Recently i was going through the balance sheet of one of Home Loan Provider/Lender & was quite amazed to know that this particular lender’s Net Profit during last Financial Year was few thousand Crores & they have reserves of approx 4.5 times the annual net profit then Why Higher Interest Rate for Existing Home Loan Customers?
In April’12 when RBI cut Repo Rate by 50 basis point then ideally Home Loan Providers should have reduced their Base Rate or BPLR or RPLR to follow the movement of policy rates but it never happened. Though i have highlighted the issue of higher interest rate being charged from existing Home Loan Customers in my following post but many of my readers requested me to throw more light on this topic
https://www.nitinbhatia.in/home-loan/step-motherly-treatment-to-existing-home-loan-customers/
In recent past, i received lot of queries from my readers who are paying very high interest compared to existing interest rates offered to new customers..They asked me why it is so…Let me clarify that its a vicious cycle, if person A has taken loan when interest rates were low then he will pay comparatively high interest rate then market rate when interest rates are high i.e. in current scenario.
Now you must be thinking that if person B has taken loan when interest rates are high then he will be paying comparatively lower interest rate then market rate when interest rate are low. But this situation never arises Let me explain this
Consider 2 Scenarios
(a) Low Interest Rate: Assume person A has taken loan in 2008 (when interest rates were low) from Lender X. The BPLR of Lender X was 12.5%. The Lender offered spread of 4% on BPLR & offered market interest rate of 8.5% to customer.
Now in year 2012, The BPLR of Lender is 16.5% and customer’s spread is 4% only therefore customer who took loan in 2008 is still paying interest rate of 12.5% whereas Market interest is 10.5%. For new customer interest rate will be 10.5% only becoz Lender will increase spread to 6%.
(b) Higher Interest Rate: Now assume person B has taken loan in 2012 (when interest rates are high) from same Lender X. The BPLR of Lender X is now 16.5%. The Lender is offering spread of 6% on BPLR to new customer & offered him market interest rate of 10.5% on Home Loan.
Now suppose in year 2015, market Interest rate is reduced to 8.5%. Here the Catch is, BPLR of Lender is decided at the sole discretion of Lender only and there is no scientific formulae to calculate the same. Even if interest rate go down, Lender will not reduce BPLR below 14.5% though market rate is now at same level of 2008 therefore going by law of justice the BPLR should also be at 2008 level but it will not happen becoz if Lender reduce BPLR to 12.5% then customer who took loan in 2012 will be paying interest rate of 6.5% i.e. 2% lower than Market Interest Rate.
In short Lender is OK if customer is paying higher rate than market rate but it is not comfortable at all with scenario where customer is paying slightly lower rate than existing market rate therefore he will tweak BPLR to its advantage and make huge profits.
Now for new customer, Lender will keep spread @ 6% therefore new customer will pay interest rate of 8.5% & both old customers i.e. Person A and Person B will also pay interest rate of 8.5% despite the fact that Person A paid very high interest rate in 2012.
In a nutshell, the people who will take Loan during Lower Interest Rate regime will always be at LOSS and people who will take Loan during High Interest Rate Regime will mostly pay Market Interest rate during Loan Tenure thus will be at advantage. In this case Person A is at heavy loss and Person B is paying almost market linked Interest rate.
Now another important question coming to ur mind is that how lender make profit. Let me tell you that Home Loan is most secured and profitable business in complete Financial Lending Portfolio. If i have to put in simple terms then i can say that Lender make profit by simply cheating the customer. None of the lender provide loan from its own pocket, they source fund from market by way of borrowing & then lend this money at slightly higher interest rate. Lending rate will always be slighter higher then Borrowing Rate.
Now u must be thinking, where is cheating in this case and if in 2008, Lender is borrowed at 7.5% and was lending at 8.5% then it deserves this margin of 1% to recover its cost and make slight profit. Let me explain how u r being cheated.
