Many home loan buyers are stuck with high interest rates from their banks or home finance institutions (HFCs) .
With some banks reducing their home loan rates, borrowers are certainly tempted to switch their home loan to other banks of HFCs with lower interest rates.
This is because a small difference in loan rates can ultimately mean a lot as home loans are big ticket loans.
If you are planning to switch your home loan, here are a few things you must look at:
Before switching consider if you benefit with:
- Sticking to your current loan package
- Converting to a different loan package with your existing bank
- Taking a loan from a different bank to repay the existing loan
- Is there any fee for terminating your existing loan?
Things to verify with the proposed bank
- Check for the pre-payment charges
- Processing fees for new loan
- Interest rate variation (compare home loan interest rates here)
It is not possible to decide whether to switch or not based on only interest rates, we will have to look at combination of all costs like processing fees, pre-payment charges if any.
Compare the present repayment schedule for your current loan package with that of the new loan package you are considering and check the total amount of interest payable and other charges .
Home loan forms a major chunk of financial burden, therfeore it's advisable to switch your loans, if you see a difference in interest rates.
Also, many banks are known to take a longer time to approve loans, in comparison to others. If your new bank takes a lot of time to switch your loan.
It may make life difficult for you, especially if the procedure is cumbersome.