Home Loan · Guide
Home loan balance transfer
A home loan balance transfer moves your outstanding loan from one bank to another that offers a lower interest rate. Done at the right time, it saves 5-15 lakh over the remaining tenure. Done wrong, the transfer costs more than it saves.
By FinancePaisa Editorial Team · Research & editorialUpdated · 2 min read
On this page (6 sections)
The 40-bps rule
As a rule of thumb, look for a gap of about 0.4 percentage points or more. Smaller gaps can still pay off on a large loan with many years left, but the break-even stretches out: on a ₹40 lakh loan with 15 years to go and ₹25,000 of switching costs, a 0.25-point cut takes 3 yr 7 mo to recover the cost, against 1 yr 10 mo for a 0.5-point cut.
Break-even worked example
On a ₹40 lakh outstanding, 15 years remaining, moving from 9% to 8.5%:
Monthly saving: ₹1,181
Total interest saved over remaining tenure: ₹2,12,595
Switching cost (processing + legal + MOD): ₹25,000
Break-even: month 22
Net saving: ₹1,87,595 over the remaining tenure. Try your own numbers in our balance transfer calculator.
When to transfer
- Your current bank refuses to reset your rate on request
- The new bank's published rate is 40+ bps below yours
- You have 5+ years of tenure remaining
- You have a clean 12-month EMI track record
- You have title papers and property documents ready
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When not to transfer
- Less than 3 years of tenure remaining
- Rate difference below 40 bps
- Your current bank offers to reset within 20-30 bps
- You're within the initial fixed-rate lock-in period
- The new bank has stricter LTV or income requirements
Process in 5 steps
- Compare 2-3 banks' rate and processing-fee offers in writing
- Request a foreclosure statement from your current bank
- Apply to the new bank with property + income + existing loan docs
- New bank pays off the old loan directly on approval
- Old bank returns original property documents to you (or new bank)