In 2008, lender borrowed at 7.5% and lend this money @ 8.5% as Home Loan. Now lender will pay only 7.5% interest rate on borrowed fund but in 2012 Lender is charging you interest rate of 12.5% on money which was borrowed at 7.5% i.e. Whooping Profit margin of 5%. Net profit of 5 Rs p.a. on every 100 Rs borrowed and lend it as Home Loan in 2008. Just keep in mind that own investment in terms of money circulation is Zero. Risk is very minimal becoz for Home Loan, the property in question is always mortgaged with Lender.
On lighter note , if someone is willing to lend me the money then i am also thinking of entering this highly profitable business.
Infact, no one is against company making profits becoz all organizations are operating to generate wealth for its shareholders but it should be through fair & transparent means not by sucking blood of customer…I really feel bad, when i come across these kind of cheating cases from my readers.
I hope better sense will prevail and Regulator will come out with some clear guidelines on how the Home Loan Portfolio should be managed by the Lenders so that instead of building huge reserves of 10,000-15,000 Crores they should also think of common man, who struggles through out his life for just 1 house.
Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.
Dear NitinSir,
I want suggestion about home loan switch over for interest rate.
I have taken a loan from indiabulls.
Right now I have partial disbursement.
Amount-1009058
Emi-10152
Interest rate-10.5%
Tenure-234 month
After giving a fee 5618 rupees they switch over my interest from 10.5% to 10.25% then
Emi-9984
Interest rate-10.25%
Tenure-234 month
And after 1st april they switch over switch over my interest from 10.25% to 10.15% default then
Emi-9917
Interest rate-10.15%
Tenure-234 month
So please guide me about that what I do for this offer.
Waiting for your favorable reply.
Thanks in advance.
Thanks and Regards,
Dilip Patel
pateldilip00@gmail.com
Even without paying conversion fees, your ROI will reduce from 10.5% to 10.4% w.e.f Apirl 01, 2013 due to reduction in RPLR/BPLR by 10 basis point.
I will not recommend you to pay conversion fees as it is not financially beneficial for you. Wait for interest rates to drop further before shifting to lower interest rate.
Hi Nitin ! Great Blog ! Very impressed ! I am also facing similar situation as that of Isha. I understand that there is no gurantee that for new customer there will not be even lower interset rate with offer of higher spread. However, don’t you feel RBI should not allow this exploitation of old customer as HFC do not offer linkage to base rate. For old customer interset rate increases very fast but does not decrease with decrease in base rate. How can we avail true and transparent floating rate from HFC?
Hi Nishant, Currently its not possible…Its better to go ahead with banks like SBI which provide loans with interest linked to Base rate, which is more transparent system then BPLR/RPLR.
In my case loan sanctioned under construction linked program is 8,20,000. Amount disbursed is 5,54,000. Current interest rate is 11.65 . Amount demanded by bank to convert it to 10.15 is rs.3900. Any idea how HDFC calculate conversion fees? Is it disbursed amount or sanctioned amount? Should I wait for interest rate to go down further or pay conversion fee now? Any guess what will be interest rate after 6 month?
Conversion fees is calculated as 0.5% of outstanding loan amount + ST. Its based on outstanding loan amount. Wait for interest rate to reduce by another 25 basis point before paying conversion fees. We cannot predict interest rate.
Thank you so much. One update ” HDFC is calculating conversion fees with 0.25% from last one month”. This offer is till 31st march. Should I wait or take this offer? After RBI cut if there will be cut in RPRL, I will still get this benefit after conversion.
Its a good deal @ 0.25%…You should avail this offer.
Hello Nitin! Great Blog! very much informative.Need your suggestion in my case. i had taken LIC home loan in 2010 at 8.9 % fixed for 3 years. Now it has been changed to 11.65%. Is it worth to change the bank to SBI right now? What is the right option for me to do now
Pls wait for 2-3 weeks…After recent RBI rate cut, it is expected that Base Rate or BPLR/RPLR might further drop.
