To help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A will appear every other Monday.
I am a home loan customer of a leading bank. I wanted to know if it is necessary to get my home loan insured. Please explain the various options available.
Since a home loan is a huge financial commitment for a long duration (15-20 years), it is advisable to get home loan insurance cover for the loan amount in order to safeguard the interest of your family in case of any eventuality.
HDFC’s group company HDFC Standard Life Insurance offers a “home loan protection plan” which has been specially developed to suit home loan customers. This plan is a single-premium decreasing-term assurance plan which ensures that the outstanding loan, up to the amount insured, is adjusted/repaid in the event of death of the borrower. This serves as huge security for the family during the term of the loan. It is possible to include the premium in the loan amount itself and repay as part of the regular instalments.
Please throw some light on how much the EMI (equated monthly instalment) would reduce per Rs1 lakh for a 20-year tenure if there was a 1% interest rate cut.
A 1% interest rate cut for a 20-year loan would result in a reduction ranging between Rs62 and Rs72 per lakh depending on your existing interest rate. For example, assuming you have taken a 20-year loan at an interest rate of 11.5%, with a reduction of 1% to 10.5% per annum, the new EMI would amount to Rs999 per Rs1 lakh against the earlier EMI of Rs1,067 per Rs1 lakh—a difference of Rs68.
Renu Sud Karnad is joint managing director, HDFC.
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