Want to reduce home loan EMI? Know how many times you can switch banks, what will be the charges!

If you have taken a home loan from any bank and later another bank offers loan at a lower interest rate, then you can transfer your home loan there. This process is called home loan balance transfer. In this, the new bank pays the outstanding amount of your old loan and then you have to pay the EMI of the remaining amount to the new bank.

The good thing is that there is no legal limit for transferring home loan to another bank. That means, you can switch home loan more than once as per your need and benefit. However, every time the new bank will check your income, credit score, EMI repayment record and property related documents. The transfer will take place only when the new bank approves your application.

What are the charges for transferring home loan?

Transferring home loan does not just mean changing the bank. There may also be some expenses involved. The new bank may charge processing fees. Apart from this, there may also be charges for verification of legal documents of the property, technical assessment and other paperwork. Their amount may vary according to the bank and loan conditions.

If your home loan is on a floating interest rate and you are taking the loan for personal needs, under the applicable RBI rules, banks generally cannot levy foreclosure penalty on premature repayment or transfer of the loan to another bank. However, there may still be processing fees and other applicable charges for the new bank. In case of fixed rate loans, it is important to check your loan agreement and the applicable rules.

Keep these things in mind before changing banks

Before transferring a home loan, do not take the decision just by looking at the interest rate. Also see how much processing fees the new bank is charging and what will be the total savings in the remaining loan tenure. If there are only a few years left to repay the loan, the cost of switching banks can eat into your savings.

First of all, talk about giving lower interest rate than your existing bank. Sometimes the bank may be ready to give a better rate to its old customer. In such a situation, you will not need to transfer the entire loan to another bank.