Home Loan Refinancing: The Reserve Bank of India (RBI) has cut the key repo rate twice this year. Due to which home loan rates are currently running below 8% for the first time since 2022. Now you can reduce your EMI by taking a loan at a lower interest rate through refinancing.
Home Loan Refinancing: The Reserve Bank of India (RBI) has cut the repo rate twice in February and April this year. Due to this, home loan interest rates have come down below 8%, which is the first time since 2022. Due to the fall in inflation, more rate cuts are expected in the coming times. In such a situation, 2025 is a great opportunity for those home loan holders who want to make big savings on their loans.
Refinancing is an important strategy
Refinancing is an important strategy. With this, you can reduce your EMI by taking a loan at a lower interest rate and become debt-free by repaying the loan quickly. Let us know what refinancing is and how it can be beneficial for you.
What is refinancing and how does it work?
Refinancing means that you replace your old home loan with a new loan, which has a lower interest rate. This reduces your total interest cost and you can also get relief in EMI.
According to BankBazaar report ‘Home Loans Made Easy’, there are two options for refinancing:-
| What to know | Refinancing with existing lender | Balance transfer to new lender |
| Reason | Old benchmark rate, high interest rate | The new lender is offering better rates |
| Pre-closure | not required | Closing the existing loan by issuing a new loan |
| Application Process | Easy | Complex, application required |
| documents | doesn’t seem to | Identity card, income proof, property documents etc. |
| charge | Processing Fees | Processing, Legal, MOD Charges, Pre-EMI etc |
| Time | within 1 week | 1-3 weeks |
| Pre-closure charges | No | may be (penalty/simple interest etc.) |
When to refinance?
When interest rates have come down. Example: A loan of ₹50 lakh if taken at 8% from 9% (for 20 years), can save over ₹6 lakh. When you want to shift from a floating to a fixed rate (or vice versa). When you are getting better terms – such as lower fees, better customer service, or a more flexible payment system.
Why is it important to choose the right time?
Refinancing at the beginning of the loan is most beneficial, as a large part of the EMI goes towards interest at that time. Do evaluate processing fees, legal charges, penalties, etc. before refinancing. If the cost is more than the savings, this option will not be beneficial.
(Disclaimer: This article is written by Adil Shetty, CEO of BankBazaar.com, it is for information purposes only. If you need to take any kind of loan or settle any financial matters, contact the experts.)