You may approach LIC to lower your Rate of Interest by paying conversion fees…If they refuse then you may switch to SBI.
NHB and HFC are hands in gloves with each other..I registered complaint multiple times in last 2 years but seems no one even reads the same.
Hello Nitin,
Is there a loan available from banks for the site/plot. If yes can you please share your views/thoughts on which bank offers this loan and probable interest rates.
Thanks for your time.
Yes, Loan is available for site/plot. All banks/HFC’s provide the same but ROI is slightly high compared to residential property.
I have received following response from RBI regarding this issue:
” If you do not receive response from the HFC regarding variation in interest rate charged within 30 days or are dissatisfied
with the response of the HFC, then approach the Complaint Redressal Cell in the
Performa given at following link
http://nhb.org.in/Grievance-Redressal-System/Application-Form.pdf “
Sir,
What will be the case with that of base rate system of banks? For example, SBI is offering loan now at 0.05% more than its base rate..so this 0.05% will be constant through out the tenure of the loan and our roi will change only when there is a change in bank’s base rate right? And bank may change this extra 0.05% to some other value to attract new customers according to prevailing market situations but still the old customers will be paying this 0.05% over and above the base rate during their tenure..am I thinking correct sir? So isn’t it beneficial for us to avail loan when markup is just 0.05%? What do you suggest sir?
The markup remains fixed for home loan tenure. The interest rate will change only when the base rate of the bank will change. Bank can reduce 0.05% to 0% for new customer but cannot go below this.
Sir, Please throw some light upon this, which is found in MITC of SBI home loan
https://www.sbi.co.in/portal/documents/25328/6783974/MITC+Version+8+-LTV+Changes.pdf/e242a347-9a70-49ae-a276-795f2548626d
Rate of Interest:
Floating Rate of Interest
Interest on the loan will be charged at prevailing floating rate of interest on a daily reducing balance at monthly rests. The rate of interest is subject to revision from time to time due to (i) changes in Base Rate or (ii) revision even without change in Base Rate the Bank has the option to reduce or increase the EMI or extend the repayment period or both consequent upon revision in interest rate.
What can we do in case (ii) as specified above?
Normally this situation never arises but depending on the future risk assessment bank may increase the markup or you can pay conversion fees to decrease the mark up. This clause is OK.
Hi,
i have take home loan from LIC, interest rate was 10.25 for two years. Then it got changed to 12.00% now. LIC is offering conversion rates to 10.25 by paying concession fee. I am planning to move to SBI which is offering 9.555 now. Can you please suggest what should be my next step- moving to new Bank or staying in same LIC by paying concession fees.
small correction – 10.50 instead of 10.25 above
You may transfer to SBI.
Thanks a lot sir.
Sir, My question is that when HFC increase intrest rate why its regulator allowed it to increase BPLR and Spread discount simultaneously like mention above in your article,how can we raise our issue as a borrower. in my view it is unfair practise, Please suggest.
I do agree but everything is linked to cost of funds. It can be justified by the HFC.
Thanks For Reply, but what justification HFC gives to increase BPLR and Spread discount simultaneously, if cost of fund increase it should be to increase BPLR not to increase spread discount which have opposite effect, as it finally impact to exist customer more and pay conversion fees time to time.
I request you to check my posts on Home Loan. I have explained this concept in detail under Home Loan section.
dear sir,very informative article..but sorry to say that neither they inform the customer regarding these and most people do not understand .
I have taken loan from LICHFL in Mar2014@10.2% fixed for 2 yrs and automatic floating thereafter.Suddenly in Aug 2016 i saw that i m paying @11.7%..
i have been wrongly charged close to 10 k because of LICHFL wrong policies/poor communication/their area managers and agent/brokers.
on asking LICHFL they suggested to rewrite the loan with fees of 1150/-.Post rewriting they have made it floating 9.95% when the current floating is 9.5%…This they claim it for new customers..
my query why we should have floating in floating rate..my friends with hdfc with floating loan are paying different ROI..
