'Home Sweet Home' dream going sour? Wake up

BANK ON US: Banks like ICICI and Axis offer the bullet payement option to customers.

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Keywords: Icici, Interest Hike

Mumbai: Is your dream of "home sweet home" increasingly burning a hole in your pocket? Clearly so, because if you had taken a Rs 20-lakh home loan three years ago at 7.5 per cent interest rate, today you may be paying as high as 12.5 per cent on that loan, increasing your EMI burden by a 33 per cent.

But there's hope. Many banks have come up with alternative payment routes. If you are well below the retirement age, you could increase the tenure of the loan beyond the existing tenure.

“Many people have increased their tenure so we are also offering other options,” says Senior Vice-President (Retail assets), Axis Bank, Sujan sinha,

But a better option is the bullet payment option. You can pay the difference between the existing EMI and the increased EMI to cover a portion of your outstanding principal. If you are lucky, you may not have to bear any prepayment charge either.

Banks like ICICI and Axis offer this option.

While Axis bank offers no prepayment charges, home loan majors like ICICI and HDFC levy up to two to three per cent prepayment charge on the outstanding principal.

In the current scenario, banks have no option but to increase their lending rates. But by offering such options, they want to keep their defaults at manageable levels.

Such options could also be the only ray of hope for home loan borrower.