Home Loan: With RBI maintaining status quo on repo rate, here's what you can do with your home loan

The Reserve Bank of India, in its Monetary Policy Committee meeting earlier this week, opted to maintain a pause on the repo rate hike. The repo rate, or the rate at which banks borrow from the RBI, has been constant at 6.5 per cent since February. The repo rate influences the interest to be paid on home loans and inflation.

Since the RBI has maintained the repo rate status quo at 6.50 per cent, banks are unlikely to revise the interest rates soon.

With the central bank maintaining the status quo on repo rate, borrowers need to understand how their repayment plans can be affected. Here are some tips for those who are paying home loan EMIs to save more after RBI’s decision.

How to save more on home loan EMIs

Choose to refinance your loan: Borrowers can go in for refinancing their loan to opt for better terms like a reduced interest rate. This will decrease their burden of repayment.

Supplement loan with extra payments: Home buyers can integrate additional payments in their loan tenure to finish off their repayment earlier. When an individual makes an Equated Monthly Instalment (EMI) payment, part of the money goes towards the interest levied on the loan. If there are additional payments done, the amount will go wholly towards the principal, leading to a reduced monetary obligation over time.

Make high-interest debt a priority: If an individual has a number of other financial obligations apart from home loans like credit card debt or other payments, they need to ensure that they settle the payments with a higher interest rate first. This can lead to savings in the long run and will help borrowers claim additional payments for their home loan EMI later.

Transfer home loan: Buyers can get their home loan transferred to another lender that is offering more favourable terms. This can lower their burden of interest payments. The best time to opt for a home loan transfer is when the rate on the existing home loan is higher than the market interest rate.

Choose to make a higher down payment: Borrowers can make a higher down payment if they have just opted for a home loan. This can lead to lower EMIs in the longer run. It can lead to more favourable interest rates.

Using these tips can make it easier for home buyers to choose the best repayment options in line with the RBI’s pause on repo rates.