Leading Banks and NBFCs have reduced home loan interest rate for loan upto Rs. 30 lakh to assist Central Government’s mission of affordable housing. Major lending institutions such as SBI, HDFC, ICICI, Axis & India Bulls have reduced rate of interest on Home Loans. Presently, lenders are emphasizing to encourage salaried women borrowers to buy their dream home.
Currently, the reduction in home loan interest rate will help salaried women borrowers to get home loan upto Rs. 30 lakh @8.35%. Whereas, other salaried borrowers can avail the home loan upto Rs. 30 Lakh @8.40%.
Recent reduction in the home loan interest rate will not only help borrowers to save money on their home loan, but also assist them to increase their home loan eligibility. Let us discuss the impact of reduction in the rate of interest of home loan on the borrowers’ home loan eligibility and EMI
Increased Home Loan Eligibility: Reduction in the rate of interest leads to reduction in the EMI per lakh. Currently, EMI per lakh @ 8.35% for the loan tenure of 30 years is Rs. 758.31. Earlier, the same EMI per lakh @ 8.65% for the loan tenure of 30 years was Rs. 779.57.
Let us now understand its impact on home loan eligibility- For instance, a woman salaried borrower’s net income is Rs. 35,000 and she has no financial obligation. Below table shows the Home loan eligibility considering net income of the borrower for the loan tenure of 30 years.
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| Net Income | Home Loan Interest Rate | EMI Per Lakh | Approx. Home Loan Eligibility |
|---|---|---|---|
| Rs. 35,000 | 8.65% | 779.57 | Rs. 26,93,790* |
| Rs. 35,000 | 8.35% | 758.31 | Rs. 27,69,315* |
| Difference | Rs. 21.26 | Rs. 75,525 | |
Low EMI : Any fluctuation in the rate of interest will impact EMI per lakh for the loan amount. With the recent reduction in the rate of interest on the home loan, EMI per lakh got reduced by approx. Rs. 21.
Let us now understand its impact on Home Loan EMI- For instance, a woman salaried borrower is eligible for the home loan of Rs. 25 lakh, for the tenure of 30 years.
| Home Loan Amount | Home Loan Interest Rate | EMI | Total Repayment Amount in 30 Years (Interest + Principal) |
|---|---|---|---|
| Rs. 25,00,000 | 8.65% | Rs. 21,205 | Rs. 55,97,994 |
| Rs. 25,00,000 | 8.35% | Rs. 20,720 | Rs. 54,69,288 |
| Savings | Rs. 485 | Rs. 1,28,706 | |
In the above table, we can easily understand that borrowers shall be saving approx. Rs. 485 per month on their Home Loan EMI, eventually saving approx. Rs. 5,820 per month and approx. saving of Rs. 1.28 Lakh on the entire loan tenure.
PMAY – Credit Linked Subsidy Scheme (CLSS):
Benefits of Pradhan Mantri Awas Yojna: Post Government of India’s initiative for affordable housing for its citizen, demand for affordable housing and mortgage has increased considerably. To capture such demands, housing finance lenders have started their focus on loans of below Rs. 30 lakhs.
There is a reduction in internal rate of return by nearly 100 bps with the assistance of CLSS under PMAY for buying new properties. As per the current scheme for the EWS & LIG segment, borrowers are eligible for 6.5% interest subsidy for the tenure of 15 years of home loans up to Rs. 6 lakh.
The MIG segment will enjoy the benefit under PMAY – CLSS scheme from the financial year 2018 and will be entitled to 3% for loans of up to Rs 12 lakh & 4% subsidy for loans of up to Rs 9 lakh.
Who are eligible for CLSS?
- The Beneficiary family should not have availed of any prior central government assistance under any housing scheme or PMAY scheme.
- Either of the spouse or both in joint ownership are entitled to single subsidy.
- The Beneficiary or any of the family member should not own a pucca house in any part of India.
Details of the scheme
| CLSS Scheme Type | MIG 2 ** | MIG 1 ** | EWS & LIG |
|---|---|---|---|
| Eligibility Household Income (Rs.) | Rs. 12,00,001 to Rs. 18,00,000 | Rs. 6,00,001 to Rs. 12,00,000 | Upto Rs. 6,00,000 |
| Interest Subsidy (%) | 3.00% | 4.00% | 6.50% |
| Carpet Area – Max SQFT | 1184 | 969 | 646 |
| Purpose of Loan | Purchase/Self-Construction | Purchase/Self-Construction | Purchase/Self-Construction/Extension |
| Scheme Validity | 31/12/2017 | 31/12/2017 | 31/03/2022 |
| Subsidy calculated on a maximum loan of | 12,00,000 | 9,00,000 | 6,00,000 |
| Maximum Subsidy (Rs.) | 2.30 lakh | 2.35 lakh | 2.67 lakh |
| Ownership of Women | Not Mandatory | Not Mandatory | Yes* |
Note: Assessment of your eligibility to avail the benefits of CLSS is at the sole discretion of the Indian Government. Contents herein are parameters outlined under the scheme for assessment of entitlement.
*for more details on the scheme please refer www.mhupa.gov.in