If you have an ongoing home loan and are tired of paying high EMIs every month, there’s a great solution – Home Loan Refinancing! This means closing your old loan and taking out a new one with a lower interest rate, which will also reduce your EMI. Many people do this and save thousands of rupees. Let’s understand in a very simple way how to do this and what the benefits are.
What Exactly is Refinancing?
It’s simple – you close your old home loan (for example, at 9% interest) and take out a new loan with a lower interest rate (like 8% or 7.5%).
The new loan covers the remaining amount of the old loan, and you decide the rest of the terms with the new lender. This can reduce your EMI or help you finish the loan faster.
What are the Benefits?
Reduced EMI
If the interest rate decreases, you have to pay less money every month.
Total Interest Saved
A lower rate means less interest on the entire loan, saving you lakhs!
Flexible Tenure
You can increase or decrease the loan tenure if you want.
Top-up Loan Available
If you need extra money, you can take a slightly larger new loan.
When Should You Refinance?
- When interest rates in the market have fallen (currently, in December 2025, rates are quite competitive).
- Your CIBIL score is good (750+ is best).
- You have already paid 1–2 years of your old loan.
- The new bank’s rate is 0.5%–1% lower than your old one.
How to Do It Step by Step?
Step 1: Check Your Current Loan
How much balance is left, what are the prepayment charges (usually 2–4% if it was a fixed rate).
Step 2: Compare Rates of New Banks
Go to the websites of banks like SBI, HDFC, ICICI, Axis, or compare on BankBazaar, PaisaBazaar.
Step 3: Prepare Documents
Salary slip, bank statements, old loan statement, property papers, KYC.
Step 4: Apply at the New Bank
Apply online or by visiting a branch.
Step 5: Get Legal and Valuation Done
The new bank will check the property and conduct legal verification.
Step 6: Close the Old Loan
After the new loan is approved, the old loan will be cleared.
Step 7: New EMI Starts
Now enjoy lower EMIs or better terms!
How Much Can You Save? See Example
Suppose you have a remaining loan of ₹50 lakhs, 15 years remaining, old interest rate 9%.
- Monthly EMI: Around ₹50,700.
- If you refinance at an 8% rate, the EMI can decrease to ₹47,500 – a saving of ₹3,200 per month.
- You can save up to ₹7–8 lakhs in interest over the entire loan period.
Things to Keep in Mind
- Processing Fees: A fee of 0.5–1% may be charged on the new loan.
- Prepayment Penalty: Check for any charges on the old loan.
- Time Consuming: The entire process can take 30–60 days.
- Slight Impact on CIBIL: A new inquiry may slightly lower your score, but it recovers quickly.
| Item | Old Loan (Example) | After Refinancing (Example) |
|---|---|---|
| Remaining Amount | ₹50 lakhs | ₹50 lakhs |
| Interest Rate | 9% | 8% |
| Remaining Time | 15 years | 15 years |
| EMI | ₹50,700 | ₹47,500 |
| Total Savings (Monthly) | – | ₹3,200 |
| Total Interest Savings | – | ₹7–8 lakhs |
Pros and Cons
Pros:
- Both EMI and total interest can be reduced.
- Better terms and top-up loan options available.
- Significant benefit if market rates fall.
- Easy to compare online.
Cons:
- Processing fees and charges apply.
- Requires documents and time.
- Less benefit if there is not much difference in interest rates. It might have a slight impact on your CIBIL score.
Conclusion
Home loan refinancing is a smart move if interest rates are low and your credit score is good. Your monthly EMI will decrease, and you’ll save lakhs of rupees – that’s a fantastic deal!
Rates are competitive right now, so check your current loan and compare new offers. If you find significant savings, go for it; otherwise, wait. Tell us in the comments, what is your current home loan interest rate, and are you planning to refinance?
