As a new customer, you will definitely get housing loan at 10%-10 .15%. If you are an existing SBI customer, interest rate on your housing loan will go down by 25 basis points (1 basis point is equal to 0.01%). Even if you are not a customer of SBI, it is good news for you because other banks typically tend to follow SBI on rate cuts.

The interest rate on my existing loan with SBI will be way above the new rates even if it goes down by 25 basis points. Do I have any options?

Yes, you can ask the bank for a lower rate (current rates) on your existing loan. The bank will agree to it if you are ready to pay a conversion fee, usually 1% of the outstanding loan amount.

I have a housing loan with another bank. How can I benefit from the new SBI rates?

Compare the interest rate you are paying with the SBI rates. If SBI is offering a lower rate, you can consider switching your loan to SBI. With the abolition of prepayment penalty, you only have to bear costs such as processing fee and valuation charges. In fact, SBI has capped its processing fee for new customers (those shifting in from other banks) at . 1000. Even other banks such as Bank of Baroda, Central Bank of India, Indian Bank and Corporation Bank have waived off the processing fee for a limited period because of the ongoing festive season. If you have a housing loan of . 50 lakh, the legal and valuation charges, stamp duty, processing and so on should cost around . 15,000-20 ,000.

How much can I save by switching to SBI?

It depends on the interest rate and the loan amount. For example, if you are currently paying 12% on your housing loan, your EMI (at 10.15%) will come down by . 5,818 per month.The total interest cost saved will be more than . 10 lakh over the life of the loan.

What is the right time to switch?

It makes sense to switch if the SBI interest rate is at least 50 basis points lower than your existing rate. Also, if the loan amount is over . 50 lakh, borrowers can consider switching the loan. However, you must do a detailed the cost-benefit analysis with actual numbers. There are several EMI calculators available online or you can even seek your lender's help with the math.

Source: Economic Times