Identify the cheapest home loan offer
By Joseph Samson
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Look beyond the present rates

Competitive rates offered by various companies are very luring but you should not consider the present rates only. The present rate offered by a lender may trap a borrower. For instance, a foreign bank had slashed rates to six percent in 2003 for the first year, 6.5 percent in the second year and variable rates from third year onwards when most banks were offering 7 percent. But after the third year, the customer had to pay a huge premium for locking in that offer. This would be a great risk as no one is aware where the rates would be headed 2-3 years from now.

Do old customers benefit?

In most cases the offer is only for the new customers and old customers are not allowed to switch. Even if they are allowed, they have to pay an additional cost. ICICI bank requires its existing borrowers to pay 1.75 percent of the outstanding amount if they want to shift to the new fixed-floating rate loan.

Similarly Kotak Mahindra bank is contemplating an option for its existing customers. Kamlesh Rao, EVP-Mortgages, says that if fixed rates are continued beyond January 31, they would consider an option to switch for their old customers but that would entailan additional charge of 0.5-1 percent.

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