Should you transfer your home loan to another company just because of better ROI. I am going to discuss something interesting in this context as The process of transferring a home loan from one lender to another is known as a "balance transfer" or "takeover." which is not a typically very hard as compare to a fresh loan and It is a common practice in India, and many borrowers choose to do so in order to get a better interest rate, lower their EMIs, or change their loan terms.
There are several costs associated with transferring a home loan from one lender to another. These include:
1. Processing fees: This is the fee charged by the new lender to process the transfer of the loan. It can range from 0.5% to 1% of the loan amount.
2. Prepayment charges: If you are transferring the loan before the end of the original loan tenure, your old lender may charge you a prepayment penalty. This can be up to 2-3% of the outstanding loan amount.
3. Legal and technical charges: You may have to pay for legal and technical charges involved in the transfer of the loan. These can include valuation charges, title search charges, and documentation charges.
4. Stamp duty: In some states, stamp duty is charged on the transfer of a home loan. The rate varies from state to state.
It is important to consider all of these costs before deciding to transfer your home loan. In some cases, the costs may outweigh the benefits, especially if you are near the end of your loan tenure. However, if you are in the early stages of your loan and can get a significantly lower interest rate by transferring, it may be worth it.
As for the average fees charged by the top 5 home loan companies in India, it can vary depending on the lender and the loan amount. However, here is a general idea of the fees charged by some of the top lenders:
1. State Bank of India: Processing fee of up to 0.35% of the loan amount, with a minimum of Rs. 2,000 and a maximum of Rs. 10,000.
2. HDFC Bank: Processing fee of up to 0.50% of the loan amount, with a minimum of Rs. 3,000 and a maximum of Rs. 10,000.
3. ICICI Bank: Processing fee of up to 1% of the loan amount.
4. Axis Bank: Processing fee of up to 1% of the loan amount, with a minimum of Rs. 10,000.
5. LIC Housing Finance: Processing fee of up to 0.50% of the loan amount, with a maximum of Rs. 10,000.
Let's a hypothetical example and the calculations have been taken from HDFC limited website:
Which shows that for a loan of 20L@8.5% EMI will be 15378/- for 30 years, now lets say same loan is offered to a takeover customer @8.35% which is a quite good offer, and it will save Rs. 212/- on every EMI and total saving would be 76358/- now let say same loan is having prepayment charges as 2% and also attracts 18% GST then total charge would be 2.36% of 20L = 47200/- and new lender is also asking for Rs10000 as processing fee then net saving would be = 76358-47200-10000 = 19158/- (I ignored the other charges and efforts)
It's important to note that these fees are subject to change and may vary depending on the specific loan product and borrower profile. It's always a good idea to check with the lender for the most up-to-date fees and charges.