The Reserve Bank of India (RBI) has been cutting key policy rates with most public lenders and some private banks lowering interest rates to their lowest levels in almost 15 years.

Most banks are disbursing home loans anywhere between 6.9-9% interest. This allows borrowers to transfer their ongoing home loans to a bank that is offering lower interest rates.

A mere decline of 0.75% in your home loans interest rates can make a huge difference in what you end up paying over a longer-term of say 10 to 20 years.       

If done properly, switching loans can be very beneficial for borrowers. Switching, balance transfer refers to taking a loan to pay off the old lender and paying EMIs to the new borrower. 

It is to be noted that switching loans is only beneficial if the loan tenure is long in order to make risk-reward in one's favour.  

For example, a borrower who has a loan of Rs 50,00,000 for a term of 15 years issued at 7.4% by a certain lender, gets it refinanced at 6.90%, which is 50 bps lower, can save more than Rs 2.5 lakh overall. However, refinancing the loan would attract stamp duty, processing fee, and other applicable charges. However, the process to make the switch is often completed and time-consuming.

The borrower has to approach the new lending institution from where he wants to get  loan refinanced. Get necessary documents including the consenting letter from the old bank along with outstanding loan amount. The application is processed by the new lender and a sanction letter is issued. This process can take up to 14 days.

Documents to be given to the new bank include loan account statements etc. From this stage, banks and finance companies take around two to four weeks to process the application. It is advisable to apply for the foreclosure letter from the old bank in the meanwhile. It states the final amount required to close the loan. The new lender also asks for property-related documents such as the registered agreement based on which the legal and valuation process is carried out by the new bank. The new lender then issues a cheque in the name of the old lender when the evaluation process