04 NOVEMBER, 2019

Every home buyer is concerned about the interest rate on their home loan. They take a lot of effort to improve their credit score to obtain lower interest rates from the lender. A home loan is a long term commitment, which usually lasts more than a decade, and borrowers spend a significant proportion of their income to repay it. If you are also paying EMIs on home loans, you should know that a large chunk of it covers the interest amount.

At the time of taking a home loan, you must have chosen the lender that provides you with a better interest rate compared to others. However, after paying several home loan EMIs, if you feel like you are paying high interest to your current lender, then you can take the option of transferring your home loan to another lender.

With a home loan balance transfer, you can switch the lender and start paying EMIs to the new lender who is providing you with more benefits such as low-interest rates. If you are thinking of transferring home loan balance to another lender, here are the factors to consider before doing it.

The Stage of Home Loan Tenure

Many experts advise transferring the home loan balance during the early stages of the tenure. This is because, during the initial 4 to 5 years, your EMIs mainly cover the interest portion of your loan. Transferring home loan balance at the mid or last stage of tenure will not be much beneficial for you because during these stages EMIs cover the principal and you already have paid significant portion of interest.

Switch-Over Fees
When you are looking to switch your lender to the bank providing a lower interest rate, you must consider the switch-over costs. Generally, it ranges from 0.5% to 1% of the outstanding amount. However, you can always negotiate with your bank.

Interest Rate

You should transfer your home loan balance if the interest rate of your current loan is higher than the market rates. In such cases, changing home loan balance transfer becomes a financially beneficial move.

Additional Charges

Before transferring your home loan balance, you should ask the existing lender whether any additional charges like penalty or foreclosure charges are applied. Moreover, many banks charge processing fees once you opt for loan transfer, which you will be paying to your new bank.

Home buying is one of the most important decisions of life, especially when you are opting for a home loan. As it is a long-term financial commitment, transferring your home loan balance seems a smart option to reduce the burden of home loans.

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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.