Every few months a customer walks in with a flyer promising a home loan at a rate half a percent lower than what they pay today. Sometimes switching is a clear win. Sometimes the costs eat the saving. The arithmetic takes five minutes.
Step 1: What is the real gap?
Compare your current rate with the rate you are actually offered after the lender checks your file, not the headline rate on the flyer. A 0.5 percent gap on a ₹30 lakh loan with 15 years left saves roughly ₹1.4 lakh in interest over the remaining tenure, or about ₹850 a month in EMI.
Step 2: Add up the switching costs
- Processing fee of the new lender, usually 0.25 to 0.5 percent plus GST, sometimes waived
- Legal and valuation charges, around ₹5,000 to ₹10,000
- Stamp duty on the new mortgage deed, which varies by state
- Foreclosure charges from your current lender, nil for floating rate home loans to individuals
Step 3: How many years are left?
Interest is front loaded. In the first third of a loan, most of the EMI is interest and a lower rate helps a lot. In the last third, you are mostly repaying principal and the saving is small. If fewer than five years remain, a transfer rarely pays.
The rule of thumb we use
A top up loan bundled with the transfer often makes the decision easier, since it gives you funds at home loan rates for renovation or to close a costly personal loan. Bring your latest loan statement and we will run the numbers for your loan in ten minutes.