Is taking a house mortgage top-up a great possibility?
I pay an equated month-to-month instalment, or EMI, of ₹55,000 on a house mortgage obtained at an rate of interest of seven.25%. I even have a automobile mortgage taken at 8.5% curiosity and pay an EMI of ₹13,000. Besides, I even have availed of a jumbo mortgage (one that’s greater than the common restrict and has strict credit score necessities) with an EMI of ₹12,000 at 16% curiosity. The excellent principal for the automobile mortgage is ₹5.5 lakh and must be repaid in 4 years, and the jumbo mortgage has an excellent principal of ₹4 lakh that must be repaid in three years.
I’m now planning to take a top-up on my house mortgage for ₹10 lakh to repay the automobile mortgage and jumbo mortgage? After closing these two loans, I plan to extend the EMI quantity on my house mortgage from ₹55,000 to ₹80,000. Is this a great possibility?
—Name withheld on request
Please verify the rate of interest of your property mortgage presently. Home mortgage charges have been rising constantly following the repo fee hikes by the Reserve Bank of India over the previous 15 months. Currently, the rates of interest of floating fee house loans are upwards of 8.5%. Your house mortgage fee will need to have additionally risen above 7.25% by now. If it hasn’t, it may very well be as a result of in some house loans, the speed stays mounted for a sure tenure (normally 12-18 months) earlier than it turns right into a floating fee mortgage.
If the prevailing fee of house loans is 8.5%, you’ll not acquire from taking a recent top-up mortgage to foreclose the automobile mortgage. Yes, it would make sense to take a top-up house mortgage to repay the bank card mortgage that fees 16%. The 7.5 share level distinction within the curiosity will deliver down the curiosity price for you. But do verify if there’s a foreclosures penalty clause within the mortgage settlement. Any such penalty will eat into the advantages that may accrue from flipping the loans. Also, issue within the mortgage processing price and different fees of the top-up mortgage.
Prepayment of long-term loans is one of the simplest ways to deploy surplus cash when rates of interest are very excessive. Increasing the EMI of the present house mortgage is a good suggestion. It will progressively cut back the mortgage tenure and you possibly can be debt free sooner.
Raj Khosla is managing director at MyMoneyMantra.com.
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Updated: 19 Jun 2023, 10:49 PM IST
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