RBI Monetary Policy Meeting (April 2023) impact on home loans: The Reserve Bank of India has decided to keep the Repo Rate unchanged at 6.5%. The decision will give some relief to home loan borrowers, who have been burdened by increasing EMIs since last year. However, borrowers, who are still finding it difficult to manage their EMIs, can explore several options to reduce their burden.
Experts say that in the rising interest rate scenario, borrowers should structure their home loans in a way that will allow them to manage their debt and monthly payments.
“In the rising interest rate scenario, it’s important for consumers to structure their home loan in a way that allows them to manage their monthly payments and overall debt,” said Atul Monga, Founder and CEO of BASIC Home Loan.
Monga suggests the following steps that borrowers can take to structure their home loan in the face of rising interest rates:
Choose a fixed-rate loan
When interest rates are rising, it’s often a good idea to choose a fixed-rate home loan over an adjustable-rate home loan. With a fixed-rate mortgage, your interest rate will remain the same throughout the life of the loan, so you won’t have to worry about your monthly payments increasing with rising interest rates.
Consider a shorter loan term
Another way to structure your home loan is to consider a shorter loan term. While a 30-year home loan may have a lower monthly payment, a shorter loan term, such as 15 or 20 years, will allow you to pay off your mortgage faster and reduce the overall amount of interest you’ll pay over the life of the loan.
Increase your down payment
If you have the ability to do so, increasing your down payment can also help you structure your home loan in the face of rising interest rates. By putting more money down upfront, you’ll reduce the amount of principal you have to borrow and lower your monthly payments.
Refinance your existing home loan
If you already have a mortgage and interest rates have risen since you took out the loan, refinancing may be a good option. Refinancing to a lower interest rate can help you reduce your monthly payments and the overall amount of interest you’ll pay over the life of the loan.
Keep an eye on interest rates
Finally, it’s important to keep an eye on interest rates and be prepared to take action if they start to rise. This may include refinancing your loan, adjusting your monthly budget to accommodate higher payments.