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POSTED BY ON March 12, 2014 10:23 pm COMMENTS (3)
I have opted for a home loan 3 years back @10.00% p.a. That time my EMI was Rs. 19,000 which was raised a couple of times due to increase in interest rates (@12.50% p.a.) in last 3 years. Now it is reduced @ 11% p.a.
I wish to shift this loan to a PSU bank offering around 10.00% p.a. and hoping for further reduction in interest rates. I was wondering how exactly to calculate the benefit of shifting. Considering all factors put together. Existing Loan of Rs. 18,00,000 (principal pending as on date Rs. 16,00,000) . EMI am paying is Rs. 20,200 for a term of 17 years (raised from 15 years to 17 years).
Proposed Tenure with the new bank is 12-15 years considering EMI remains around 20k.
Help me to assess whether shifting make sense or not?
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Dear Ratnesh, the exact benefit just on the basis of interest rate difference can be calculated easily in a loan amortization template in exl. file in your PC. Please check it. Now add the value of transfer cost and compare.
Thanks
Ashal
Dear Ratnesh, what about switching charges to be borne by you in the process?
Thanks
Ashal
Dear Ashal,
There will not be any pre-closure charges from my existing bank but the new bank will charge processing fees to the tune of 0.15% which is minimum. The question is how much will be the monitory gain/ loss if I shift. Will the interest portion of EMI paid which was calculated on the basis of 17 years term gets adjusted against principal when am closing the loan just after 3 years?