08 JULY, 2022

When it comes to home loans, there is no such thing as a small decision. Even the slightest change in interest rates can mean big differences in your monthly payments and the total cost of your loan. So, what should you do when home loan rates start to rise?

  • Increasing your EMIs

With high interest rate loans, it is important to manage your monthly cash flows. Skipping EMIs can have an adverse effect on credit and could lead you into a higher interest loan repayment plan with longer tenure, which would cost more in the long run if interest rates go up again. 


Increasing EMIs can be the quickest way to adjust to rising interest rates and could result in the least amount of additional interest paid over the life of the loan. If it is not feasible for you to increase your monthly payments, increasing the loan tenure could help to keep your EMIs affordable. However, this can result in paying more home loan interest rate over time. 

  • Home saver option

As home loan interest rates continue to rise, borrowers with restricted liquidity may find the home saver option increasingly attractive. If you also have restricted liquidity, you can opt for the saver option.


Under this facility, an overdraft account is opened in your name, where you can park any surplus and withdraw from it as per your financial requirements, without sacrificing your liquidity. The interest gets calculated after deducting what has been parked in the savings account from the outstanding balances due.

  • Refinancing your loan

Rising interest rates can make it difficult to keep up with your monthly mortgage payments. With home loan rates on the rise, your EMIs are also going to increase, and this can put a strain on your finances. Here, you can choose to refinance your home loan.


By transferring the balance to another lender, you can take advantage of lower interest rates from the new lender and save money over the tenure of your loan. There are many benefits of refinancing your loan, like getting a lower interest rate, more flexible repayment options and even a top-up loan.

  • Negotiating for a lower housing loan interest rate with a good credit score

If you have a good credit score, you may be able to negotiate a lower rate with your lender. When home loan rates are high, lenders are more cautious about lending money. As a result, they often offer lower rates to borrowers who pose less of a risk. And what indicates a lower risk to a lender? A good credit score.


Thus, if your credit score has improved since you last applied for a home loan, it is worth renegotiating your interest rate. Not only could you save money in the long run, but you might also be able to purchase your dream home sooner than you thought.


Rising rates can have a big impact on both investors and borrowers in today’s market. If you are an investor, you need to be aware of how rising rates can affect your portfolio, and as a borrower, you need to understand how it could affect your ability to apply for home loan.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.