In October 2019, RBI mandated that it was necessary for every financial institution to switch to benchmark rates, preferably MCLR (Marginal Cost of Funds Lending Rate). This move was primarily aimed at promoting transparency and thereby benefitting both lenders and customers.
Borrowers can also opt for balance transfer over to repo-linked home loans so as to claim better benefits. Previously, RBI often decreased the repo rate, unfortunately, the benefit of which was not transferred to the home loan borrowers by the lenders. Lenders used to determine a lending rate that did not consider the changes made by RBI.
Here is a list of things you need to consider before switching over to repo-linked home loans –
Eligibility criteria
The first thing to consider in this context is the eligibility criteria imposed by financial institutions. An individual with an annual income of and above Rs. 6 Lakh is eligible to apply for a change in their credit linking structure.
Reduced rate of interest
Repo-linked home loans are substantially cheaper as one can enjoy reduced interest rates on repaying the home loans. As you opt for a balance transfer, it can benefit both new and existing customers due to the slashed rates.
Additionally, you should also consider other factors that impact your home loan interest rate. For instance, your repayment history and credit score are prime factors in this regard. Therefore, make sure you are aware of such points before you switch to repo linked loans to make the most of it.
