How to save Home Loan Interest using Loan Savings Calculator

Your bank is Charging 7.25% p.a. interest rates but you are getting offer of 6.75% p.a. from other bank for home loan transfer. From this post you will get to know , How to save Home Loan Interest using Loan Saving Calculator .

Home Loan Interest Savings Calculator:

You have to give four inputs :

1. Loan Amount: You can get it from Net banking or check with your bank. Let assume 1,000,000
2. Loan length in years : You have to provide tenure of loan. In case you have months , you can divide it by 12 . Let us assume 10 Years
3. Annual Interest rate from Bank 1: What interest rate you are paying to bank . In our example , it is 7.25% (No need to enter % sign)
4. Annual interest rate from Bank 2: What interest rate you are getting from other Bank. In our example, it is 6.75%. (No need to enter % sign) and then click on calculate.

[calc id=176417]

Result :

You will get follow result that there is monthly saving of 416.67 and total saving of 50,000 during entire tenure of 10 years . You can ignore $ sign and consider result for INR or any of your domestic currency . Answer will be same. You can use all your home loan inputs to get desire results.

Reason for change of interest

In case of floating rate of interest for your home loan, it may be link to RBI repo rate . For example, presently repo rate is 4% p.a. and your home loan interest rate is 7.25 % p.a. . It means bank is charging you repo rate + 3.25 % p.a. You can say bank is having additional margin of 3.5% over RBI Repo rate. RBI through Monetary Policy Committee ,every quarter takes decision on changing interest rate . Normally RBI consider inflation while deciding on repo rate increase or decrease

Cost Benefit Analysis

You can see that there is saving of 50,000 over tenure of 10 years however while switching home loan from one bank to other bank, you should consider below cost factors as well :

1. Any pre-payment charges to be paid to your existing bank.
2. Total changes you may have to pay to transfer loan to new bank i.e. processing fees, document charges, Taxes etc.
3. Additional insurance premium for new house property.
4. Please make sure that new rate is repo rate link rates and check with new bank when they will do next increase .

Conclusion – How to save Home Loan Interest :

1. . Do sum for all above costs and reduce it from Saving of 50,000 and if you are getting good benefits, it will make sense to change bank otherwise you can approach current bank for interest rate reduction . Further this saving of 50,000 is for entire duration of loan i.e. 10 years however you have to pay cost upfront to transfer loan to new bank
2. Your existing bank will charge fixed amount with GST from you to reduce interest rates.
3. Your existing bank may not be able to offer you competitive rate as compare to market rate however you have to consider net cost benefit analysis as explained above .
4. In case you don’t want to reduce EMI per month on reduction of interest rate, you can reduce tenure so that you can quickly close the home loan. In this case you can use our EMI calculator to verify revise repayment schedule as provided by bank. Please click on link to check our EMI Calculator .

You can check Home loan interest rates of various bank on Bank Bazaar website using this link . Home Loan interest rates ( we have no affiliation with them) or alternatively you can visit bank websites or branch .

Hope you get now clarity regarding How to save Home Loan Interest .

Do read our post on Time Value of Money to get idea about real rate of interest .