The bank interest rates have been consistently coming down in the country. While this may mean good news for a new loan borrower, the existing borrower generally don’t benefit much. The reason is simple. Banks in order to attract new customers offer preferential rates to the newer customers, but are reluctant to reduce the rates for their existing customers.
Experts are of the opinion that one needs to consider several factors before shifting your home loan.
ADDITIONAL CHARGES TO BE BORNE
An important factor which existing borrower need to consider is that of the additional cost of relocating to a new bank.
A new bank would treat it as a fresh loan application. And the borrower would have to undergo all the same process that he undertook while applying for the loan all over again.
So right from providing all the financial documents of the borrower and the property papers, everything would have to be done again.
The bank would again be evaluating the property papers to determine its value in the market and the legality of all the documents would again be verified. The cost of doing all this would have to be borne by the borrower. The new bank would also be charging the processing and the administrative charge for processing the new fresh loan application.
WHEN IS IT ADVISABLE TO SHIFT?
If the difference in the interest rates after factoring in all the costs comes to more than one percent, then shifting to another product would be advisable.
However before shifting to another bank, it is always advisable to try and renegotiate the interest rates with the existing bank.
Many banks would not want to lose their existing customer and would work on reducing the rates to retain him.