RBI directive, borrowers need not pay any prepayment penalty on home loans availed on the floating interest rate.
- Government incentives
To encourage borrowers to buy a house, the governments have brought various incentives, which were supported by people’s participation. Under the Pradhan Mantri Awas Yojana (urban) PMAY, the government as per the last update sanctioned around 65 lakh houses. Similarly, a total of 93,000 beneficiaries were recorded under the credit-linked subsidy scheme of PMAY, where individuals can avail a home loan at subsidized interest rates. Also, bringing the real estate market under the Real Estate Regulatory Authority has made investing in real estate easier. This act would make the process of purchasing real estate secure and safeguard the interest of home buyers.
To make the real estate industry safer and lucrative, these have been the recent updates announced by the government and RBI. You must be aware of such updates to maximise benefits whenever applicable. Also, you must carefully choose lenders while applying and ensure that they abide by all the RBI updates and amendments.
Krishna Murthy is the senior publisher at Finance XOD. He is not only the senior publisher but also the owner of Tricky Finance. Krishna Murthy was one of the brilliant students during his college days. He completed his education in MBA (Master of Business Administration), and he is currently managing the all workload for sharing the best banking information over the internet. The main purpose of starting Tricky Finance is to provide all the precious information related to businesses and the banks to his readers.