Out of fear and frustration i have decided to close my loan..on that they are as king for documentation charges..
they hide the facts and once they have the documents ,they start their game of base rate ,BPLR,MPLR
Pl. dont approach LICHFL for your loan requirements.
they depend on brokers for their business and once hooked they reveal their real ways.
very poor communication//no sms//no emails//
Suggested..
Why cant the banks and hfc follow a single pattern..
There may be lot of calculations behind the screen but loaning agency should come clean with 2 ROI..
Banks should declare on board their fixed rate and floating rate.
Floating rate should be the same for all customers of that bank at any given point of time .(No floating inside floating)
Fixed rate is to remain fixed for the complete tenure.
Banks to provide calculation details with emi/int./principal outstanding/ROI on monthly basis.
Government must pitch in bring uniformity//
Customer service /ROI should be the differentiator//
Simple,tax paying ,law abiding citizen with dream of home needs protection from these cheat/fraud/financial terror.
it pains when some body loots your hard earned money without your info. under the guise of policy/BPLR/Base Rate etc.
Gautam
Thanks for sharing your inputs. It will be beneficial for readers of this forum. I do understand your concern and hope that the regulator will bring more transparency in how the interest rate is fixed by HFC’s.
I have taken loan from LICHFL,Raipur in Mar2014@10.2% fixed for 2 yrs and automatic floating thereafter.Suddenly in Aug 2016 i saw that i m paying @11.7%..
I have been wrongly charged close to 10 k till date because of LICHFL wrong policies/poor communication/their area managers and agent/brokers.
On asking LICHFL they suggested to rewrite the loan with fees of 1150/-.Post rewriting they have made it floating 9.95% when the current floating is 9.5%…This they claim it for new customers..
2 yrs floating and then to floating was part of the scheme, why should i pay separately?
They want me to give 1250 for rewrite for reducing the ROI but didn’t bother to inform me when spiking it from 10.2 to 11.7%
they hide the facts and once they have the documents ,they start their game of base rate ,BPLR,MPLR etc
I asked them to rerun the loan calculations wef from April2016 with the floating rate and transfer the wrongly recovered interest to principal deduction.
now they are telling amount deducted is lost ..cannot be adjusted
very arrogant..manager told .. you can pay the outstanding and walk away.
My query..
Why should the customer approach LICHFL for loans
1. is it for higher rate of interest-as per manager LICHFL is always 0.5% higher than the market.
2. harassment-no proper clarification/information
3. no transparency-hiding under the garb of policies
4. very poor communication ..they will not respond to your emails/
5. agent depended business capture.. after that agent/broker is no where to be seen.. he will stop taking calls//total disconnect//false promises///
6. and once you are into the trap..real things will start policies//its all there in document//
Out of utter frustration and subjected to financial terror i decided to some how manage /arrange and payback the outstanding balance.
Now for closing i need to pay documentation charges 2500/-+tax(never heard till now)
That means fleecing the hapless customers till the end.
No communication/no information…customer ignorance is company delight
Suggested pl. dont go to LICHFL for Home loan..Their policies/dealings/process/hidden terms conditions sucks.
Request to RBI/GOI
1. Why cant the banks and hfc follow a single pattern..
2. There may be lot of calculations behind the screen but loaning agency should come clean with 2 ROI..fixed and floating
3. Banks should declare on board their fixed rate and floating rate.
4. Floating rate should be the same for all customers of that bank at any given point of time .(No floating inside floating)no variation in old/new customers
5. Fixed rate is to remain fixed for the complete tenure.
6. Banks to provide calculation details with emi/int./principal outstanding/ROI on monthly basis.
7. Government must pitch in bring uniformity//
8. Customer service /ROI (with transparency should be the differentiator.
9. Govt./RBI need to control these and protect hapless home loan seekers from these kinds of fraudulent deals unleashing financial terror.
