Watch out for the best home loan ‘offer’
Many banks offer customers great deals in the festive season. Find out what your financier is up to
It’s that time of the year again. The festival season is almost here and we are being bombarded with advertisements on TV and in newspapers which invite us to buy consumer goods, cars... new homes... Apart from builders trying to lure people to buy into their projects with lucrative offers and gifts, we have banks and lenders coming up with interest rate concessions and processing fee waivers for home loans.
Lenders run these “festival schemes” in the last quarter of a year – just when the Indian festival season begins. The only difference this time is that with a high rate of inflation, the demand for housing has been relatively muted in markets such as Mumbai. In the other cities, too, the demand is concentrated in the middle segment.
With the interest rate slated to go down, lenders are clearly using this opportunity to lower their rates by calling them “festive offers”. Not only do we now have lower interest rates, but the processing fees has also been cut (practically nil in a few cases) for new customers. Of course, the lower interest rates are likely to continue even after the “festival season” is over but the processing fee waiver may not.
Now let’s look at some of the best “festival offers.” There’s this blockbuster offer from the State Bank of India, both in terms of interest rates and processing fee. Its interest rates are as low as 10% per annum (for home loans up to R30 lakh) and fixed processing fee is just R1000. UCO Bank has fully waived the processing fee for both home loans and car loans.
In a classic combo offer, Corporation Bank has not only waived the full processing fee but is also offering interest concession of 0.25% on a car loan if the vehicle and home loan are taken together. Other players like Axis, HDFC and ICICI, too, have come out with “festival offers”. (Please see box for other offers).
So, if you are planning to buy your dream home, this is as good a time to do so.
Always make it a point to remember that when you take a floating rate loan, you would be covered in case there is any further reduction in interest rates.
Before you apply for a home loan, here’s what you should check out now:
1. First, check the interest rate after the concession and compare it with other offers by using comparison tools available on online market places such as www.apnapaisa.com. After all, it is quite possible that the bank may have a higher rate (than the market) even after the “concessions” in interest rates.
2. If the bank is giving lower interest rates, then please know that most banks are changing the spreads rather than reducing the base rates. Clearly, the benefit is only meant for you as a new customer and not as an old consumer. So, remain vigilant even after you take the loan to ensure that your bank keeps passing on new benefits such as reduction in interest rates etc to you.
3. Some of these banks compulsorily require life insurance and critical insurance for their borrowers. Though compulsory bundling is not allowed by regulation, in practice banks may still insist on this. Buying life insurance or critical illness insurance is a great idea with a home loan, especially if the pricing of the bundled products is competitive. It is better to ask about these before you finalise your home loan.
Existing borrowers can take advantage of these offers by shifting their loan. So, if you have a loan of, say, R30 lakh and you are paying an interest rate of more than 10.5%, then there is no earthly reason for you to continue to do so. Shift to another lender immediately. This way you can create your own festive offer, literally!