State Bank of India (SBI) has decided to offer a facility to their existing home loan customers where they can switch to lower interest rate i.e current interest rate. SBI introduced this service to retain their old customers who are paying higher interest rate on there home loan as compare to new customers.
SBI customers who took home loan at SBAR (State Bank Advance Rate or prime lending rate) are paying approximately 2% to 3% extra rate of interest than customers who’s took loan at floating rate that is linked to the base rate. Currently base rate of SBI is 10% whereas SBAR is 14.75% which is the reason home loan customers linked with SBAR are paying much higher than new customers.
Now using this facility existing home loan customers can also switch to new interest rate by paying 1% of the outstanding amount as conversion fee. And this will take down the monthly interest payment of old customers by as much as 2% points. Which will be a substantial reduction in monthly interest payment of a borrower. While switching, customers can also decide whether to reduce the loan tenor or the amount of loan.
Current floating rates of SBI on home loans are:-
- Upto 30 lakhs – 10.75% p.a
- Above Rs. 30 lakhs and upto Rs. 75 lakhs – 11% p.a
- Above Rs. 75 lakhs – 11.25%
Conditions For Switching Home Loan From Old Rate To New Rate
The only condition for switching home loan at SBI is that the customer should not be a defaulter. If so, then he or she needs to pay the default amount before initiating the process to switch to new interest rate.
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