Home loans are flexible, less burdensome than the requirement to raise too much money, and are also time-based. In addition, there are also tax advantages on the repayment of home loans. Remember, investing in a home is like investing in an asset that could generate one of the highest rates of appreciation to come.
Earlier this week, SBI via its Twitter account said, “#GoAhead, #GoBig. Get your dream home with SBI Home Loans.”
SBI has launched a credit score-linked home loan interest rate. Moreover, the rates are floating and linked to the repo rate.
Since April 1, 2022, SBI has been offering different types of home loans at interest rates ranging from 6.65% to a maximum of 8.60%. But the biggest beneficiary is regular home loans.
However, as mentioned, the amount of EMI you pay on your home loans will depend on your credit score.
Here’s how your credit score will affect your EMIs for regular SBI home loans.
Credit Score 800 or Less: SBI offers the lowest rate of 6.65% on regular home loans on this CIBIL score. The maximum gain is 7.05%.
Credit score 750-799: the lender offers a rate of 6.75% as a term loan, while the maximum gain can reach 7.15%.
Credit score 700-749: The regular home loan rate starts here at 6.85%, while the maximum gain is 7.25%.
Credit score 650-699: The bank grants 6.95% as a term loan, with a maximum gain of 7.35%.
Credit score 550-649: The bank grants an interest rate of 7.15% on regular home loans while the maximum gain is 7.35%.
No CIBIL score: Then regular mortgage rates will be 6.85% at SBI, while the maximum gain is 7.25%.
From the above, it can be said that a higher credit score gives better chances of getting the lowest interest rates on home loans and therefore cheaper EMIs.
There are many advantages that SBI also offers on its home loans.
First, the bank grants 5 basis points of concession to female borrowers subject to a maximum EBR of 6.65%.
Second, the bank places a premium of 10 basis points on the card rate for loans up to ₹30 lakh for LTV >80% and
Third, top-up loans are not permitted under the overdraft category for the loans below ₹20 lakhs and above ₹2 crore. In addition, the interest rate on an add-on loan should not be less than the interest charges of the underlying home loan.
SBI offers rates of 7.05% to 7.65% on add-on home loans, while overdraft rates in this category range from 7.35 to 7.95%.
Also, it should be noted that the maximum gain feature is only available on “ready to move in” properties.
In addition, a 5 basis point concession is offered under the Privilege & Shaurya HL & Apon Ghar HL if the salary account is maintained with SBI under the salary package.
Loans linked to the repo rate:
Simply put, repo rate linked lending means that every RBI decision on India’s political repo rate will have an impact on the cost of borrowing for homebuyers.
If the policy repo rate is increased, it could lead to higher mortgage interest rates or vice versa. However, it depends on the banks whether or not they pass on the repo rate change to the borrowers. Also, banks may not necessarily revise lending rates in the exact amount of the change in the repo rate.
The reverse repo rate can be referred to as the “call option” or the “interest rate” that a bank must pay to qualify for credit from the central bank. Just as borrowers have to pay interest to banks on their loan amount, banks also pay interest rates to RBI for available funds. Banks deposit their treasury bills or gold in the central bank for overnight credit during the period of liquidity shortage.
In the first fortnightly monetary policy, RBI kept the repo rate unchanged at 4% for the 11th consecutive time. The MPC also decided to remain dovish while focusing on withdrawing accommodative measures to ensure inflation remains on target going forward while supporting growth.
CIFAR, in its April 2022 Monetary Policy Research Note, said: “We continue to expect the change in stance to be followed by a shallow rate hike cycle, the rate repo being increased by 25 basis points each in August and September 2022. The 10-Year G-sec yield topped 7.1% after the policy announcement.We expect it to increase to as high as 7.4% in the first half of fiscal 2023 as market views on the number and timing of rate hikes crystallize.”
What is a credit score?
Credit score is essential for loan approvals. These are three-digit dashboards that give a clear view of a borrower’s credit health.
The CIBIL score gives a view of how a borrower manages his credit. Also, it gives a clear understanding of the ability of borrowers to opt for loans.
Simply, a credit score helps understand whether you are a reliable or risky borrower and banks sanction loans to such borrowers accordingly.