{"id":28149,"date":"2023-08-29T03:27:51","date_gmt":"2023-08-29T03:27:51","guid":{"rendered":"https:\/\/tata-blog.osian.dev\/blog\/?p=28149"},"modified":"2024-07-02T19:38:54","modified_gmt":"2024-07-02T14:08:54","slug":"does-it-make-sense-to-switch-to-a-teaser-home-loan","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/loan-for-home\/does-it-make-sense-to-switch-to-a-teaser-home-loan\/","title":{"rendered":"Does It Make Sense to Switch To A Teaser Home Loan?"},"content":{"rendered":"\n

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Did you read about an exciting new offer on a teaser home loan? On the surface, you may feel that its loan terms are better than your existing ones.<\/p>\n\n\n\n

Teaser loans often create a buzz in the market because they come with plenty of promotional offers for the consumers. Some popular teaser loans include adjustable-rate mortgages, zero or low-fee credit cards, etc. Yes, teaser loans do look like an attractive option. And from a consumer’s perspective, they seem like a ‘good deal.’ But, if you are already repaying a housing loan, does it make sense for you to switch to a teaser loan?<\/p>\n\n\n\n

Let’s find out.<\/p>\n\n\n\n

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What is a teaser home loan?<\/strong><\/h2>\n\n\n\n

A ‘teaser loan’ is a special loan that lenders offer at a low rate of interest for the first few years of the loan tenure. After this period ends, you will have to bear the normal interest rates.<\/p>\n\n\n\n

For example, suppose you’ve taken a home loan for 20 years at 9% interest. Now, the lender can offer you a teaser rate housing loan for 6%. This means that you will pay only 6% interest for the first three years of the loan. From the fourth year, your interest will change to 9%.<\/p>\n\n\n\n

Remember, the rate of interest and low-interest duration will depend on several factors and vary from lender to lender. <\/p>\n\n\n\n

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Should you switch to a teaser rate housing loan?<\/strong><\/h2>\n\n\n\n

You can switch to a teaser home loan if the switching cost is less than the savings from the lower EMI. To make the switch, you’ll have to bear the prepayment charges on the existing loan and pay a processing fee to avail of the new loan. <\/p>\n\n\n\n

Most financial institutions will typically charge you 2-3% of the balance loan amount if you want to refinance. The processing fee also ranges from 0.5% to 1% of the new loan amount. Let’s look at an example to understand if a teaser rate home loan is worth it.<\/p>\n\n\n\n

Suppose you’ve taken a home loan for Rs. 28.99 lakh for 15 years at 10.25% interest. You repay an EMI of Rs. 31,598 for the first four months. Since you began the repayment, the interest rate has now increased to 10. 5% Now, out of the total loan amount:<\/p>\n\n\n\n