HDFC Bank is a titan in the home loan market of India. After the merger with HDFC Bank and HDFC, the former emerged as the market leader in this segment with a loan book of Rs 7.3 lakh crore. The earlier market leader State Bank of India (SBI) had a book size of Rs 6.4 lakh crore.
The formula
HDFC Bank follows a simple formula for calculating the interest rate on its home loans given to salaried and self-employed applicants. It is the Repo Rate (6.5%) + 2.25%-3.15% = 8.75-9.65%. Therefore, the minimum rate that one has to pay is 8.75% while the maximum rate will be 9.65%. The applicable rate will depend on a few things such as credit score, monthly income and amount of existing loans.
For repayment period of 25 years
Let us assume a person applies for a home loan of Rs 25 lakh to HDFC Bank. He wants to take the loan for 25 years. Let us also assume that he satisfies all the criteria of the bank and gets the cheapest rate of 8.75%.
In this situation, he/she has to pay an Equated Monthly Instalment (EMI) of Rs 20,554. Over 25 years, the applicant has to pay back a total of Rs 36,66,077 (Rs 36.66 lakh) as interest. Since the principal is Rs 25 lakh the total payout over this period will come to Rs 61,66,077 (Rs 61.66 lakh).
Repayment over 30 years
If we raise the repayment period to 30 years, the EMI will go down, but the total interest that one has to pay back will rise. The EMI will be Rs 19,668. But the total interest liability will become Rs 45,80,304 (Rs 45.80 lakh). The total payout will expand to Rs 70,80,304.
Repayment over 20 years
If the applicant wants to pay back the loan in 20 years, the EMI will go up but the total interest to be paid back declines drastically. For a tenure of 20 years, the EMI for Rs 25 lakh will rise to Rs 22,093, but the total interest payable contracts to Rs 28,02,264 (Rs 28.02 lakh). The total interest payable amounts to Rs 53,02,264 (Rs 53.02 lakh).
Taking a home loan is the biggest financial decision in the lives of almost all of us. We have to be vigilant about all expenses related to a home loan. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
