Looking to Switch to a Cheaper Home Loan? Look Closer

It’s commonplace to refer to new home loans in the market just to understand and cross-check if you’ve currently got a good deal on yours. Switching to a new home loan while maintaining the same EMI but a lower rate of interest can reduce tenure of payment. If you are stuck at a high rate of interest, moving to a new home loan could be the perfect option for you. However, switching to a more attractive offer might not be possible because of several reasons:

• Lending norms have changed significantly over the past few years: Banks and NBFC’s are under strict instructions to reduce funding percentage so if you have borrowed 85-90% of the property cost earlier, switching to a loan where 75-80% is allowed will pose a problem. A loan with higher percentage funding could be a major disadvantage.
• Fluctuating real estate prices: If your property is under-construction the market value might have shot up and the 85% funding that you had received stands to be 75% or lesser now! The property will be of no consequence to the new lender unless you have received possession. So, you will fall short if they consider the ‘agreement value’ to take over your loan which is true of most cases.
• Irregular repayment: It goes without saying that if you have a bad track record with your previous lender it won’t help your case. Never mind the reasons for late repayment like change of address or any disputes.
• You are under a fixed rate loan: One isn’t aware that pre-closure penalty ranging from 2-4% and service tax levied by lenders is waived off for home loans however it isn’t applicable for fixed rate loans.
• You have laminated your property’s registered deed: Unfortunately, this could go against you as lenders do not accept laminated deeds for mortgage.
• You have a guarantor in your loan: Having a guarantor could ruin your chances of switching to a new loan as he/she might not oblige again or the new lender may not have a policy of accepting a guarantor.
• You have obtained funding on stamp duty and registration charges: Funding on statutory charges like stamp fee and registration duty isn’t allowed by the RBI anymore and banks might stay away from taking over loans where these costs have been considered.
• The timing is wrong: Switching in the initial years of your home loan will ensure that you get a better deal as you pay higher amount towards the principal part at the end of the loan.
• Change in profession: If your professional status changes from ‘employed’ to ‘self-employed’ then lenders will require at least three years of business community proof and the absence of a regular monthly income could severely hinder your chances of getting a new loan.
• Loss of the original deed: Although a rare occurrence, not having the original deed is a no for most lenders and they might refuse to take your loan on board. 
  Low Interest Rates: State Bank Of India has cut it's interest rate twice this year. So, you can avail SBI Home Loan at lowest interest rates.