New Delhi: If you are having trouble paying the EMI burden of a home loan, and if there is no way to reduce the EMI burden, don’t worry. Until recently, banks offered home loans at 8-9%, but now most banks’ home loans are close to 7%.
In this case, if you transfer your old home loan to another bank, your EMI burden may be reduced. However, when to do a loan shift, a little planning has to be done in advance.
Suppose you took a home loan 4 years ago, i.e. in 2016, then the interest rate on home loans was 9.25%. Now suppose you transfer a home loan to a new bank and take it to 7%, then understand how much difference your EMI will make.
EMI difference from home loan shift
The year 2016
Loan amount 30 lakhs
Interest rate 9.25%
Loan term 20 years
Now suppose that in 2020 you have transferred the home loan to a new bank. Outstanding loan of Rs 26 lakh.
The loan amount is 26 lakh
Interest rate 6.90%
Loan term 16 years
That is, your EMI will be as low as Rs. 5000 per month. Understand how you will benefit from paying interest
If the total interest paid on a home loan from a new bank during a period of 16 years = Rs. 17,00,820
If total interest is paid on a home loan from an old bank for a period of 16 years = Rs. 23,90,488
Estimated savings in interest = 23,90,488 – 17,00,820 = 6.89 lakhs
That is, during the rest of the loan period, you can save up to Rs 6.9 lakh by changing the loan.
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How to transfer to another bank
.. Before transferring your home loan from one bank to another, do a comparative study of the interest rates of all the banks. When you think your bank is charging more interest than you, then ask them to lower the rate. If your bank considers your demand and lowers the interest rate for you, then nothing is better. Then you do not need to transfer the home loan to another bank. You will avoid paperwork.
2. If your bank does not consider your demand and refuses to reduce interest rates. You should then contact another bank. Which allows you to get a loan at a lower rate. You should apply to another bank with all the required documents attached. When you get a letter of approval from a new bank, understand that your work is done. Take this letter to your existing bank. Ask him for letter lettering and other information on the letter. Ask for your original property papers from an existing bank.
3. With the letter given by the existing bank, you should go to the new banker. The new bank will proceed with the loan transfer process and disburse the loan amount shortly. This may take some time, however.
.. Transferring a home loan at a lower interest rate will benefit you in the long run, for which you may have to pay the price. Your existing bank may charge you about 0.50% as a loan-prepayment charge. If you have taken a loan at a floating rate from a housing finance company, you can avoid the pre-payment charge, but if the loan is taken at a fixed rate, the housing finance company may charge a pre-payment charge.
2. After the existing bank, the new bank will also charge you a loan processing fee ranging from 0.50% to 1.5%. Many banks also waive loan processing fees. Because these days many people are doing banks including SBI in view of the festive season. Banks often waive processing fees even after seeing your good track record, but for this you have to appeal to the bank.
When to make a loan transfer?
.. Only shift the loan if you have a long-term loan balance, such as a 15 to 18 year loan balance.
2. The benefit of loan shifting comes when your loan amount is too high. Avoid this if you have a low loan amount
3. While the new bank is giving loans at a lower rate than the existing bank
4 Before transferring a loan, understand all the terms and charges of the new bank in advance. Start the process after knowing everything
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