5 Pointers To Consider While Switching A Home Loan.


The best time to switch your home loan is during the primary years of repayment as it will give you the maximum benefit. Consider a switch only if your loan tenure still has good amount of years left. Apart from the tenure term, you also need to evaluate the rate cut. Here we will guide you about how you can make the switch smooth. Before making the decision to transfer your home loan to another bank, you must first assess its advantages:

Compare the Interest rate

Interest rate and the difference in the EMI are the major differentiators. Lesser the EMI means more saving. The difference should at least be a minimum of 0.5% from the existing rate. For example, if Rs 50 lacs are outstanding at 10.9%, you will have EMI of Rs 49,919. If you do opt for home loan transfer at 10%, you save over 4 lacs in 20 years and if the new interest rate is 9.85%, you will save 5.19 lacs over 20 years.

Processing fee charges

You also should consider processing fees and charges. If the other financial institution charges amount higher than your old rate, there is no point in making the switch.

Prepayment penalty

Most banks these days don’t levy the prepayment penalty. But if your bank has it, then you can ask your new lending bank to take it into

Tax benefits

If you opt for a lower interest rate, your interest liability goes down, thus reducing your overall tax benefits.

Know when to make the switch

It is better to make this switch in the early part of loan tenure as EMI comprises a higher interest part, while the principal amount is less. If you are towards the end of your home loan tenure, then it may not save much and might not be worth the effort.

Incorporate these points in your decision making process before considering switching your home loan. These points will help you gain an optimum amount of knowledge and confidence over this decision.

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