Falling interest rates on home loans are prompting many existing borrowers, who are paying much higher interest rates, to shift lenders offering much lower rates with better service in order to save on the overall interest. Banks and housing finance companies have been offering home loans at rates starting from 6.75 percent-6.9 percent a year. But before you consider making the shift, here are some important things to consider.

The borrowers’ intention to transfer the balance home loan to another lender is fuelled by reduction in overall interest pay-out without impacting the liquidity and existing investment. Availing the balance transfer is helpful for those who took loans at higher interest rates and are now eligible for a much lower rate owing to their improved credit profiles.

But one must consider that their decision to switch to another lender will amount to a fresh home loan application by the new lender and attract processing fee, administrative and other charges levied for any new application. Hence, it is important that you make a calculated move and factor in all the charges before going ahead.

Additionally, borrowers can consider opting for home loan overdraft, a home loan variant, where a savings or current account is opened and linked with the home loan account. The surplus amount can be deposited in the overdraft account and can be used at the time of need or to conserve funds.

A borrower can, before applying for a home loan transfer, try to negotiate the interest rate and other terms and considerations with the existing lender.

However, if the loan is in the later stages, it is not advisable to go for a transfer as the borrower must have paid the majority part of their interest component in the earlier stages of the tenure itself. It leaves a relatively lower scope of overall interest cost saving.



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