Is this right time to transfer home loan?



I have taken home loan from PNB Housing Finance on April 2012, bank was regularly disbursing amount to builder on builder’s request. Till date bank has paid 18,87,160.00 to builder. My home possession likely be on May 2014.

–Loan details------------------

Bank: PNB Housing Finance Ltd.

Rate of interest: 10.75%

Interest rate type: Floating

Tenure: 20 Years

Processing feed paid: 5,500
Franking charges paid: 8,500
One time insurance paid to IFFCO Tokyo: 8,700

– Payment details --------------

Loan start date: 19 April 2012

Disbursed loan amount: 18,87160.00

2,77,349 – Paid to Bank till date

2,34,344 - Interest taken by Bank till date

18,44,155 – Present outstanding (March 2014)

Will it beneficial for me to transfer loan to any other bank like SBI now?
Will it beneficial for me to reduce loan tenure to 15 Years now?
If i will keep loan tenure to same 20 years and do prepayment every year say 1 Lac, will it beneficial for me?


Scenario 1: Loan transferred to SBI at interest rate of 10.15% (Tenure 15 years), assuming processing and other charges to be 1.2% of loan amount.
Amount payable in loan term of 15 years= Rs 3619781
Amount already paid to previous bank= Rs 277349
Total amount payable= 3619781+277349= Rs 3897130

Scenario 2: Tenure reduced to 15 years with existing bank at interest rate of 10.75%.
Result: Amount payable in 15 years with existing due of Rs 1844155= Rs 3720963 Add: Amount already paid= Rs 277349 i.e. 3720963+277349= Rs 3998312 (Total Amount Payable)

Scenario 3: Prepayment of Rs 1 Lac each year starting after 36 months of initiating the loan. Existing bank’s interest rate = 10.75%, tenure 20 years.
Result: Total Amount payable after prepayment= Rs 3339835, Tenure reduced to 11 years

Analyzing all the 3 scenarios you will find under the scenario 3, the total amount payable is only Rs 3339835 and you would also save tenure by 9 years. If you are comfortable with prepayment of Rs 1 Lac every 12 months (and assuming the tax impact to be neutral for all the scenarios), you should opt for “Scenario 3”.



You can consider a balance transfer for your Home Loan. The process by which the unpaid principal amount of the loan is transferred to a different lending bank for a lower rate of interest is called balance transfer.

A Home Loan balance transfer primarily depends on the following factors:
 The difference in the interest rates
 The loan amount that is yet to be paid
 How many years remain in the loan tenure
In case the unpaid amount of the loan is low or if the remaining loan term is not too long, then a balance transfer may not be the best choice. Remember to also check if your lending bank charges a processing fee for balance transfer of your Home Loan.

A balance transfer will be most beneficial if you are in the early phase of your Home Loan, rather than later in the loan tenure.

Remember that for a Home Loan balance transfer you need to go through all the procedures involved in a Home Loan once again. These include a credit appraisal, legal verification of property documents and technical evaluation with the new bank. The loan will be approved only when the bank is satisfied with the verifications. This also includes paying a processing fee from anywhere between 0.5%-1% of the loan amount. You could ask your new lender to waive this off.

Some banks charge a prepayment penalty for a balance transfer. This can vary anywhere between 2%-5% of the principal outstanding amount of the loan and depends on your lender. However, recently many institutions and some banks seem to be waiving this off for their customers.

The lender that you are shifting to usually offers you a loan based on the current Home Loan
rates that their customers enjoy. You can, of course, negotiate and check if they will give you lower rates.

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BB Expert