Home loan balance transfer
A home loan balance transfer moves your outstanding loan from one bank to another that offers a lower interest rate. Done at the right time, it saves 5-15 lakh over the remaining tenure. Done wrong, the transfer costs more than it saves.
By Aditi Menon·Editor-in-Chief·reviewed by editor
Last updated: 15 June 2025
The 40-bps rule
The new bank's rate should be at least 40 basis points lower than your current rate. Below that, the switching costs (new processing fee, legal + technical valuation, MOD stamping) usually eat up the interest savings. Above 40 bps, transfer typically pays off within 18-24 months.
Break-even worked example
On a ₹40 lakh outstanding, 15 years remaining, moving from 9% to 8.5%:
Monthly saving: ~₹1,300
Total interest saved over remaining tenure: ~₹2.4 lakh
Switching cost (processing + legal + MOD): ~₹15,000-25,000
Break-even: month 12-19
Net win: ~₹2 lakh saved over the remaining tenure.
When to transfer
- Your current bank refuses to reset your rate on request
- The new bank's published rate is 40+ bps below yours
- You have 5+ years of tenure remaining
- You have a clean 12-month EMI track record
- You have title papers and property documents ready
When not to transfer
- Less than 3 years of tenure remaining
- Rate difference below 40 bps
- Your current bank offers to reset within 20-30 bps
- You're within the initial fixed-rate lock-in period
- The new bank has stricter LTV or income requirements
Process in 5 steps
- Compare 2-3 banks' rate and processing-fee offers in writing
- Request a foreclosure statement from your current bank
- Apply to the new bank with property + income + existing loan docs
- New bank pays off the old loan directly on approval
- Old bank returns original property documents to you (or new bank)