Who doesn’t want to save on interest rate? So, if you have got a home loan deal that you would like to transfer for a lower rate of interest, it would certainly be a wise idea. It’s hard to cope up with increasing interest rate, which puts additional burden on monthly EMIs. So, if you are paying a home loan with a high interest rate, you can contemplate to transfer the loan to gain a lower interest rate. Doing so would lessen the monthly installments significantly. Nevertheless, transferring a home loan for a slightly lower rate would not help. If you contemplate to switch, make sure it’s at least 1-1.5% lower, which could make a difference in the amount that you pay each month. When you choose to transfer your loan, there are certain expenses that you need to bear as a borrower, so if you are switching for a trivial difference, it won’t be beneficial in the long run.

As mentioned, making a loan switch is not free. Your present loan lender would charge you about 2% of the outstanding loan amount. Your bank charges you for transferring the balance over to another lender. Likewise, the new lender also levies certain charges, which is nearly 0.5 to 1% of the loan amount in order to process the loan transfer. Keep yourself aware of such fees that you would incur while you transfer your home loan from one lender to another.

Besides, it’s rewarding to switch earlier than later because if you have already paid a substantial amount then it would not be useful to switch later. For instance, if you have a home loan for about 15 years, plan to transfer to a lower rate before 5 years of your loan tenure to save on finance charges.

Apart from taking care of the fees, one must go through the loan agreement with the present bank and follow the procedure accurately to avoid any discrepancies later. You need to submit a letter to your bank requesting the loan transfer. The letter should include the details like the date when loan was taken, its tenure, the amount that has already been paid and the remaining due. After securing the consent letter, you can approach the new lender for the loan switch.

The minor hitch here is that banks do not release the required documents until the loan is paid in full. On the other hand, the new lender would not pay the loan till the time they receive the documents. However, there is nothing to worry about. In such a scenario, you need to obtain a letter from the previous lender, which should state that the documents would be dispatched within a certain time.
Although, the idea to transfer home loan is not that simple but as long as you grab a good deal, which would really save you money, it’s valuable to go ahead with the transfer.