How To Get A Lower Interest Rate On Your Home Loan?

In general, many individuals who receive home loans do not care to evaluate the interest rate that their lender offers them. However, the interest rate on home loans are modified more often with changes in external conditions. So if your lender offers you a higher rate of interest on your home loan than what some provide on the sector, it still generates perception for you to either transfer to another lender or assesses the likelihood that the current lender itself will decrease the rates. Let us explore how to do it and other things to be taken into consideration for this mission.

Transfer your current home loan to another lender

Oh, and by the way, you have to render a statistical comparison of the rates provided on the sector by different lenders. And thereafter, with an application to reduce the rate, you can contact your current lender. It can be given by the lender upon reimbursement of a specific charge. It provides a logic for you to go for it if your lender is ready to give you the rate that is affordable from other lenders since it is the best choice to execute and it does not require any paper activities.  

You must contact the lender promising a decent deal than your current lender if your lender does not approve. Submit a request with all the appropriate documents, namely printed copies of the property papers, to the approved lender. You must address the current lender with a print of the sanction letter after you have issued the authorization letter from the potential lender with an application to issue you a letter stating the amount of interest pending on compensation of which the original property papers will be handed over to you by the current lender.

The lender might also be asked to complete the new lender’s letter specifying the unpaid balance. Although the new issuer will take some time to allocate the debt, the letter may be asked to specify anything between 15 days to one month of the due unpaid date on a future date. In certain situations, your lenders will take that forward to release the money against the issuance of the property records to the current lender.

Charges applicable on the transfer of home loan

Transferring a home loan is chargeable. Furthermore, by the end of the tenure of the loan, the current lender will ask you anything between 0.50 per cent and 0.75 per cent for the prepayment. They have been recommended not to impose any prepayment fees if the home loan is taken from a housing finance corporation that comes within the floating rate system. In the case of fixed-rate home loans, though, the housing finance firm will impose the prepayment fees. Banks do not implement structured procedures and you will have to figure out the fees from them in full.

In contrast, the new lender will, however, charge a standard application fee on your loan applications. This ranges from 1% to 1.5 trillion. If you have a strong track record of financing your new home loan, this charge may be negotiated. The potential lender may also agree to waive the processing fee in certain situations. As when the festive period is coming in, several lenders will declare that they will waive the processing charge or may limit it to an absolute amount around Rs. 1,000 rupees. 

Tax benefits

Under tax regulations, you can seek tax deductions under Section 24(b) and 80C for home loans in the form of interest and principal reimbursement. A loan obtained for the sake of rehabilitation of the first loan is considered as a home loan and is eligible for income tax deductions for interest payments, as per the income tax legislation. Please keep in mind that this option is only applicable to you once, i.e. when you lend money to pay for the first home loan and not the same loan for subsequent transfers.

In compliance with Section 24(b), even the transaction fee charged for prepayment as well as for new lenders is tax-exempt, since the same is specified in the concept of interest under the tax regulations. To summarize, compare the gains you will receive over a longer duration against the one-time expenses of the prepayment fee, service charge, etc. attributable to lower interest rates. As mentioned above, do not neglect to take into consideration the income tax effects of transferring the home loans.  

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