What should be your ideal home loan tenure? If you are struggling with this question, here are the factors that may help you to make the right choice.
Choosing the right home loan tenure is crucial to ensure that financial situation of the borrower remains stable throughout the repayment period. This is more important at a time when borrowers are already reeling under the pressure of lengthening loan tenures and rising interest rates due to Reserve Bank of India’s (RBI’s) repo rate hikes. Before hitting the pause button on this hike for the second time in its last policy, the central bank raised the repo rate cumulatively by 250 basis points since May 2022.
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For most banks, the external benchmark to which their home loans are linked is the repo rate. So, with the hike in repo rate, all existing home loans on floating rates of interest became expensive.
Currently, the repo rate stands at 6.5 percent. This is the second incidence when the RBI paused the rate. This is good news for home loan borrowers as it signals that interest rates are stabilising. However, the best is yet to come when RBI starts cutting the rate.
Source: cnbctv18.com