Will Repo Linked Home Loans Have Fixed Principal?

I am a bank professional working in one of the leading government banks of India. And I must tell you that with effect from October 1, State Bank of India (SBI) changed its repo rate-linked home lending programme. For salaried and non-salaried borrowers, the bank has now slightly raised interest rates. So, if you are wondering will repo linked home loans have fixed principal or not, I will tell you all about it.

In July of this year, SBI became the first to provide home loan programmes linked to repo rates. SBI discontinued this programme on September 16 in order to alter the product and interest rates. From October 1, 2019, banks were required to tie all new floating-rate home, vehicle, and other retail loans to external benchmarks in accordance with Reserve Bank of India (RBI) regulations. A number of banks have begun to provide loans with repo-linked lending rates.

Repo linked home loan emi with 3 principal

SBI has also returned with a fresh home loan programme linked to repo rates. All floating rate loans issued to micro, small, and medium-sized enterprises (MSMEs), housing companies, and retail clients use the repo rate as the external benchmark.

Before, borrowers of floating-rate house loans only had one choice: loans based on the lending rate determined by the marginal cost of capital (MCLR). They can now, however, obtain a mortgage that is tied to the repo rate.

The borrower must earn a minimum of Rs. 6 lakh per year in order to qualify for SBI's repo-rate-linked home loan programme. The loan can be repaid over a maximum of 33 years. In the case of projects that are still in the planning stages, a maximum moratorium period of up to two years is provided in addition to the 33-year maximum loan term. Therefore, the total loan term in such circumstances cannot exceed 35 years.

SBI charges a margin of 265 basis points (bps) above the RBI repo rate, which is currently 5.4%. Its external benchmark-based loan rate has increased from October to 8.20% as a result of this. Up until September, SBI offered house loans to new customers at rates starting at 8.05 percent.

The current effective home loan rate changes for salaried borrowers. The bank will now add a 15 basis point premium to loans under Rs 30 lakh, bringing the effective rate for housing loans down to 8.20 percent. After adding a premium of 40 bps, the interest rate for loans between Rs 30 lakh and Rs 75 lakh will now be 8.45 percent. The effective lending rate is increased by 50 basis points for all loans drawn beyond Rs 75 lakh, bringing it to 8.55 percent. The additional premium for non-salaried borrowers is 15 bps, according to SBI.

In this mortgage loan programme, the borrower is required to make equivalent monthly payments totaling at least 3% of the principal loan amount annually. You must pay back the principal amount plus interest on a home loan of Rs. 50 lakh plus a minimum of Rs. 1.50 lakh per year.

Borrowers choosing a repo-linked home loan scheme incur additional charges in addition to interest rates. In addition to service tax, the bank assesses processing fees equal to 0.35 percent of the loan amount. The minimum and maximum fees are Rs 2,000 and Rs 10,000, respectively, plus service taxes.

Now you have the answer to your query, “will repo linked home loans have fixed principal?”.