The rate cut war continues. When the State Bank of India (SBI) offered new home loans at 8 per cent interest (for the first year), HDFC upped its switching fees to 3 per cent to prevent the exodus of its customer.
Now, in a move to retain old customers, ICICI Bank is offering attractive home loan swaps for existing customers. If you have already taken a home loan from ICICI Bank at a higher rate of interest, you could now book yourself at 9.75 per cent interest rate by paying 0.5 per cent as switching fee on your existing loan. And, you need to decide if you want to switch by April 30, 2009.
In such a scenario, Wealth explores if these are indeed deals to grab. CEO of Apnaloan.com, Harsh Roongta advices, "If the current rate on your loan is 11 per cent, by switching you will be saving a considerable amount - a difference of 2.25 per cent this year!"
As a thumbrule, Roongta suggests that if the interest rates on your new loan and is even 0.5 per cent lower than the old one, you stand to gain by shifting.
The fine print:
Experts say that limited period offers are called teaser loans. And typical features of teaser loans are that you might have to pay a high charge if you decide to pre-close the loan or you will have to bear high interest rate at the expiry of the teaser schemes.
Though that does not mean the current slew of schemes would adopt such practices, it pays to be aware and stay vigilant.
So before you sign the dotted line, make sure you read all the terms and conditions in your agreement, especially with respect to the prepayment penalty clause and the interest reset clause.
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Interest rate offered for new customers
For a loan amount of Rs 20 lakh, you can get a home loan for 20 years at the following interest rate: SBI - Special Home Loan Schem 8%, LIC Housing Finance Limited 8.75%
ICICI Bank 9.75%, HDFC 9.75%.
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Note: This story was sourced from CBNC-TV18’s website Moneycontrol.com (wealth.moneycontrol.com), which received many comments saying readers enquired about this scheme with ICICI bank, but the bank claimed that there was no such offer. When CNBC-TV18 contacted the bank to confirm this, they asserted that this scheme would be available only on case-to-case basis. CNBC-TV18 paid a visit to one of the branches of ICICI; they told CNBC-TV18 that this scheme applied to a loan amount of Rs 20 lakh or less. For loan amounts over Rs 20 lakh, the interest rate and swap rate are slightly higher. CNBC-TV18 suggests readers speak to the branch manager before applying for the same.
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