Many people who have taken a home loan few years back are facing a dilemma. The rates when they borrowed were high and hence, they are paying higher EMIs. Now with fall in interest rates, lenders are offering fresh home loans and transfer of old ones at lower rates.
So does it make sense to switch from an old home loan (at high interest rate) to one at lower rate?
The answer is yes. It makes sense. Even a small reduction in interest rate can save you a lot of money during the course of loan.
But remember that lower rates alone should not be considered before deciding to switch.
Make sure you check the foreclosure charges with your existing lender. That is not all. There are charges like processing fees, legal charges, stamp duties, valuation fee, etc. that the new lender might charge. So once you have taken these additional charges into account, only then can you decide whether to shift or not.
But if you do find reputed lenders like Tata Capital offering lower rate of interest on switching your old loans to them, it makes sense to do a deeper analysis. How should you approach if you wish to shift your loan?
First of all, submit an application to your existing lender for transfer of loan to Tata Capital. Once the existing lender issues the NOC, submit it with loan statement and complete application to Tata Capital for transfer of loan. The application will be processed and evaluated.
Once the loan is approved, the loan amount will be sanctioned for closure of loan account with existing lender. You will need to hand over the original property papers to Tata Capital.
As for your EMIs, you would now have to pay lower home loan EMIs as you have a loan at lower rate of interest. Or you can continue paying old EMIs and reduce the loan tenure (suggested approach).