Mortgage Loans FAQs

What is MCLR?


MCLR stands for Marginal Cost of Funds based Lending Rate.

 

MCLR is the benchmark rate below which the banks cannot provide loans to the customers who are availing loans linked to MCLR. This new benchmark rate is applicable for new loans sanctioned from April 1, 2016 onwards.

What are the various types of benchmark under MCLR?


Currently, the Bank has published the following MCLR:

  • Overnight MCLR
  • One-month MCLR
  • Three-month MCLR
  • Six month MCLR
  • One year MCLR

What is ICICI Bank MCLR rate?


The MCLR will be a tenor linked rate which has to be reviewed and published every month on a pre-announced date

 

For the existing ICICI Bank MCLR rate please click here.

Will MCLR be different between Banks?


Yes, MCLR can be different between different banks as it will depend on marginal cost of funds, negative carry on account of CRR, operating costs, tenor premium of respective banks.

What does periodicity of reset means?


In case of floating rate loans, the Banks can specify dates of interest reset which will be linked to either the date of first disbursement or date of review of MCRL.

 

The periodicity of reset will be one year or lower. The exact periodicity of reset will form part of the terms of the loan contract.

 

For loans disbursed in a particular month, the reset date will be the 1st day of the month of the subsequent year(s). e.g. if the loan is disbursed during any day of April 2016, the reset date for the said loan will be April 1, 2017

 

If, however, the customer opts for any rate conversion in a particular month, then the annual reset date will be 1st day of the month (in which the conversion is effected) of the subsequent year(s). e.g. if the loan is disbursed on April 20, 2016 and subsequently in the month of September 2016, the customer opts rate conversion which is effected on September 12, 2016, the reset date for the said loan will be September 1, 2017

What is the benchmark MCLR applicable for ICICI Mortgage Loans and what would be the reset period for ICICI Bank Mortgage Loans?


The benchmark MCLR for mortgage loans is I-MCLR-1Y. The reset period would be an annual reset.

When will be the reset date decided for the loan? How will the reset impact the current rate of interest (ROI) in case the MCLR increases or decreases?


The reset period and date will be decided on the date of first disbursement.

 

In case of increase in MCLR on the reset date, the ROI will increase which in turn will impact the EMI/tenor of the loan depending on the option exercised by the borrower.

 

In case of decrease in MCLR on the reset date, the ROI will decrease which in turn will impact the EMI/tenor of the loan depending on the option exercised by the borrower.

 

Illustration: Consider a scenario where first disbursement of the loan is done on April 15, 2016 under I-MCRL-1Y benchmark rate, with the I-MCRL-1Y being 9.20% p.a. with a spread/margin of 20 basis points (bps). In such a case the effective rate would be 9.40% p.a.

 

In the above scenario, the effective rate of 9.40% p.a. would remain constant till the next reset date i.e April 1, 2017. On April 1, 2017, the loans would be reset with the applicable I-MCLR-1Y rate as on that date.

 

It may be mentioned that the spread/margin of the loan would continue to remain the same. e.g. If the I-MCLR-1Y is 9.10% p.a. as on April 1st 2017, then revised rate applicable for the loan would be 9.10% + 0.20% = 9.30% p.a. w.e.f. April 1, 2017.

If a loan is partly disbursed and earlier rate is linked to I-Base, which benchmark (I-Base OR MCLR) would be applicable for subsequent disbursements?


All existing loans linked to the I-Base Rate will continue till its repayment. All existing borrowers will, however, have the option to shift to the MCLR linked loan at mutually acceptable terms

 

Thus, in case of partly disbursed loan, for subsequent disbursements, the I-Base benchmark rate will continue to be applicable, provided the borrower does not exercise the option to move to the MCLR linked loan at mutually acceptable terms

Will ICICI Bank discontinue the current benchmark rates I-Base/FRR/PLR?


For all new loans sanctioned from April 1, 2016, the Bank has discontinued offering loans linked with I-Base. However, the existing loans will continue on the respective I-Base/FRR/PLR till its repayment, provided the borrower does not exercise the option to move to the MCLR linked loan at mutually acceptable terms.

Will the existing customers linked to FRR//PLR/I-Base based benchmark rate be allowed to migrate to I-MCLR-1Y based pricing without change in effective rate of interest?


All existing customers has an option to switch from the existing system of FRR/PLR/I-Base (FRR/PLR/I-Base +/- spread) to the new system of I-MCLR-1Y (I-MCLR-1Y + spread) without changing the effective rate of interest. No switch fee would be charged for this option. The effect of conversion in the system, from existing system of FRR/PLR/I-Base to new system of I-MCLR-1Y, will be provided on an immediate basis.

 

Illustration: If an existing customer with loan amount of ₹ 2.5 million is at 9.55% p.a. effective ROI (I-Base + 0.20%) and if the customer opts to switch-over to I-MCLR-1Y then the Adjustable Rate Home Loan (ARHL) interest rate will become (I-MCLR-1Y (9.15%) + spread (0.40%)) equivalent to 9.55% p.a..

 

Thus, the effective rate will continue to remain same at 9.55% p.a. with spread applicable on the loan being adjusted.

What is the process for changing from an existing benchmark rate of FRR/PLR/I-Base to I-MCLR-1Y benchmark rate?


For changing from existing bench mark rate of FRR/PLR/I-Base to I-MCLR-1Y based benchmark rate, the customer will be required to visit the nearest loan servicing branch, execute an agreement for conversion into I-MCLR-1Y benchmark rate.

Can I close my home loan? What are the charges for prepaying my loan?


The prepayment charges are as under:

  1. Nil for Home Loans and Home Improvement Loans with floating rate of interest.
  2. 2% plus applicable taxes on principal outstanding* on full repayment for Home Loans with fixed rate of interest.
  3. 2% plus applicable taxes on principal outstanding* on full repayment for Home Loan Top Up loan if the applicant or co-applicant is Non Individual.
  4. 4% plus applicable taxes on principal outstanding* where loan** is given to Non Individual borrowers or with fixed rate of interest to Individual borrowers. If the loan is sanctioned prior to March 1, 2011 then prepayment charges would be 2% plus applicable taxes.

*Current principal outstanding and all amounts tendered by the borrower towards prepayment of the Facility during the last one year from the date of final prepayment.

 

**Home Equity Loan/Home Equity Enhancement Loan, Office Premises Loan and Lease Rental Discounting Loan.

Can I make a part pre-payment on my Home Loan Account through NEFT with ICICI Bank?


Yes, ICICI Bank accepts part pre- payment of your Home Loan through National Electronic Funds Transfer (NEFT).

 

In case you want to make part pre-payment on your Home Loan Account through NEFT, you need to visit the nearest ICICI Bank branch. For the list of Branches nearest to you please click here.

 

The Service Request number received during branch visit must be mentioned in the remarks column in the NEFT form while making part prepayment through NEFT. Please note that the transactions with invalid request numbers will be rejected.

 

NEFT is a nation-wide payment system facilitating one-to-one funds transfer. Individuals can electronically transfer funds across the country from one bank to another bank participating in the Scheme.

What is the minimum part pre-payment amount that I need to pay?


The minimum part pre-payment amount should be an amount equivalent to 1 EMI.

If I opt to increase my EMI, can I decrease the EMI in the future?


The EMI once increased will not be decreased at a later date except in case of Part Pre-payment/ Conversion.