Benefits of SBI’s offer to existing customers to switch to new home loan rates?

SBI offers existing customers to switch to new home loan rates

SBI offers existing customers to switch to new home loan rates

On March 21st , most newspapers reported the SBI’s new provision allowing existing home loan customers (approximately 17 lakh customers) to switch to it’s new home loan rates which are linked to base rate thus enabling significant savings.

Earlier, upto June 2010, the floating home loan rates were linked to SBAR (State Bank Advance Rate) and currently it is linked to the bank’s base rate. As a result of this the interest rates has come down significantly. While the current home loan interest vary between 10.75% to 11.25 % based on the loan amount (SBI home loan ), the earlier customer’s home loan rate may be as high as 13.5% – 14.0%.

Inorder to help the customers whose is suffering higher home loan rates the bank itself has brought a new scheme where the customers can get the home loan rates pegged to the banks base rate. This would enable the older home loan users whose rates were linked to SBAR to avail the lower current available home loan rates. However the catch is that the customers will have to pay a fee of 1% of outstanding principal amount. But when compared to the savings that one can make by shifting to the current home loan rates, there is no need of worry of the processing fee which is 1%.

We would like to present you the impact on monthly EMI and the benefits,

Lets assume the current outstanding amount of the home loan is Rs 50,00,000. The processing fee to be paid for shifting the older home loan to the new benchmarks will be Rs 50,000 (which is 1% of outstanding).

The table below shows the net benefit to customer savings in new EMI (which will be paid by the customer over the remaining period of the home loan) and after reducing the 1% fee.

Difference in interest between today’s home loan rate (x)and customer’s older home loan rate (y):  Y-X Saving on monthly EMI

If EMI is saved over 10 yrs, the value of that saving today will be:

If EMI is saved over 15 yrs, the value of that saving today will be:

0.5% Rs 1712 /-        Rs  82,969 /- Rs 1,14,336  /-
1.0% Rs 3445 /-        Rs 2,17,551 /- Rs 2,80,725 /-
1.5% Rs 5297/-        Rs 3,53,679 /- Rs 4,48,995 /-
2.0% Rs 6969 /-        Rs 4,91,285 /- Rs 6,19,092 /-
2.5% Rs 8759/-        Rs 6,30,304 /- Rs 7,90,936 /-
3.0% Rs 10567/-        Rs 7,70,671 /- Rs 9,64,446 /-

 

If your older home loan interest rate is higher than new rate by 1%, the monthly EMI difference for you will be Rs 3445/- (please refer row 2) . If you have to pay the EMI for next 10 years, the value of savings on discounting to today  (while  you would accrue the same over next 10 years) after payment of processing fee, you tend to save ~ Rs 2,17,551.  If the balance years left is 15 yrs, then the value of saving today is Rs 2,80,725 /-.   if you want to calculate your savings if your outstanding loan is lesser or higher, you can proportionately factor it or you can send a query in the comment box. For e.g if your outstanding loan amount is 25 lacs that is to be paid over next 10 years, then your savings will be Rs 1.08 lacs (half of Rs 2,17,551).

Hence to all customers of SBI who may be paying a higher rate of interest, the advice from Goodhomeadvisor.com  is rush to your bank and pay the processing fee for transfering your home loan to the new rates.

 

 

  • Sudha

    Still we are not getting full benifit after shifting to new rates, we are getting charged with 10.75% in SBI, Can you please provide me the current interest rate of SBI if loan amount is 27lakh? Is there any difference between current interest of new customers and interest charged to old customers after shifting to new rates?we opted for floating rate and we had taken loan 27 lakh in 2007

    Thanks

    • Jis

      Hi Sudha,

      The rates for SBI would be available on the website. There would always be a difference in interest rate between old customer and new customer. What you could do is to negotiate with SBI for a rate reduction to get them to offer you the same interest rate as for new customers else look at a balance transfer to another bank which offers better rates.

      regards,

      Jis
      Team Goodhomeadvisor

  • Rajendrakumar

    To,
    Jis

    I have taken 700000/ lakhHome loan for purchase of Karnataka Housing Board Plot 60/40 during the year 2009 of May. as per the new scheme that is switch to base rate i have requested by giving application mentioning all the details of my loan.

    But bank officer replied on telephone that you have been sanctioned loan for the purchase of land so you will not get benefit of this scheme. My home loan is sanctioned as easy home loan scheme.
    kindly give me the suggestion that i am eligible or not? or for this to whom shall i meet for further inquiry.

    with regards

    Rajendrakumar

    Dharwad(Karnataka)

  • kishan

    What is the procedure for shifting of old housing loan to new scheme

  • kishan

    what is the benefit ? I took housing loan in 2009 at below 2.75 of SBAR .Please advice

    • Jis

      Dar Kishan,

      You can apply to any bank online for a quote on housing loan and they will provide you the new rates. The rate is the same whether you have to shift your existing loan or it is a new loan

      thanks