As the interest rates on home loans have been reduced borrowers are planning to switch their existing home loans to banks where the rates are lower. Although this balance transfer option seems attractive, one has to first check out the charges while transferring the loan. Since there would be a penalty charge from your existing bankers as well as the new bank will levy a processing fee too.
The two main charges levied by the bankers would be:-

-Your existing lender will charge a prepayment amount upto 2% on your total loan amount due. This charge is levied mainly to discourage customers from moving to another bank. The levying of this charge is mentioned in the terms and conditions of the agreement.

-Then again you will need to shell out an amount to the new lender called processing fee. Your new lender will charge you the processing fee on the amount of loan you will be taking. Generally it is in the range of 0.50% to 1% of the total loan amount. You may also incur expenses for stamp duty, documents like, No Objection Certificates (NOCs) for your new loan, to the new lender.

You should switch over your loan only if your going to get a reduction in your current interest rate of 1.5 to 2 % taking in to account the tenure of the loan too. So , it is advisable to first check and evaluate how much you are going to benefit before switching over your loan to a new lender. Keep in mind the above charges which you will incur for the balance transfer.