Transferring Your Home Loan: Things to Consider

Home Loan Transfer

When a bank offers you alluring interest rates that seem better than the bank you've currently availed your home loan from, you may be tempted to transfer the loan. But remember the point that every bank has its own marketing strategy and things may not be what they seem from the exterior. 
It is imperative that you know the details of a bank's offer in-depth. There are other important things to take into account than just the interest rates of your loan. The following are the things to consider when you are transferring your home loan.

Compare the Total Outflow

While a new bank can draw you by its side by offering reduced EMIs and elongating the time period of your loan repayment, you should be aware that this can increase the total amount you are to pay in the end due to the constant addition of interest rates to your outstanding loan amount. 

If your current EMI is higher than what the new bank offers, you must compare the total outflow of the two banks before you shift. Unless you're struggling to pay your current EMI, it is not advisable to shift banks just for the reduced interest rates.

Be Sure to Negotiate

If you don't want to be dictated by the terms of your new bank, even though you find some of the aspects of its offer to be attractive, be sure to negotiate. Negotiation can take you away from being at the mercy of your lender and can even give you an upper hand. 

Banks don't want to lose their borrowers, especially if they have a clean record in repaying the loans on time. So more often than not, your negotiation will be taken into consideration by the bank.

Switch at the Right Time

In general, your EMI is structured in a way that you pay the interest component first and then your principal component. So if you make a switch at the start of your loan period, you will pay a higher amount to the interest component.

Whereas if you switch at the end, you will pay a higher amount to the principal component. If the new bank has attractive interest rates, you get maximum benefits by switching during the initial period. Timing the switch properly can save you a lot of money.

Pay Attention to Terms and Conditions

Whenever you're switching to a new bank, it is very important that you thoroughly read the terms and conditions of both your old and new banks. Some banks can have conditions like buying insurance from a specific company or other such terms. Acquire complete knowledge before signing the document.

Know the Allied Charges

Especially with home loans, you must know that transferring your loan comes with charges like processing fee, stamp duty, legal charges, technical charges, valuation fee, and more. You must take all of these into account and see if the offer of the new bank is worth.


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