On December 5, the Reserve Bank of India delivered major relief to borrowers by sharply cutting the repo rate, prompting banks across the country to lower their lending rates. As a result, home loan interest
rates that were earlier hovering near 9% have now eased to around 8% at most banks.
Going a step further, a subsidiary of a government-owned company has introduced home loans at an even lower rate. LIC Housing Finance Limited, a subsidiary of Life Insurance Corporation of India, has significantly reduced its home loan interest rates, offering loans at a starting rate of 7.15%.
Customers with a strong CIBIL score can avail of these lower rates, making the offer cheaper than those of many public and private banks, including SBI.
New Rates Effective From December 22
LIC Housing Finance announced on Monday that the revised interest rates for new home loans will start from 7.15%. These rates came into effect from December 22.
The company said that at a time when buyers are cautiously reviewing their purchasing decisions, the move is expected to revive interest among home buyers and reinforce its commitment to affordable housing.
The reduction in interest rates followed the Reserve Bank’s Monetary Policy Committee (MPC) decision earlier this month to cut the repo rate by 0.25%, prompting lenders to revise their loan rates.
SBI Home Loan Interest Rate
The country’s largest public sector bank, State Bank of India (SBI), is currently offering home loans at a starting interest rate of 7.25%.
This revised rate has been effective since December 15, after SBI also reduced its rates by 0.25% following the repo rate cut.
LIC Housing Finance’s rate of 7.15% is 0.10 per cent lower than SBI’s. This makes LIC Housing Finance one of the cheapest home loan providers at present, offering lower rates than both government and private sector banks.
EMI On Rs 50 Lakh Loan With LIC
If you take a home loan of Rs 50 lakh from LIC Housing Finance for a tenure of 20 years at an interest rate of 7.15%, your monthly EMI will be Rs 39,216.
Over the full tenure, the total interest payable will be Rs 44,11,939, and the total repayment amount will come to Rs 94,11,939.
For the same loan amount and tenure from SBI at an interest rate of 7.25%, the monthly EMI will be Rs 39,519. Over 20 years, the total interest paid will be Rs 44,84,512, and the total repayment amount will be Rs 94,84,512.
By choosing LIC Housing Finance over SBI, borrowers can save Rs 303 per month on their EMI. This translates to a saving of Rs 3,636 per year, and a total saving of Rs 72,720 over the full 20-year loan tenure.
However, it is to be noted that these lower interest rates are available only to borrowers with a good CIBIL score and sufficient income. Applicants who do not meet these criteria may not qualify for the lowest rates.
Investing The EMI Savings Through SIP
If the monthly EMI saving of Rs 303 is invested in a Systematic Investment Plan (SIP) at an assumed return of 12%, the total investment over 20 years would be Rs 72,720.
At this rate of return, the total interest earned would be Rs 2,05,997, taking the final value of the investment to Rs 2,78,717 after 20 years.
