Home loan conundrum: Should you switch lenders to slash your EMI burden? Here's what experts say

I took a home loan of Rs 70 lakh in 2021. I am paying 55000 as equated monthly installments (EMIs), at approximately 9% interest. The tenure of my loan is 30 years. I want to migrate to another lender to reduce the interest rate and EMI burden. My other monthly commitments include mutual fund investments of Rs 30000 per month. I do not have any other liabilities. Please tell me if I should change my lender, or continue with the existing one. My annual income is Rs 22 lakh. 

Abhishek Basu (Delhi)

By Atul Monga CEO & Co-founder, BASIC Home Loan

Deciding whether to switch lenders to reduce your EMI burden depends on various factors such as the interest rate offered by the new lender, any additional fees involved in switching, the remaining tenure of your loan, and your financial situation.

Based on your current home loan details, switching to a new lender with a lower interest rate could be advantageous. With a loan amount of Rs 70,00,000 and 3 years into a 30-year tenure, here are two scenarios:

1. For a CIBIL score between 800-850, a reduced interest rate of 8.4% could lower your monthly EMI to around Rs 53,329, saving you Rs 2,995 monthly.

2. With a CIBIL score between 740-799, an interest rate of 8.75% would result in a monthly EMI of about Rs 55,069, saving you Rs 1,255 monthly.

Considering your annual income of Rs 22,00,000 and monthly mutual fund investment of Rs 30,000, the savings from a lower EMI can enhance your financial portfolio.

Also read: Bitcoin will disappear and go to zero someday: Jim Rogers

Also read: Can mother and father both contribute in PPF account of their minor child?

Also read: Gold price dips amid dollar strength ahead of US Fed rate signal

However, consider additional costs, negotiate with your current lender, and understand how the change may affect your loan tenure. It is important to make a decision based on a comparison of long-term benefits and costs. This way you can assess the potential savings against the costs.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)