Investment School: How to reduce home loan EMI?

How to reduce home loan EMI?

In the period of high interest rates,people are now trying to reduce the EMI burden of their respective home loan.One way of reducing the EMI burden is to shift the loan from a higher interest rate to lower interest rate loan.

Of late, there has been a significant 1-2% interest rate diff between private bank home loans and PSU bank home loans. So one way to reduce ur EMI(if you are a private bank customer) is to shift your home loan from private to PSU banks.

Scenario:

Private Bank:

Home Loan Amount : 20 lacs
Home loan Rate : 12%
Tenure : 20 years
EMI : 22000

PSU Bank:

Interest Rate : 10.5%
EMI : 19970

Savings in EMI : 2000

Savings in Total Interest paid for the loan : 4,80,000

Penalty(usually 2% of outstanding loan amount) : 40,000

Processing charge of new home loan (0.5% of loan amount) : 10,000


So Total Savings = 4,80,000 - (50,000) = 4,30,000

The saving of 2000 in EMI can be used for good investment purpose.

So analyze the current rates in the PSU and try to shift your home loan.

As per latest fact,PSUs offer floating home loan rate at 11% while private banks offer at 13%.So you ca then save your money if you act aptly.
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6 comments:

rusty said...

can any body tell me if i can change my EMI to a higher than present EMI. presently i am paying 11716 as emi where as i can spare 15000 every month. how much will be the penalty.

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