It would based on what you have fill while applying your loan.
They are two possibilities, when rate of interest on home loan decreased.
- Option 1: Fluctuating EMI
- Here your EMI will be reduced.
- Option 2. Fluctuating Tenure
- Here your Tenure will be reduced.
Let me explain which one is advantage of the both .
First, when you have applied for a loan with the floating rate of Interest, you have to opt what is the change you like to have from above two options.
By default most of the banks the Option 2 is by default, i.e tenure would decrease if the rate comes down and tenure would increase if rate goes up.
Which one is better ?
If you have opted for Option 1, that EMI should change then your tenure gets fixed and when rate comes down your EMI will reduce and when rate goes high your EMI would increase. So if you are contributing maximum of your salary towards EMI then be cautious about it. It can hurt other financials.
When the rates are downward trend the keeping the EMI constant would reduce your tenure drastically. For example, for a Rs 50 lac loan for 20-year tenure if the rate drops by 0.50% then your tenure would reduce by 30-months that is (2-years 6 Months) almost saving Rs 15 lac. But if the rate are upward trend then keeping your EMI constant then your tenure is going to go up same as above by 30-more months of EMI. Which would mean Rs 15 lac more.
So, its always good to manage your loan and keep changing EMI according to your financials. In interest rate downward times decreasing Tenure is good and in interest rate upward trend increasing EMI is good.
If you plan your loan well, you will be able to close it faster and home will be fully yours.
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