Can someone explain that if I've chosen a FLOATING ROI anyway, when taking the home loan, why do I need to pay conversion fees everytime I'm changing to a lower ROI? 🤔 #GenuinelyPerplexed @HomeLoansByHDFC
A kind pal DMed me an explanation: The thing is when you take a loan bank calculates based on your profile how much MCLR (their internal benchmark) + spread they want to give your profile. Eg 7 percent may be MCLR & for self employed with your profile they may add .35 (Contd.)
But later with time they might agree to make it MCLR plus .20...
So at that point your floating for same MCLR becomes 7.20.
For that change of your profile they charge you the money.
Safer to convert your loan from MCLR based floating to Repo rate floating. (Contd.)
RBI changes repo rate every few months. Eg 6 percent. Then each bank decides their internal MCLR based on that. Eg 6+.50. And then add your extra spread for your profile. Eg. 6+.50+.35...
For repo based they may say Repo rate + .85 which comes to same. But, but, but... (Contd.)
Bank changes MCLR sometimes after 2 months of change in Repo rate.
So we lose benefit for the two months.
So ideally if there is an option convert to repo based floating loan once and for all. Some banks like @bankofbaroda have that option. Check for yours. (Fin.)
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