Every time the Reserve Bank of India makes a change in the repo rate, house buyers are told that the cost of borrowing will become lower/ higher due to the change. This is why it is necessary to know about the impact of repo rate in home loan as well as the repo rate linked home loan.
What is Repo Rate for Home LoanJust like borrowers are required to pay interest to take home loans from banks, financial institutions are also required to pay interest, for the money they borrow from the RBI. This interest is referred to as the repo rate.
The cost of borrowing for banks goes down when the RBI lowers the repo rate. Similarly, the housing loan interest rates go up when the RBI makes an upwards tweak in its lending rate.
Current Repo Rate for Home Loan:4%
Repo Rate Linked Home LoanAs per the regulation by RBI, banks introduced this scheme under which housing loan rates of interest for floating loans are benchmarked to the repo rate instead of MCLR (Minimum Cost to Lending Rate).
If you’re an existing borrower of a housing loan and your bank has introduced the repo rate-linked home loan, then you can transfer your housing loan from MCLR based to repo rate-based, with no additional spread or margin. However, you might have to pay some administrative charges as per the bank’s policy.
This is all about home loan repo rate.
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Read more:
What is Repo Rate of RBI?
What is the difference between bank rate and repo rate?
What is the difference between repo rate and reverse repo rate?
I hope now you know about the repo rate linked home loan.
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What is repo rate in home loan?
Hemu
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2021-12-29T17:50:29+00:00 2021-12-30T17:46:36+00:00Comment
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