It pains when some body loots your hard earned money without your info. under the guise of policy/BPLR/Base Rate etc.
Sir, Thanks for a wonderful article. I had taken house loan from Vijaya Bank in 2007 at floating interest rates. I have always been charged much higher rates than the market rates. Vijaya bank currently (Aug 2016) offers housing loan at 9.65% where as in the same period I am being charged 11.75%.
I feel cheated of my hard earned money. My question is that is there anything I can do? I am a army officer and have never defaulted on my payments.
You may approach the vijaya bank to lower the interest rate and inform them that you are willing to pay conversion fees to reduce your home loan interest rate. Hopefully bank will agree else you may transfer your home loan to banks like SBI or ICICI Bank.
Hello Sir,
Your article is informative. I had taken 15 lacs home loan from HDFC at floating rates 2 yrs ago. Duration is 20 yrs at 10.5% ROI. Now my interest rate is 10.05%. HDFC offering me to convert this loan to 9.4% by keeping same EMI 15009 but reducing the total months to 210 by paying 4256 one time fee. Now my total pending moths are showing 240. Another offer was to reduce EMI to 13060 by paying same amount and keeping total months to 240.
So my question is which offer is good for me? My total principal amount is 1384000.
Also RBI announced repo rate yesterday. So shall i wait for the bank to reduce it further or go with the existing offer? Also they are changing current spread from -6.25 to – 6.9 after conversion.
Wait for 2-3 weeks. You may retain the EMI amount and reduce the no of months.
Sir recently indiabulls has cut the home loan interest rate by 15 basis points wef 04/11/2016, sir how it will affect existing customers with floating rates?
Unfortunately this change is only for new customers.
Thanks for d info Sir
Hi Sir,
I have a loan with HDFC and my current EMI is 37374/- at an interest rate of 9.65% for a tenure of 90 months. And the conversion charge is 5750/- where interest will be 9.15% the EMI will be changed to 36674/- and tenure to 89 months. This is the only option provided by the bank. The recent RBI announcement hasn’t decreased any repo rate but should I wait for the next update or can go ahead with the existing conversion offer provided by the bank?
I heard that SBI is very much transparent on case of reducing the rate for existing customers.
I have taken a Home loan with 9.40% interest rate on May 2016 though the current rate reduced to 9.1% but i have not offered that.Any reason for that?
You home loan is linked to MCLR and there is a reset clause of 1 year. Even though SBI has cut MCLR but you will get benefit only next year in May, 2017.
I have take home loan in 2014 from SBI with interest rate 10.10 pa. Max gain account. 6 month back of so it has been reduced to 9.40 pa.
a) SBI is offering 9.1 pa to new customer but not the existing. Can i get that? If yes, how?
b) there is difference between max gain interest rate 9.25 and normal home loan interest rate 9.10? Can i switch to normal home loan? and Should I?
1. You can pay conversion fees and reduce your home loan interest rate but it is at the discretion of the bank.
2. Yes. Normally, Interest rate on maxgain home loan is 0.10% higher compared to normal home loan.
Thank you Nitin.
Hello Nitin sir,
I have taken home loan from SBI max gain in 2012 at 10.5 % ROI now I can ROI in my home loan profile is 9.8 though they are offering 9.15 % to new customer only.
I wanted to change rate of interest to new and reduce my home loan tenure.
May I know what is procedure and processing fee. Is it advisable to wait for some ot reduce further ROI.
You can reduce your home loan interest rate by paying conversion fees. You may approach bank for the same.
Sir,
I have taken Home Loan from LICHFL in 2015 January at 10.10% ROI in the fixed rate of interest for two years. After January 2017, I want to switch over to SBI home loan. Is it right or wrong?. Compare to both which is best SBI or LICHFL? Please guide me, sir.
Before making any decision, you may check with LICHFL what will be the revised interest rate under floating interest home loan. After that you may decide to balance transfer your home loan to SBI.
