A "low interest" loan shouldn't mean you have very little interest in paying it back!
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  • Home Loan BYTES FROM OUR KITCHEN

    The Best Time to Switch a Home Loan:

    The Indian loan market has been accelerated by RBI’s repo rate cut, followed by drop in rates by lenders and banks. At present, the home loan market holds a major share among all loans. Along with a decline in rates, an increasing number of housing schemes available and flexible repayment options have acted as a catalyst to the home loan segment. However, unfortunately the new rate does not hold good for existing borrowers. Therefore it is advisable to them that they switch their home loan if they want to lower their EMI by taking advantage of the rate cuts.

    Normally, a home loan is for a period of 15 to 20 years on an average. You must monitor your loan account throughout that period and keep your eyes open for better interest rates being offered by other banks. It is not mandatory to continue with the same bank as chosen in the beginning for taking the loan. There is this wonderful option of switching to another bank with lower rates and processing fees. Alternatively, existing customers who are usually not eligible for lower loan rates can renegotiate the rates with the bank before making the transfer of loan balance.

    Making the Decision of Refinancing Home Loan:

    Before making the decision to refinance your home loan or make a home loan switch to another bank, you must first assess if there are major advantages in it:

    • The easiest comparative is the interest rate and checking the difference in the EMI. A significant fall in EMI would obviously imply that you switch your home loan immediately. The difference should at least be a minimum of 0.5% from the existing rate as over a long duration, this rate change could help you save a lot.
    • However, interest rate is just one of the parameters to be considered while refinancing or switching your home loan. In order to have a holistic approach, you will have to consider the total outflow in case of the new rate that would include processing fees and charges. If the other charges amount higher than your old rate, there is no point in making the switch.
    • Timing of home loan refinancing is also very important. In the beginning of the tenure, EMI comprises of a higher interest part, while principle is of lower interest. But with time, the principal goes up and the interest comes down. As you are looking at reducing your EMI, it is better to choose to switch the loan in the early part of the loan tenure in order to save more.
    • Sometimes you may feel the need to top-up your loan and some banks do offer a top-up at the same home loan rate. So, it is a greater advantage if you can switch your lender who is offering a lower rate as well as willing to offer a top-up.

    Once all assessments and analysis is done, you can either make the switch or speak to your existing bank and show them the new offer. The existing bank may reduce their own rate to match the offer in case they do not want to lose a customer. However, if this doesn’t happen so, you can feel free to move to another lender for your home loan. It is important to stay alert on such refinancing options as making the move at the right time could make your life a lot easier.

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