The Interest Rates on Housing Loans rise and fall, causing people to consider lower rates. However, this is not the only aspect to consider when transferring your Home Loan. When you approach the lender to close your loan for a better lender, most lenders do agree. But they do so only after a transfer charge and a pre-closure fee gets paid.
Most lenders charge these fees. So, what to do if you are a creditor in this situation? Should you pay an expense to move your loan for lower Home Loan interest rates? Let us look at this!
According to the Reserve Bank of India advice, India's top lending banks has recently lowered Home Loan Interest Rate. Many lenders are also providing festive Housing Loan discounts. Owing to this, the rates have hit an all-time low. Reduced rates, transaction fee concessions, and exclusive offers for women buyers are among the deals available.
All of these are exciting ways to lure potential consumers. You, as a borrower, get more incentives, such as a reduced Home Loan rate of interest and other perks. You can move an existing loan to a new lender or continue with your current lender to negotiate the rates.
You pay the switching fee and shorten the length of your loan by a few months or years. On the new loan, you save money on interest in the first year by spending less on the interest rate for Home Loan. So, in most situations, the switch/transfer fee get recouped in a few months. It is an incredibly significant estimate. As a result, it is essential to measure the difference between the amount saved and the fee you pay for the closure/transfer.
You must switch it only:
• If there is a considerable interest rate gap on your new loan.
• When you save even after the transfer fee.
• For measuring how much you save if you opt for a shorter term.
• Make a move if you save a substantial amount of money.
Part-payment as an option
The transfer fee to the new lender and the processing fee you pay the new lender gets saved and used to prepay the loan partially. If you pay this, the balance of your outstanding loan gets reduced. It helps you save money on your equated monthly instalments or reduce the duration of your loan.
So, if you decide to switch your Housing Loans, you must factor this into your calculations while using the Home Loan EMI calculator.