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10 August 2011

Help EMI Increased! Can I Change my Home Loan from Floating to Fixed Rate of Interest?

People who have borrowed huge amount as home loans are suddenly facing the hammer. With the Reserve Bank suddenly increasing its prime lending rate, all lending institutions and banks have increased their interest rates. The result is borrowers are facing the crunch! Increased EMIs.
How to come out of this situation as a borrower? One way out would be to consider that you can ask your bank to change your loan repayment policy. Even if you have taken your home loan on fixed rate of interests or floating rate of interests there is an option that you can change the agreement with the respective lending bank with mutual discussion.
The first response of any home loan borrower would be that you feel your other counterpart home loan borrower who has selected fixed rate of interest is safe. They are paying high interest rate but do not have to bear the insecurity of the future changing banks policies. No, this is not so , though the bank promises to fix an interest rate for lending it is seen that they have the clause wherein they can change the interest rate as per changing bank policies. So every home loan borrower will have to face the same situation which ever home loan repayment schedule you have selected.
Jumping from floating to fixed rate of interest will also have an effect on your EMI, but you will also end up paying their transfer charges. Usually it is seen that banks charge 1.5 to 2% of the outstanding loan amount for transferring your home loan from floating to fixed rate of interest. So you end up paying this amount. And it is also observed that here are hardly any banks that will keep to their word of lending on fixed rate of interest.  Even if they want they can’t! Since the sole finance lenders increase their rates and they have to adapt to be in the race!

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