home loans are flexible, less cumbersome than needing to collect a lot of cash, and are also time-based. Apart from this, there are also tax benefits on repayment of home loan. Not to forget, investing in a home is like investing in a property that can further fetch one of the highest appreciation rates.
Earlier this week, SBI through its Twitter account said, “#GoAhead, #GoBig. Get your dream home with SBI Home Loan.”
SBI is reducing the home loan interest rates by up to 6.65%. However, the home loan rates will depend on the credit score of the borrower. Women borrowers will be the biggest beneficiaries of SBI home loans.
SBI has introduced credit score-linked home loan interest rate. Also, the rates are temporary and linked to the repo rate.
With effect from April 1, 2022, SBI offers various types of home loans at interest rates ranging from 6.65% to a maximum of 8.60%. But the biggest advantage is with a regular home loan.
However, as mentioned, the EMI you pay on your home loan will depend on your credit score.
Here is how your credit score will affect your EMI on regular SBI home loan.
CIBIL Score:
Less than or equal to 800 credit score: SBI offers the lowest rate of 6.65% on regular home loans against this CIBIL score. The maximum profit is up to 7.05%.
750-799 Credit Score: The lender offers 6.75% rate as a term loan, while the maximum leverage is up to 7.15%.
700-749 Credit Score: Here regular home loan rates start at 6.85%, while the maximum leverage is 7.25%.
650-699 Credit Score: Bank gives 6.95% as term loan with maximum return of 7.35%.
550-649 Credit Score: The bank offers 7.15% interest rate on regular home loans while the maximum leverage is 7.35%.
No CIBIL Score: Then the rate of regular home loan in SBI will be 6.85% while the maximum benefit will be 7.25%.
From the above, it can be said that a higher credit score gives better chances of lowest home loan interest rates and hence cheaper EMIs.
There are many benefits that SBI offers on its home loan as well.
Firstly, the Bank gives a concession of 5 basis points to women borrowers subject to a maximum EBR of 6.65%.
Secondly, the bank pays a premium of 10 basis points on the card rate for loans up to 30 lakhs for LTV > 80% and <= 90%.
Third, Top-up loan is not allowed under overdraft category for the following loans 20 lakh and above 2 crores. Also, the interest rate on the top-up loan should not be less than the interest rate charged under the underlying home loan.
SBI offers 7.05% to 7.65% rates on top-up home loans, while overdraft rates in this category range from 7.35-7.95%.
Also, it needs to be noted that the maximum profit facility is available only on ‘ready to move-in’ properties.
In addition, a concession of 5 basis points is given under Privilege and Bravery HL and Upon Ghar HL, if a salary account is maintained with SBI under the salary package.
Repo Rate Linked Loan:
In simple words, repo rate linked loans means that every decision of RBI on India’s policy repo rate will have an impact on the borrowing cost of home buyers.
If the policy repo rate is increased then it may lead to increase in home loan interest rates or vice versa. However, it is up to the banks to pass on the change in the policy repo rate to the borrowers or not. Also, there is a possibility that banks may not revise lending rates to the exact amount of changes in the repo rate.
Repo rate can be referred to as ‘repurchase option’ or ‘interest rate’ which the bank has to pay to get loan from the central bank. Just as borrowers have to pay interest to banks on their loan amount, banks also pay interest rates to RBI to receive funds. In times of liquidity crunch, banks park their treasury bills or gold with the central bank to get overnight credit.
In the first bi-monthly monetary policy, RBI kept the repo rate unchanged at 4% for the 11th consecutive time. The MPC also decided to remain accommodative with a focus on the return of housing to ensure that inflation remains within the target while supporting growth.
ICRA, in its research note for monetary policy for April 2022, said, “We expect a change in stance to be followed by a volatile cycle, with an increase in the repo rate by 25 bps in August and September 2022. 10- Policy The G-Sec yield jumped to over 7.1% after the announcement of the announcement. We anticipate it to rise to 7.4% during H1 FY2023, as market views crystallize on the number and timing of rate hikes.”
What is a Credit Score?
Credit score is important for loan approval. They are three-digit scoreboards that provide a clear view of a borrower’s health in terms of credit.
The CIBIL score measures how well a borrower manages his credit. Also, it gives a clear understanding of the borrowers’ ability to take loans.
Simply, a credit score helps to understand whether you are a reliable borrower or a risk-averse one and banks sanction loans to these borrowers accordingly.