Reader comment about ICICI Home Loan

by Manshu on June 16, 2011

in Articles

Piyush Modi had a very interesting comment on yesterday’s post, and this is relevant for people with home loans from ICICI Bank. It seems that he called them up to get something done, and they offered him a lower rate on an existing home loan, and saved him a lot of money!

I’ve been thinking about it, and can’t understand why they did that, and I certainly don’t know of any other such cases.

I thought I’d publish his comment here to see if anyone else has a similar experience, and to let others know about this as well. It will only cost you a phone call, so there is no harm in trying your luck.

Here is his comment verbatim:

Though this comment is not particularly relevant to this post, but I wanted to leave it and want you to write about it cause I am sure it will help many many of your readers.

My dad has a home loan with ICICI Bank which was once taken at a floating rate of 7.5%, and which now stands at 14.5% rate. I recently called up ICICI Phone banking to ask the procedures for a balance transfer to a different bank & I was told that they are running a scheme where existing customers could move to a lower rate of interest. I was skeptical at first, but then went through with the documentation required and apparently its an amazing scheme. Obviously ICICI wont advertise it or inform you, but it is available.

My dad’s rate has been reset from 14.5 to 10.5% a huge 4% difference. His tenure, which was originally 180 months, and had now gone up to 315 months despite making the EMI repayments for the last 4-5 years (60 months approx) stood slashed at one go to 160 something. Alternatively, one can choose to reduce one’s EMI instead of choosing to reduce the tenure.

For those wondering how such a drastic reduction in tenure is possible, it can happen. In this case, the total EMI was approximately equal to the interest charged in a year and only a very small amount (4-5%) of the EMI was being used to repay capital. With the fall in the rate charged by 4%, this shifted up considerably to 25-27% of the EMI, and this means that a lot more of the EMi is being used to repay capital instead of just service debt and this leads to drastic reduction in tenure.

What were the documentation/formalities required –

1. Cheque for a charge of 0.5% of balance outstanding on the loan+service tax on the same.
This is extremely cheap as I will recoup this charge within 2 months
2. Non-judicial stamp paper of Rs 30 signed by borrower & co borrowers
3. Some sort of an agreement which you will get from the bank itself and has to be signed by borrower & co borrowers
4. All outstanding EMI payments have to be cleared (obviously)

Now I am not sure whether the scheme is available for all home loan borrowers or a particular category, as also the amount of reduction in rates will be the same for all borrowers or not. But give a call to ICICI bank and just ask. It will save you a tonne of money.

 

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