Prospective homebuyers should take advantage of low interest rate regime

Creating an asset called home is one of the big-ticket and cherished goals of one’s life. The need to move into one’s own home as opposed to paying rent to the landlord has become all the more crucial in these times. Several people had to leave their rented premises and move to their hometown during covid-19 induced lockdowns. Paying rent on unoccupied premises and not using it adds on to the sunk-cost for the tenant. Even otherwise, shifting homes and landlords always comes with its own share of concerns in the long run.

The last call: The current environment is perhaps the last call for homebuyers looking to move into their own homes. With the stock of unsold inventory decreasing in good locations across cities and home loans available at rock-bottom rates, the smart buyer is already latching on to the real estate boom about to unfold in the next few months.

Opportunities: Home loan interest rates are at a multi-year low, giving an opportunity to the home loan takers to create a long-term asset. To an end-user who wants to buy a home for living or for an investor looking to capitalize on low real estate prices and attractive rental yields, the present environment is throwing up huge opportunities for buyers of residential properties.

With the fear of inflation still looming large, the Reserve Bank of India (RBI) recently decided to maintain status quo with the policy repo rate. It is widely expected that the rate of interest may have reached its bottom and may even witness a slight uptick in the near future. For homebuyers, this could be the best time to borrow at rock-bottom rates and gain from the low interest rate environment.

What lenders are offering: Most leading banks and housing finance companies are offering home loans starting at around 7%. While approaching banks or lenders, besides the interest rate, keep an eye on the charges including processing fees and other legal charges. The rate of interest of most banks is nowadays linked to the RBI’s repo rates. The actual rate of interest may vary depending on the borrowers’ profile, including their credit score, income and age. Further, to empower women, most lenders offer further discounts of 0.5% to female borrowers who stand to gain if the home loan is in their name.

Low rate translates into huge savings: Choosing a lender that offers you a competitive rate of interest helps in saving interest cost. While taking a home loan for the first time or getting it refinanced from another lender at a lower rate, even a difference of 1% can result in a saving of a few lakh rupees. For example, if you take a loan of ₹45 lakh for a period of 15 years, or 180 months, a difference of 100 basis points (8% as against 9%) in rate of interest will result in a savings of nearly ₹5 lakh, nearly 13%.

The low interest rate regime also works to the borrower’s advantage in the long run. A bigger portion of the EMI consists of interest in the initial years of the home loan. Therefore, the current low interest rate environment will keep your interest cost lower, and if at all rates increase in future, the interest burden will be considerably lower.

Investing deals: Even the investor community is making a comeback in a big way. Unlike in the past, when the interest rate hovered around 10% and rental yield stayed at around 3%, today, with a rate of interest of around 7%, the gap between rental yield and rate of interest has reduced.

With tax breaks thrown in and real estate prices also lying low, real estate as an investment option is gaining currency among several investors. Remember, real wealth is created not at the top of the cycle but when the asset class is near its bottom and when the cycle turns. Real estate investors know this and are making use of the opportunities available in the marketplace.

Tips while buying: The current real estate scenario, when seen in context of the low rates, is a win-win proposition to a homebuyer. For a smoother home buying experience, you may use some of these tips—Explore two to three locations before finalizing your home, visit a few builders and ask about the authenticity of their project, search for low-cost lenders, and, finally, keep your credit score healthy for availing competitive home loan interest.

https://www.livemint.com/money/personal-finance/prospective-homebuyers-should-take-advantage-of-low-interest-rate-regime-11629996198346.html

Creating an asset called home is one of the big-ticket and cherished goals of one’s life. The need to move into one’s own home as opposed to paying rent to the landlord has become all the more crucial in these times. Several people had to leave their rented premises and move to their hometown during covid-19 induced lockdowns. Paying rent on unoccupied premises and not using it adds on to the sunk-cost for the tenant. Even otherwise, shifting homes and landlords always comes with its own share of concerns in the long run.

The last call: The current environment is perhaps the last call for homebuyers looking to move into their own homes. With the stock of unsold inventory decreasing in good locations across cities and home loans available at rock-bottom rates, the smart buyer is already latching on to the real estate boom about to unfold in the next few months.

Opportunities: Home loan interest rates are at a multi-year low, giving an opportunity to the home loan takers to create a long-term asset. To an end-user who wants to buy a home for living or for an investor looking to capitalize on low real estate prices and attractive rental yields, the present environment is throwing up huge opportunities for buyers of residential properties.

With the fear of inflation still looming large, the Reserve Bank of India (RBI) recently decided to maintain status quo with the policy repo rate. It is widely expected that the rate of interest may have reached its bottom and may even witness a slight uptick in the near future. For homebuyers, this could be the best time to borrow at rock-bottom rates and gain from the low interest rate environment.

What lenders are offering: Most leading banks and housing finance companies are offering home loans starting at around 7%. While approaching banks or lenders, besides the interest rate, keep an eye on the charges including processing fees and other legal charges. The rate of interest of most banks is nowadays linked to the RBI’s repo rates. The actual rate of interest may vary depending on the borrowers’ profile, including their credit score, income and age. Further, to empower women, most lenders offer further discounts of 0.5% to female borrowers who stand to gain if the home loan is in their name.

Low rate translates into huge savings: Choosing a lender that offers you a competitive rate of interest helps in saving interest cost. While taking a home loan for the first time or getting it refinanced from another lender at a lower rate, even a difference of 1% can result in a saving of a few lakh rupees. For example, if you take a loan of ₹45 lakh for a period of 15 years, or 180 months, a difference of 100 basis points (8% as against 9%) in rate of interest will result in a savings of nearly ₹5 lakh, nearly 13%.

The low interest rate regime also works to the borrower’s advantage in the long run. A bigger portion of the EMI consists of interest in the initial years of the home loan. Therefore, the current low interest rate environment will keep your interest cost lower, and if at all rates increase in future, the interest burden will be considerably lower.

Investing deals: Even the investor community is making a comeback in a big way. Unlike in the past, when the interest rate hovered around 10% and rental yield stayed at around 3%, today, with a rate of interest of around 7%, the gap between rental yield and rate of interest has reduced.

With tax breaks thrown in and real estate prices also lying low, real estate as an investment option is gaining currency among several investors. Remember, real wealth is created not at the top of the cycle but when the asset class is near its bottom and when the cycle turns. Real estate investors know this and are making use of the opportunities available in the marketplace.

Tips while buying: The current real estate scenario, when seen in context of the low rates, is a win-win proposition to a homebuyer. For a smoother home buying experience, you may use some of these tips—Explore two to three locations before finalizing your home, visit a few builders and ask about the authenticity of their project, search for low-cost lenders, and, finally, keep your credit score healthy for availing competitive home loan interest.

https://www.livemint.com/money/personal-finance/prospective-homebuyers-should-take-advantage-of-low-interest-rate-regime-11629996198346.html