Your interest rate with LICHFL will be about 9.85. Then they will ask for conversion fee of Rs 2500/- and reduce inerest rate to 9.6.
It will always remain 1% higher than existing customer.
I had very bad experience with LICHFL.
hi I have taken a home loan in june 2016 for 30lakhs , with interest rate of 9.35%, since now the SBI has reduced its interest rates, will I get the benefit of reduced interest rate ie .90% less than earlier value ?
It seems your home loan is linked to MCLR and interest rate reset period under MCLR is 1 year. Therefore, there will not be any change in your home loan interest rate till June, 2017.
I have taken a home loan of 16.5 lacs from indiabulls at adjustable interest rate of 17.05-7.65=9.40% PA on 05.11.2016.Now what would applicable interest rate in present interest reducing scenario and with which rate my applicable rate is connected to change.
There is NO change in your home loan interest rate as Bench Mark Home Loan Rate (FRR) is still the same i.e. 17.05%. Indiabulls has increased the spread only for new customers to offer 8.65% interest rate.
Dear Sir,
I have availed a home loan of
Rs.15,00,000/- from SBI in the year 2015 in the anme of my wife whose
current interest rate is 9.25.Latest notification from the bank is to
avail present low rate of interest, I need to pay 0.5 percent+service
tax. Please guide what to do ? I am really desperate to come to a
conclusion.
Please help!!!!!!!!!!!
With regards
You have not mentioned the revised interest rate offered. Also whether your home loan is linked to base rate or MCLR.
9.25 and perhaps MCLR
Prima facie you can pay conversion fees and reduce home loan interest rate.
I have taken a home loan of 29.7lakhs on 2014 (Max gain )from SBI , the current Rate of interest calculated is 9.4%, For new customers it is around 8.8%, what is the procedure for me to do to get lower interest rate like new customer,
It seems your home loan is linked to base rate. You can approach SBI to migrate your home loan to MCLR and also pay conversion fees to bring interest rate at par with new borrowers.
hello nitin sir i have taken sbi home loan 23 lac. in may 2016 . interest rate 9.4%. For new customers it is around 8.50%, what is the procedure for me to do to get lower interest rate like new customer & i have eligible for new interest rate yes /no.
Please let me know the spread over MCLR on your home loan
Hello Mr Nitin. I had my Home loan disbursement on 22-Jan-2014 from SBI. It is Maxgain account and currently Interest rate is 9.35%. So do I have to pay any conversion fee, in order to reduce interest rate or is it going to be automatically reduced after 22nd Jan, 2017?. Also will you help me understanding “It seems your home loan is linked to MCLR and interest rate reset period under MCLR is 1 year?” this statement. Mainly as I have taken loan on 22nd Jan, 2014, so do you say after 22nd Jan 2015 automatically interest rate goes down each time SBI does a rate cut? Or is the reset happen only once in each year on 22nd Jan to the current applicable interest rate fixed by SBI. Thank you for your help and support.
It seems your home loan is linked to Base Rate if you have not placed any request with SBI to link your home link with MCLR. Only the home loans sanction on or after 1st April 2016 are by default linked to MCLR.
Therefore, to reduce your interest you can shift your home loan to MCLR and also pay conversion fees to reduce spread over MCLR.
Dear Nitin , I have taken partial loan disbursement on 29th April 2016 . Interest rate is 9.45% floating . will i get the reduced interest automatically after 1 year ie after May 2017 ? Should i pay to bank 5000 + ST now to get reduced rates ?
At the time of reset your MCLR will reduce to the prevailing MCLR. I don’t know the breakup of MCLR and spread for 9.45% therefore on payment of conversion you may reduce your interest rate but end up increasing spread.
Dear Nitin,
In short can I summarize the above blog to one sentence as
it is in the best interest of customer to take home loan when the spread is equivalent to MCLR or minimal ?
