It’s important for consumers to structure their home loans in a way that allows them to manage their monthly payments and overall debt. Here are some steps you can take to structure your home loan in the face of rising interest rates.
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New Delhi: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting that began on 3 April 2023 will conclude today and Governor Shaktikanta Das is expected to brief media about the decision of the committee tomorrow.
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It’s widely believed that the RBI will resort to a smaller 25 basis points (bps) rate hike in the current monetary policy revision. After the last revision that happened in February this year, the repo rate has increased to 6.25 per cent. The continuous rise in the interest rates has led to higher EMIs for home loan buyers hugely impacting the housing segment.
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It’s important for consumers to structure their home loans in a way that allows them to manage their monthly payments and overall debt. Here are some steps recommended by Atul Monga, Founder and CEO of BASIC Home Loan, which you can take to structure your 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.
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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.
