The Reserve Bank of India, in its latest monetary policy review, has cut the repo rate by 25 basis points to 6.25 per cent. This reduction has made home loans more affordable for new borrowers. For existing borrowers, the lower interest rate presents an opportunity to refinance at a more competitive rate—particularly for those in the early stages of their loan tenure. 

A home loan balance transfer enables borrowers to shift their loans to another lender offering a lower interest rate, potentially reducing EMIs and leading to substantial long-term savings. However, while the prospect of lower costs is appealing, it's essential to carefully assess factors such as processing fees, loan tenure, and overall savings before making the switch.

Home Loan Balance Transfer – How It Works

When a borrower initiates a balance transfer with a new lender, the process begins with the new lender agreeing to take over the existing home loan. The new lender then pays off the outstanding dues to the current lender, who, upon receiving the full amount, releases the property documents and issues a no-due certificate to the borrower. These documents are subsequently transferred to the new lender. Once the transition is complete, the borrower is required to make all future EMI payments to the new lender under the terms of the revised loan agreement.

While the option of switching lenders may appear beneficial, it requires careful evaluation. Here are some key factors to consider before proceeding with a balance transfer:

  • Cost vs Benefit: Many borrowers opt for a home loan balance transfer to secure lower interest rates and ease their EMI burden. Moving to a lender with a more competitive rate can offer significant financial relief. However, it’s essential to weigh the savings against processing fees and legal charges to ensure the switch is financially worthwhile.
  • Loan Tenure: If you are close to the end of your loan tenure, transferring your loan may not be financially worthwhile. But, if you’ve recently taken a loan and want to switch to a lower rate, you may be an ideal candidate for a balance transfer. 
  • Eligibility: Just like a fresh loan, your credit score and repayment history are crucial for getting a lower rate upon switching. 
  • Hidden Charges: Understand the fine print of the balance transfer, including the terms, conditions, and charges, before committing to the new loan agreement.

A well-timed home loan balance transfer can reduce loan costs, especially if the new interest rate is lower and a substantial tenure remains. Before switching, evaluate the lender’s customer support, compare options, and negotiate for better terms to maximize savings.

Besides selecting a home loan with the lowest interest rate, make sure the loan agreement permits prepayment, foreclosure, and lender switching without additional charges. Your decision should also consider the approved loan amount (in comparison to other lenders), the ease of documentation, and the expected time required for loan disbursement.

Also Read : Home Prices To Rise Faster Than Inflation, Rents Expected To Surge: Poll

If you're looking for banks offering the lowest interest rates, the table below highlights the 10 most competitive options.

Bank Name

Lowest Interest Rate Range Advertised

Central Bank

8.10-9.25

Union Bank of India

8.10-10.50

Bank of Maharashtra

8.10-10.65

Indian Bank

8.15-9.55

Indian Overseas Bank

8.15-8.75

Bank of Baroda

8.15-10.35

Punjab National Bank

8.20-9.85

State Bank of India

8.25 - 9.20

Canara Bank

8.25-11.0

UCO Bank

8.30-10.00

Disclaimer: Data compiled by BankBazaar.com. Interest rates that vary with tenures or credit scores within the specified loan amount are indicated as a range. Data taken from respective bank’s websites on Feb 28, 2025. 

(The author is the Associate Vice President, Communications at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)