R
Sir I have taken loan from hdfc rs 18 lk in DEC 2015 at 9.5 % . Now rate is reduced for new customer but bank is charging conversion fees for me. What to dp please tell me
There is no other option but to pay conversion pay and reduce your home loan interest rate else you wait for HDFC to reduce RPLR but it will not bring your interest rate at par with new borrowers.
Why do someone has to pay a conversion fee?. Cant there be a complaint against bank in this case?
They are charging different interest rates from different customers. What is understandable is 0.25-0.5% difference. But if one person does not pay and get his interest rate revised, the difference can reach 2 or more %.
What kind of a floating loan is that?? It is not true floating, but floating part is managed by lender.
Bank’s are changing RPLR at their will especially in reducing interest rate times.
Question: here is can some complaint be lodged.?
You may complain to Banking Ombudsman and subsequently to RBI. Unfortunately, the case will be decided in favor of bank.
You may check my post on conversion fees for more details.
Bank Of Baroda is not charning any fee for existing customer compare to other private bank.
The interest rate is linked to MCLR provided credit score is good.
HDFC charging 13.3% ROI on a home loan of Rs17,50,000 taken in mar 2006 at floating rate. What best to do ? Advice please!
Sir I have taken home loan from HDFC rs 24.26 lk in OCT 2015 at 9.55 % . Now rate is reduced for new customer 8.7 but bank is charging me 8.95 after paying conversion fees for me. What to do please tell me
Please negotiate for 8.7%.
Thank you sir, But when I visited HDFC for negotiating they told 8.95% offered as per the HDFC conversion module and not possible to give 8.7%. What should I do?
You may balance transfer to Bank of Baroda or SBI.
Thank you sir
Dear Sir, I did balance transfer to SBI with ROI 8.65% in April-2017. Now ROI changed to 8.35 %, Will I get that benefit of ROI?
Sir, today I visited HDFC Ltd for conversion enquiry, they said it’s not Bank it’s HFC hence no Base Rate to MCLR conversion. And I asked why I am being charged 8.95 ROI where as new customer getting 8.70 ? they said they will keep 0.25 difference for existing and new customers. Kindly suggest what to do? shall I do balance transfer to other Bank?
On MCLR part they are correct..HDFC Ltd is HFC and only bank’s benchmark rate is MCLR.
You have to negotiate with HDFC Ltd for 8.70% interest rate.
HI Nitin,
I have taken loan from Indiabulls in 2012. current interest rate is 9.65%. They are willing to reduce it to 8.75%. will charge 2800 for this conversion.
1) should i go ahead with above option or get my loan transferred to other bank (HDFC is giving 8.65% at no processing fees)
2) if i stick with Indiabulls, will they automatically move me to MCLR if i get the intrst rate reduced?
3) if i refinance it from HDFC will i be under mclr??
MCLR applicable only for banks. indiabulls n hdfc both r HFCs so no MCLR applicable.
1. I will prefer to pay conversion fees to indiabulls and continue with them
Rest 2 queries are answered by Rajkumar
Hi Nitin, I have a home loan of Rs 40,00,000 for 20 years (starting Mar 2016) from Oriental Bank of Commerce based on Base Rate (which is 9.70% at the the moment).
Currently the Home Loan lending rate on MCLR basis for OBC bank is 8.6%.
Should i do a switchover from base rate to MCLR?
You may switch but just check the negatives of MCLR as i shared in my posts on same topic.
Hi Nitin,
I took a home loan from HDFC Bank in November 2016 at the interest rate of 9.35%, they have updated my interest rate to 9.20%.
HDFC is ready to reduce my rate of interest to the new rate of interest at 8.65% with a conversion charge of Rs 5,800/-.
Currently, the rate of interest for new customers is 8.65%.
HDFC bank has no plans to update my interest rate further, that is what I have been told.
Should I take up the conversion charge and update the interest rate or change the bank to SBI?
Please provide your valuable feedback. Thanks.
I took home load in November 2016*
Please pardon me.
