What should borrowers do?

What should borrowers do?

Monga of BASIC Home Loan recommends revising the repayment plan to manage the increased EMI burden. This can be done by opting for a longer tenure loan to reduce the EMI burden, he says. “In such scenarios, the borrower would pay a higher total interest amount, but his EMIs would remain the same. It would help the borrower with their cash flow monthly,” Monga tells TOI.

Adhil Shetty of BankBazaar.com says that since inflation is moderating, the rates are somewhere close to their peak. He advises prepaying home loans based on availability of funds since this can shorten the ballooning loan tenor.

Borrowers can pay 5% of the loan balance every year, which will help them pay off a 20 year loan in just 12 years. “Similarly, if you prepay one additional EMI every year, the loan can be closed in 17 years. If you increase the EMI by 5% every year, the loan can be finished in less than 13 years,” Shetty says.

Yet another scenario is that if your EMI increases by 10 % every year, then the loan can be close  in 10 years,” he  adds.

Lastly, he advises that borrowers should consider refinancing their home loan if the rate is not in sync with the market or their credit profile. A difference of 50 basis points warrants a look, he says.