Use this home loan transfer calculator to determine if it is worth refinancing your mortgage, that is, transfer your home loan to a new bank or new loan scheme. When a new home loan offer at a lower interest rate appears, it is tempting to want to shift an existing home loan, because the EMI will decrease for the same duration.
However, this involves costs – exit fees and processing fees. Also, a lower EMI implies, lesser tax savings. This is because the interest component decreases, while the principal component increases, resulting in a net saving after accounting for the extra tax to be paid.
There are two ways to analyse a home loan transfer.
- If the net savings per month is used to prepay the home loan, how much quicker will the amortisation be completed? Support this is about 2 years. Then the total cost involved in transferring the home loan to a lower rate has resulted in a pre-closure. Is it worth that, is a question that we need to answer?
- What is the net savings were invested elsewhere? Letting the new home loan run its course? The costs can be recouped in a few years, and at the home loan tenure, one will have a decent corpus from the investment.
These options are provided in the home loan transfer calculator. A detailed Excel Home Loan Amortization Schedule Template is also available which allows periodic and aperiodic pre-payments.
This prepayment options are also available in the present calculator but are hidden for ease use. Once you are comfortable with the sheet, you can unhide columns and play with it.
Do let me know what you think of the sheet and consider sharing it with your contacts.
Screenshots from the Home Loan Transfer Calculator
Download the Home Loan Transfer Calculator (old version)