EMI Calculator: Home loan burden leads to EMI repayment beyond retirement age, explore options

EMI Calculator: Prior to May 2022, banks and housing finance companies offered home loans at reduced interest rates of 6.50 percent. However, due to an increase in retail inflation to 7.80 percent in April 2022, the Reserve Bank of India (RBI) began raising the repo rate to curb inflation. In six steps, the RBI raised the repo rate from 4 percent to 6.50 percent, leading to an increase in home loan interest rates and EMIs offered by banks and housing finance companies.

Homebuyers who had secured home loans at 6.50 percent were forced to pay EMIs at 9 percent interest rates, resulting in a disturbance of their household budgets. For instance, if a homebuyer had taken a home loan of Rs. 40 lakh for 20 years at an interest rate of 6.50 percent, the EMI would have been Rs. 29,823. However, they would now have to pay an EMI of Rs. 33,568 on the same loan. This translates to an extra burden of Rs. 44,940 per year, assuming they opt to increase their EMI and keep the tenure unchanged. For most homebuyers, the EMI repayment period exceeds the retirement age limit of 60 years.

There are a few options available for homebuyers in this situation. Those with floating-rate home loans and an extended repayment period can contact their bank or housing finance company to negotiate a reduction in the increased interest rate. Additionally, they can request to increase their EMI amount and decrease the tenure, although a nominal fee may be charged for this.

Alternatively, banks and housing finance companies often offer enticing rates to new home loan customers with good credit scores. Therefore, homebuyers can explore this option to secure a cheaper loan. Despite the slight burden on their finances, a slight increase in EMI can result in lower interest payments to the bank and a shorter repayment period.

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