• Hey there! Welcome to TFC! View fewer ads on the website just by signing up on TF Community.

Home Loan Top-Up and Balance Transfer Advice Needed

Hello Technofino Community,

I currently have a home loan with ICICI Bank that was taken for purchasing an empty plot. The current interest rate on this loan is 9.4%, and I am exploring two options:
  1. Top-Up Loan: Is it possible to top up my existing home loan with ICICI Bank for additional funding?
  2. Balance Transfer: I am considering transferring my loan to another bank that offers a lower interest rate and also allows me to avail of a top-up loan.
I also have an HDFC Imperia account and an IDFC Wealth account, and I’m wondering if these could help me negotiate better interest rates or terms with either of these banks or any other banks.
 
Just a doubt, is it worth it? I mean its only for a quarter or two then again interest rates may increase/decrease. This SBI rate may go to ICICI rate, and ICICI rate stays same, its upto bank to decide but when we considering extra misc. charges like MODT, Stamp etc. which effectively reduces the money that you'll save in next 2 quarters with that reduced interest rate.

Looking your perspective when analysing these things, and to find something that I missed with above logic.

As per RBI guidelines, all home loans have to be linked to Repo rate i.e. an external independent benchmark. Earlier used to be each bank's PLR. Therefore, interest increase / decrease due to change in benchmark i.e. REPO will now affect entire market and not any individual loan.

Margin is something banks negotiate on case to case basis. They do reserve right to increase their margin on loans. However, in practice this will be done only very rare scenario if credit profile deteriorates drastically. Or they increase the margin wholesale for most of home loan portfolio.

The ideal scenario therefore is always, as kashishj suggested, to stick to same bank, pay the small processing fee and reduce the rate.

Plus I will tell you very important information which less people know. Loan Emi interest rate is = Repo rate + 2-4% Margin which is bank's profit every bank charges us like us. Talking about Icici, this margin interest rate is variable and keeps on changing quarterly or annually. Now important hidden info - whenever this margin is increased, all existing loans Emi interest rates are increased automatically. But whenever they decrease it, they don't decrease loan Emi automatically. Icici has conversion form - They charge Rs.1180 and reduce your Emi interest rate to lowest. Regularly check the margin with bank and reduce it asap. Mark it solution or rate me as helpful user if benefitted.

+1
All banks seem to have this option now a days. One needs to keep discussing / negotiating with them.
The margins are not standard so difficult to pin point. They generally have the maximum flexibility in margins for new loan originations.
 
Just a doubt, is it worth it? I mean its only for a quarter or two then again interest rates may increase/decrease. This SBI rate may go to ICICI rate, and ICICI rate stays same, its upto bank to decide but when we considering extra misc. charges like MODT, Stamp etc. which effectively reduces the money that you'll save in next 2 quarters with that reduced interest rate.

Looking your perspective when analysing these things, and to find something that I missed with above logic.
pls get an eblr loan..
 
Plus I will tell you very important information which less people know. Loan Emi interest rate is = Repo rate + 2-4% Margin which is bank's profit every bank charges us like us. Talking about Icici, this margin interest rate is variable and keeps on changing quarterly or annually. Now important hidden info - whenever this margin is increased, all existing loans Emi interest rates are increased automatically. But whenever they decrease it, they don't decrease loan Emi automatically. Icici has conversion form - They charge Rs.1180 and reduce your Emi interest rate to lowest. Regularly check the margin with bank and reduce it asap. Mark it solution or rate me as helpful user if benefitted.
For HDFC too, you need to submit a conversion request with ~3-5k fee. Only with SBI, they automatically reduce the interest rate when the repo rates are cut by RBI. Not sure why other banks don't follow the same.
 
Back
Top