No Prepayment Charges On Teaser Rate Loans, Shift Now
A lot of people who took teaser rate home loans in 2009–2010 or in the early part of 2011 have finished the period of fixed interest rates and are now paying floating rates of interest. The typical floating rate interest is between 11.5 per cent and 11.75 per cent whereas consumers are able to get the new home loan in the range of 10.25 –10.75 per cent. Clearly, whatever their savings may have been in the teaser period, today they are paying 1 per cent to 1.25 per cent higher than what they would have paid if they were on floating rate today.
But they have an option to shift the loan from their existing lender to another lender at the lower rate of 10.25 per cent -10.75 per cent. The lower end of the rate band is offered by the State Bank of India (SBI) for loans up to Rs 30 lakh and some foreign banks for large-value cases. They do not have to pay any prepayment charge to their existing lender if their teaser rate loan has already converted into a floating rate loan. The National Housing Bank (NHB) has clarified this vide its circular and this applies to all housing finance companies such as the HDFC , LIC Housing Finance, etc. If their teaser rate loan is from SBI, ICICI, Axis, IDBI, Citibank, Standard Chartered, HSBC, etc. then the Reserve Bank of India (which regulates all banks) has also clarified that there will be no pre-payment charges if the teaser rate loan is shifted to another lender after it turns into a floating rate loan.
If you want to shift your existing loan type, then it is better to check with your current bank if they can shift you to a floating interest of 10.50 per cent. It is better to pay the bank a small fee (normally around 0.56 per cent of the outstanding loan amount) as a one time fee and shift to this lower floating interest rate loan of 10.50 per cent per annum instead of going through the entire process of shifting your loan from one lender to another. But if the shifting fee is higher than 0.56 per cent or the rate being offered by your existing lender is higher than 10.50 per cent, then one should shift the loan to another lender. If you have a loan in excess of Rs 50 lakh coupled with a good credit record, you should be able to get an interest rate of 10.25 per cent from several foreign banks.