Firstly the home loan is from HDFC Ltd not from HDFC Bank. Your query is not clear to me. You mentioned “HDFC is ready to reduce my rate of interest to the new rate of interest at 8.65% with a conversion charge of Rs 5,800/-” but later you mentioned “HDFC bank has no plans to update my interest rate further, that is what I have been told”.
Please clarify
Please pardon me.
Yes, the home load is from HDFC Ltd.
HDFC Ltd have reduced my ROI to 9.20% from 9.35%, but wont reduce the ROI to 8.65% without charging me around Rs 5,800.
You may pay conversion fees and reduce home loan interest rate. There is no other option.
But for my case HDFC Ltd. not offering to reduce the ROI to 8.65% with the conversion fee. They only offering to reduce ROI to 8.95% with the conversion fee. Please advise why diffrence with the above.
It depends on the risk assessment of the bank and cannot be taken for granted. You may balance transfer to some other bank.
Hi Nitin,
I have outstanding balance of 11,00,000 home loan with SBI with interest rate @ 9.5%. The loan was taken on Aug’13. SBI is asking for conversion charges around 0.45% or Rs.11.500 whichever is higher to reduce the rate of interest @ 8.65%. Will it not be a wrong decision for me if I switch over to the new rate of interest, as Rs.11,500 is too high and I will only get a benefit of 0.85% only which is around Rs.9,350. Also HDFC is offering 8.60% to shifting the loan.
Please suggest
I will not balance transfer to HDFC Ltd. For SBI offer, you need to do cost benefit analysis i.e. upfront cost v/s savings in interest cost.
Hi Nitin,
I took home loan of 35 Lakhs in 2013 from INDIABULLS HOUSING FINANCE for a tenure of 168 months at interest rate of 10.15%. For this 4 years the interest rate climbed to 10.75% and now again has settled down to 10.15%. My current outstanding is 30,50,000 for a period of 127 months.
Indiabulls contacted me and told that they are offering me 8.7% interest rate. I have to pay approx. 10,000 to 15,000 switch over fee. I want to ask two things.
1. Should i switch over? I fear that if in coming years home loan interest increases again then my money will go waste.
2. Why are they making loss for themselves by asking their existing customers to switch over to lower interest rates ? They can make profit from existing customers by not informing them about the lower interest rates.
1. You may switch. Current switch is not a hedge against any future increase in interest rates.
2. They are not doing favor. It is better to collect Rs 15000 upfront and gestation period will be couple of years i.e. time taken you to recover this amount through interest savings. Secondly, they fear of losing customer in case customer opt for balance transfer.
Hi ,
I have taken Home loan of 22 Lacs from UCO Bank at Interest Rate of 9.7 . Now Interest Rate has been changed to 8.75 for New Customers . When i contacted Branch Manager , he told me that i have to Pay Conversion fee of 1% on Outstanding Amount which will be around 22k. What is that?
Is this charges with every bank
should i plan balance transfer to some other bank???
This fees is charged by every bank or HFC but normally it is 0.5%.
Hi Sir,
I have transferred my home loan of Rs. 16lac from HDFC to SBI in the month of July 2016 at MCLR based interest rate of 9.4%. Even after reduction of interest so many times, SBI has not passed any interest benefit. As per the agreement signed with SBI interest rate is dynamic & it is some %age above one year MCLR. SBI is not responding my queries. What to do?
As the home loan is linked to 1 year MCLR therefore any benefit of reduction in MCLR will be passed to you in June 2017 i.e. on completion of one year. You may wait till June 2017.
Thank you
Dear Sir,
most bank provide MITC after home loan disbursement,
if bank told me that your ROI is 8.5%, and after disbursement it is mandatory bank have to mention same ROI (8.5%) in MITC or they have mention different ROI..
It may happen in case there is any change during loan application and date of sanction letter. You can ask bank to fix the spread offered over the MCLR to hedge risk. An email from the employee of bank is sufficient.