15 August 2011
Does Switching my Home Loan make Sense?
With interest rates rising and new prime Lending rate increased by all the banks the borrowers are suddenly faced with paying a higher EMI amount and this will take a toll on their regular monthly expenses as the incoming income will be the same and out going will increase. Many borrowers are considering switching their existing home loans to a new lending bank as they are offered the same loan amount at lower interest rates as well as other perks and offers. Does switching my home loan make sense?
There are a few tips to consider and few points to think before taking this plunge of change. Firstly find out the housing finance companies that are offering home loans at a reduced rate of interest. Try to calculate all the charges you will have to pay for the new home loan. Since all banks have administrative charges for the approval of home loan even here you will have to pay the charges which usually come to about 1% of the loan amount.
For the closure of your existing home loan you will also have certain administrative charges and fees. They will definitely charge you with penalty fees for transfer or prepayment of the home loan. If you are paying off your home loan with your saving amount then the charges of penalty are less, but when you are shifting your existing loan to another bank then you have to pay approximately 2% of the remaining loan amount to the bank.
Now for this decision of transfer of your home loan you calculate your new home loan fees and consider your penalty charges fees from the previous bank before transfer of your home loan. For the new loan you may also need to pay other administrative charges for making the new document which will again cost you money, and also time.
So if you have the time to try out this and you are ready to go about with all the hassles required in transferring your home loan then go ahead, remember it must really be worth it! You must get a new home loan at a really cheaper rate of interest to make this decision and if you are saving a lot which I bet you will, then it is definitely worth it.