Festival offers on home loans: Avoid teaser rates that reset after months
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar pointed out that lenders also waive legal and valuation charges and offer loan-to-value ratios of up to 90%. He said lower spreads over MCLR or repo-linked rates are preferable to teaser rates, noted that many offers need a high credit score, and suggested keeping total EMIs within 35% of take-home income.
What Abhishek Kumar said
What did festival home loan offers include besides lower interest rates?
Beyond interest rate offers, I noted that lenders were also waiving legal and valuation charges during the festival season, and some were offering loan-to-value ratios of up to 90 per cent. A higher loan-to-value lets you borrow more against the property, but I would weigh that against what you can comfortably repay.
Is a teaser rate better than a lower spread on a home loan?
In my view, an offer with a lower spread over the lender's benchmark, whether the MCLR or the repo-linked lending rate, is preferable to a teaser loan. With teaser loans the spread goes up after one or two years, so the attractive rate at the start does not last. A lower spread that stays in place gives you stable and transparent terms.
Can every borrower get the festival home loan offers?
Not always. Many of these special offers are open only to those who have a high credit score, so the advertised rate may not be the one you are offered. I suggest confirming with the lender whether you qualify before you plan your home purchase around a festival deal.
How much EMI can I safely take on with a home loan?
I suggest not stretching your home budget just because a larger loan is on offer. As a rule of thumb, keep your total EMIs, including the new home loan and any other loans you are repaying, within 35 per cent of your monthly income after deductions. That leaves room for your regular expenses and other financial goals.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on debt and loans
The article examines festive season home loan offers, such as processing fee waivers and special rates that may reset after a year or two. It explains why a lasting rate discount tends to matter more than a one-time waiver, how daily and monthly reducing balance methods affect interest, and what borrowers should compare across lenders.
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Festival offers on home loans: Avoid teaser rates that reset after months