MyMoneyMantra Exclusive: Post Moratorium, Reset Home Loan & Pay Lower EMIs

MyMoneyMantra Exclusive: Post Moratorium, Reset Home Loan & Pay Lower EMIs

In less than a month RBI’s COVID 19 relief cum EMI Moratorium will expire. Thus from September 1, 2020 your Home Loan EMIs will be due again. You will be liable to pay the outstanding loan and accrued interest rate as per the new EMI schedule released by your bank.

Since March 2020, the spread of pandemic has drastically impacted the financial activities across the world, let alone India or your city. From New Delhi to Bangalore, Gujarat to Kolkata, everywhere people have been facing cash woes owing to disrupted business and salary pay cuts. While your cash flows have not come to pre COVID levels, your EMIs will come to pre-COVID levels and also bring along the capital interest for these six months.

Have You Booked Your Home Under PMAY Yojana Yet? Top 10 Best Home Loan Interest Rates in India

How to manage these EMIs post expiry of Moratorium?

Further extension of Moratorium is neither a possibility nor a recommended move.

At MyMoneyMantra, serving customers the way they want is one of the guiding principles.  Thus we have built a step-by-step guide to help customers manage their Home Loans with utmost ease, post Moratorium.

You should not wait till August 31, to reset your loan. Use this guide and take practical steps to ease out your Home Loan EMIs without making any hole in your pocket.

Inflated Home Loan Liability due to Moratorium

Let’s take an example to understand the impact of Moratorium on your Home Loan and finances.

Say, you opted for a Moratorium for a loan of Rs 50 Lakh Home Loan in March 2020. You were in the middle of your loan that was serviced at 9% rate of interest. The residual tenure was 10 years and you had already served 120 EMIs.

 

Best Home Loan Interest Rates in India

 

After 120 months, overall outstanding loan will be approximately Rs. 3551294

Using the Home Loan Moratorium Calculator, the IMPACT of Moratorium on Home Loan will be as follows:

  Pre Moratorium Post Moratorium

Number of EMIs

120

130

EMI

Rs 44, 986

Rs 44, 986

Loan Outstanding

Rs 3551294

Rs 3551294 + 428946
(EMI remains same)

Rs 3551294 + 247528
(Tenor remains same)

Interest Payable

57,96,711

62,25,657*

Now you have two choices:

A: To continue servicing similar EMIs and extend the loan tenure

B: Or, to not change the tenure and increase the EMI size.

In Case A: EMI remains same at pre-moratorium level i.e. Rs 44,986.

So number of EMIs Post Moratorium Period will be 130 Months in place of 120 months.

Overall Loan Tenure will be 250 Months, i.e 10 more EMIs for 6 months of Moratorium.

*Additional interest cost due to Moratorium 4,28,946.

  Pre Moratorium Post Moratorium

Number of EMIs

120

130

EMI

Rs 44986

Rs  44986

Loan Outstanding

Rs 3551294

Rs 3980240

Additional interest cost

Rs 428946

Overall Interest Payable  

Rs 57,96,711

Rs 62,25,657

In Case B: You decide to not change TENOR.

So, your EMI amount will change from Rs 44,986 to Rs 47,049

Overall Loan Tenure remains the same, i.e. 240 Months

Since there is no change in tenure, number of EMIs to be paid post moratorium period is 120 Months

Increase in the interest payable is Rs. 2,47,528

  Pre Moratorium Post Moratorium

Number of EMIs

120

120

EMI

Rs. 44, 986

Rs.  47049

Loan Outstanding

Rs. 3551294

Rs. 3798822

Additional interest cost

247528

Overall Interest Payable  

57,96,711

60,44,239

How to manage your loan?

As Home Loans are big ticket loans, the impact on the size of loan is really a significant one.

By paying higher EMIs or serving longer term & further paying additional interest is not going to ease your cash woes.

However there is a way out: Balance Transfer.

As you know the RBI has reduced benchmark lending rates historically, Home Loans are available for as low as 6-7%. Thus, it is recommended to Opt for Balance Transfer and enjoy the benefit of lower rate of interest.

If you happen to steal lower rate of interest by 150 bps or 200 bps points, you will not only manage your loan better, but will also be serving lower than pre-Moratorium EMIs.

We recommend you to check the latest Balance Transfer Home Loan Interest Rates:

SBI

6.85%

HDFC

6.95% p.a

Bank of Baroda

6.85%

ICICI

8%

Cost Benefit Analysis: Home Loan Balance Transfer Vs Pre Moratorium Home Loan

  Pre Moratorium Post Moratorium Post Moratorium

Balance Loan Amount

3551294

Rs. 3798822
(Outstanding if tenure remains same)

Rs. 3980240 (Outstanding tenure increased by 10 months & EMI remains same)

RoI

9.00%

6.95%

6.95%

EMI

44, 986

Post Moratorium EMI

47050

EMI After Balance Transfer

44,010

43,217

Tenure

10 Years + 6 month Moratorium

10 Years

11 years

Thus, it is evident that it will be cost effective to switch to a better rate of interest on Home Loan. It will not only reduce your EMIs but will also save you from additional interest burden of Moratorium.

It is important to plan the balance transfer now rather than waiting for Moratorium deadline to expire. By planning for a balance transfer you can ensure better rate of interest with a chosen lender. Besides, you will get enough time for meeting eligibility criteria and fulfilling documentation requirements.

What You Need for Home Loan Balance Transfer?

Documents:

  • Employment proof- Identity Card issued by Employer
  • Proof of Identity: PAN/ Passport/ Driver’s License/ Voter ID card
  • Proof of Residence/ Address: any of the recent utility bills/ Passport/ Driving License/Aadhar Card
  • Property Papers:
    • NOC from Society/ Builder
    • Registered agreement for sale
    • Occupancy Certificate, property tax certificate & others as per your state
    • Previous sale agreements
  • Account Statement: Last 6 months Statements for all Bank Accounts
  • Income Proof for Salaried Applicant/ Co-applicant/ Guarantor: Salary Slips & Copy of Form 16 for last 2 years or copy of ITRs
  • Income Proof for Non-Salaried Applicant/ Co-applicant/ Guarantor: Business address proof, IT returns and Balance Sheet & Profit & loss A/c for last 3 years, Business Licence, TDS Certificate, Certificate of qualification for professionals
  • Documents from the previous Bank:
    • List of original documents submitted to Bank
    • Loan A/C statement for last one year
    • Sanction Letter
    • Interim period security

Due to Moratorium it will be important to establish your repayment capacity substantially for Balance Transfer. For more questions, use professional advice.

 

Also Read: Why Plan Home Loan Balance Transfer In Advance?

 

To apply online for Home Loan, Personal Loan, Credit Card, Business Loan & LAP visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 4 million+ happy customers since 1989.

 

Home Loan

Share This:
Category: Home Loan