RBI cuts repo rate, Know how much you can save on Home Loans

A 0.25 per cent reduction may not appear much at this point, but if the rate keeps falling over a period of time and banks continue to pass on the benefit, the cumulative impact could be huge. There is a large amount of savings in the interest outgo over the long-term.

Borrowers stand to gain as and when banks reduce their lending rate. On a 9.50 per cent interest on a home loan of Rs 40 lakh for 15 years, the total interest burden can be reduced by Rs 1 lakh if the home loan rate also reduces by 0.25 per cent. Here’s how much you can save on various loan amounts:

Loan Amount EMI @ 9.50% EMI @ 9.25% EMI Saved Interest Saved
25 Lakh 26105 25730 -375 67645
50 Lakh 52211 51460 -751 135291
75 Lakh 78317 77189 -1128 203000

Reduce tenure
Let’s assume you had taken a home loan of Rs 40 lakh at an interest rate of 10.50 per cent for 180 months with an EMI of Rs 44,216. Today, after say three years, the outstanding stands at Rs 36,12,000.
If your bank reduces the rate by 0.25 per cent, you have the option to keep the EMI constant, and the tenure falls by about nearly 40 months.