Selecting Home Loan Bank

While purchasing my second flat, I took loan from Godrej Housing Finance (GHF) since I didn’t have lot of money. GHF provided me upto 94% of loan while regular bank won’t go beyond 80%.

Fast forward 2 years, government is reducing repo rate consistently. In past one year, repo rate has come down by 1.25%. But same hasn’t been the case with GHF loan. Its interest rate has come down just by 0.25% . My other bank loans (from HDFC and SBI) have reduced their interest rates by 1.25% and that too in the same month when repo rate announcement was made.

I have tried reaching GHF multiple times to reduce the interest rate otherwise I would transfer the loan to another bank. They are ok with it, but rate will not budge.

Transferring loan from one bank to another isn’t also that straight forward. First there will be processing fees, stamp duty charges, … Last I checked this for ICICI Bank, it came around 1.3% of the home loan which is roughly Rs. 1L . That doesn’t hurt that much. The second part where the insurance would go away and I will have to buy new insurance hurts more.

In GHF I had to pay Rs. 1.86L for insurance. If I transfer loan to another bank, this insurance too will go away. And further I will have to buy insurance (though of some lesser amount) from that bank. Overall it would be a loss of Rs. 3-4L in transferring the loan. So, I haven’t been able to transfer the loan till now.

Once, I get the possession of the flat I will transfer the loan to other bank. Because after that I will be aggressively repaying the loan and each extra decimal in interest rate will matter.

So, it is important to select right bank while taking home loan. Had I taken home loan from HDFC / SBI I would have saved few thousands over past few months.