Save More, Pay Less: Short Guide On Home Loan Refinancing

The Reserve Bank of India (RBI) has reduced the key repo rate twice this year–in February and then April. Home loan rates are currently trending below 8% for the first time since 2022. With inflation easing, more rate cuts may be imminent. 

2025, thus, offers a prime opportunity for home loan borrowers to save significantly. There are many strategies to explore, such as Refinancing is one efficient strategy you can explore to secure lower interest rates, reduce your EMI burden, and accelerate repayments to become debt-free faster. Let’s learn more about how refinancing can help you and how. 

What Is Refinancing And How You Can Do It

Refinancing essentially replaces your existing loan with a new one at a lower interest rate, helping you reduce repayment costs and pay off your debt faster. A recently published BankBazaar primer titled ‘Home Loans Made Easy’ highlights two options borrowers can explore under refinancing. Let’s look at what these are. 

What to know	Refinance with current lender	Balance transfer to a new lender
Reason	You're on an older benchmark, paying a higher interest rate. Your lender is ready to convert your loan with better terms	You're on an older benchmark, paying a higher rate. Another lender offers you better terms, allowing you to shift your loan
Pre-closure of existing loan	Since your loan is being converted from one benchmark to another, pre-closure isn’t required	Your new lender disburses a new loan and issues a demand draft to your current lender to help close your existing loan
Application process	Not required	Intensive
Documents required	Not required	Proofs of identity, income, address; property documents such as sale deed, agreement to sell, property tax receipts, other documents are required
Fees for refinance	Processing fee	Processing fee, legal fee, MOD charges, other charges, pre-EMI interest as applicable
Turnaround time	Typically under a week	Typically 1-3 weeks
Pre-closure costs	Not required	May be required for simple interest for pre-closure, and pre-closure penalties, if any

When To Refinance

While refinancing can be a smart way to cut down your monthly EMI, reduce overall interest paid, or even shorten your loan tenure, you should be clear about when it’s the right move.

Refinancing makes the most sense if interest rates have dropped since you first took your loan. Even a 0.5 per cent reduction in rates can save you lakhs over the loan’s life. For instance, if you took a Rs 50 lakh loan at 9 per cent for 20 years and now refinance it at 8 per cent, your interest savings could exceed Rs 6 lakh—assuming the same tenure.

You can also explore refinancing to switch from a floating rate to a fixed rate (or vice versa), especially if market conditions have shifted. Another reason could be to secure better terms, like lower fees, improved service, or more flexible repayment options.

But timing is key. Refinancing early in your loan tenure delivers the most value because that’s when a larger portion of your EMI goes towards interest. Also, assess the associated costs—processing fees, legal charges, and penalties. If these expenses outweigh your potential savings, refinancing may not be worthwhile.

A good time to refinance is when you have a strong credit score, stable income, and a few years left on your loan. Always compare offers from banks and NBFCs before deciding.

Refinancing is a practical way to reduce the cost of your home loan and become debt-free faster. If you’re paying a higher rate or feel your lender’s terms no longer work for you, this may be a good time to refinance. In a falling-rate environment like 2025, a timely switch can unlock significant long-term savings.

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