With the increase in purchasing power and standard of living people are buying homes at a very young age. And the buying of new home has been made easy by the banks and financial institutions that give loans to buyers to purchase their dream homes. There are many banks and financial institutions which give home loans that help in giving options to choose the best and the most suitable loan to the borrower. If we see the scenario today the rate of interest on home loans are very high and a borrower tries to get the best deal out of that. Sometimes one feels to switch the home loan lender in order to reduce his/her EMIs if other lender is giving home loan on a lower rate. Here comes the penalty part.The prepayment penalty is the charges that are applied by a bank or a financial institute in case of a borrower (customer) switches his home loan to other bank or financial institute because of any reason. These charges help the banks to retain their customers or borrowers and the interest income coming out of the loan amount. These charges are called prepayment penalty on home loan. This penalty can range from 1 percent to 3 percent. Public sector banks usually have 1 percent penalty while private institutions have 2 to 3 percent penalty on home loan prepayment. This penalty is calculated on the principal amount of home loan.For example: Suppose Amit has a home loan of rupees 10 lakh at the fixed rate of 12 percent for 15 years but if he gets a better rate by another bank then he may want to switch to that bank. If the other bank is offering loan at 9 percent then Amit will switch but he has to pay the penalty of 2 percent (suppose). It will be rupees 20000 and it is an expense or cost of switching for Amit but if he is saving more in monthly instalments as the rate of interest has gone down by 3 percent then it is a right decision. One should calculate the long term benefits in order to know whether the switching is actually helping him in saving money or not. The banks do not change the penalty rate for prepayment of home loan for existing borrowers but for new customers they can change or increase the rate.Things to know here are:1. Only fixed rate loans have the prepayment penalty charges.2. Floating rate loans are not having any such rules.3. One must check out the rate of penalty for pre payment at the time of taking loan from the banks. It is better for one if the rates are lower. But the actual benefit will depend on the new rate of interest while switching.4. Switching is better in long term’s perspective not immediate.5. Remember to bargain on the penalty rate while borrowing home loan.6. One very important thing here is if you are not switching but repaying the remaining amount of loan from your own funds then banks will not charge any penalty but you need to prove that it is your funds that you used to repay the loan. You can show your bank statements as evidence in order to prove that the funds belong to you.7. One can negotiate on the penalty rates on the basis of having good credit history.8. Choose a loan with no or less prepayment penalty and get it in writing in your documents to avoid future conflicts.9. Be sure that you have enough savings for emergency before closing the home loan.10. In case you have more than one loan then it is advisable that you prepay that loan first which has higher rate of interest.11. There is another option called part pre payment which helps customer in reducing EMI or tenure of loan. In this option also banks charge penalty to the borrower.Ruchi Mahajanзайм на карту без отказов круглосуточновзять кредит онлайн