Wondering when to switch your home loan? This year-wise analysis reveals the ideal time to transfer your loan for maximum interest savings.
Many borrowers feel excited to switch their home loan whenever interest rates start falling. But switching is not as simple as choosing the bank offering the lowest rate. You must consider how long your existing loan has already run, the actual rate difference, the processing and transfer charges, and the remaining tenure. Without evaluating these factors, blindly shifting to a new lender just because the headline rate looks lower may not be a sensible or beneficial decision.
When Should You Switch Your Home Loan? Year-by-Year Guide
Switching or transferring your home loan to another bank may look like a simple interest-rate decision, but in reality, timing plays a much bigger role than most borrowers realize. Many people switch their loan too early out of fear or too late when their interest-saving potential is already gone.
This article provides a clear, practical, and fully data-backed analysis so you can confidently decide when switching actually makes financial sense — and when it does not.
You will find:
- A year-by-year savings table (Years 1 to 20)
- How much principal you repay each year
- When interest dominates, and when principal dominates
- The scientific “sweet spot” for switching your home loan
- When switching is a waste of money
- A practical decision checklist
All calculations are based on a standard EMI amortization model.
Assumptions for the analysis
To keep the example simple and relatable, we assume:
- Loan Amount: Rs.1,00,00,000 (Rs.1 crore)
- Loan Tenure: 20 years (240 months)
- Current Interest Rate: 8%
- New Rate (if switched): 7.5%
- If you switch during any year, the remaining tenure = 20 – that year
These numbers are realistic approximations and closely match actual bank EMI behaviour.
Why timing is more important than interest rate
Many borrowers think switching depends only on rate difference (0.25%, 0.50%, 1%).
But the truth is:
The earlier you switch, the more you save — even with a small rate reduction.
The later you switch, the less you save — even with a big rate reduction.
This happens due to how EMI is structured:
- In early years – EMI = mostly interest, very little principal
- In later years – EMI = mostly principal, very little interest
Hence:
- A 0.50% rate cut in year 1 saves lakhs
- A 0.50% rate cut in year 18 saves almost nothing
Understanding this simple point is the key to making a smart home loan decision.
Part 1: Year-by-Year Switching Savings
This table shows how much total savings you get if you transfer the loan at the start of each year.
| Year of Switching | Outstanding Balance (Rs.) | Years Left | Estimated Savings (Rs.) |
| 1 | 97,88,633 | 19 | 7,79,000 |
| 2 | 95,59,723 | 18 | 6,19,000 |
| 3 | 93,11,814 | 17 | 5,14,000 |
| 4 | 90,43,328 | 16 | 5,05,000 |
| 5 | 87,52,558 | 15 | 4,51,208 |
| 6 | 84,37,655 | 14 | 3,99,000 |
| 7 | 80,96,614 | 13 | 3,49,900 |
| 8 | 77,27,268 | 12 | 3,02,954 |
| 9 | 73,27,265 | 11 | 2,58,669 |
| 10 | 68,94,063 | 10 | 2,17,231 |
| 11 | 64,24,905 | 9 | 1,78,814 |
| 12 | 59,16,807 | 8 | 1,43,599 |
| 13 | 53,66,538 | 7 | 1,11,768 |
| 14 | 47,70,596 | 6 | 83,510 |
| 15 | 41,25,191 | 5 | 59,018 |
| 16 | 34,26,290 | 4 | 38,486 |
| 17 | 26,69,900 | 3 | 22,115 |
| 18 | 18,52,215 | 2 | 10,107 |
| 19 | 9,69,384 | 1 | 2,666 |
| 20 | 0 | 0 | 0 |
Note – You can use our FREE home loan calculator to calculate on your own, “Prepay Home Loan Calculator – Download Free Excel Sheet” and “Home Loan EMI Calculator 2025 – Download Free Excel Sheet“.
Key takeaway
The maximum switching benefit happens during:
Years 1 to 5 ? Savings between Rs.4.5 to Rs.7.8 lakh
Years 6 to 10 still provide moderate savings.
After Year 15, savings become negligible.
Part 2: How much principal do you repay every year?
You earlier asked “When do we finish 10%, 20%, 30% of principal?”
This table answers that fully:
| Year | Outstanding (Rs.) | Principal Repaid (Rs.) | % of Principal Repaid |
| 1 | 97,88,633 | 2,11,367 | 2.11% |
| 2 | 95,59,723 | 4,40,277 | 4.40% |
| 3 | 93,11,814 | 6,88,186 | 6.88% |
| 4 | 90,43,328 | 9,56,672 | 9.57% |
| 5 | 87,52,558 | 12,47,442 | 12.47% |
| 6 | 84,37,655 | 15,62,345 | 15.62% |
| 7 | 80,96,614 | 19,03,386 | 19.03% |
| 8 | 77,27,268 | 22,72,732 | 22.73% |
| 9 | 73,27,265 | 26,72,735 | 26.73% |
| 10 | 68,94,063 | 31,05,937 | 31.06% |
| 11 | 64,24,905 | 35,75,095 | 35.75% |
| 12 | 59,16,807 | 40,83,193 | 40.83% |
| 13 | 53,66,538 | 46,33,462 | 46.33% |
| 14 | 47,70,596 | 52,29,404 | 52.29% |
| 15 | 41,25,191 | 58,74,809 | 58.75% |
| 16 | 34,26,290 | 65,73,710 | 65.74% |
| 17 | 26,69,900 | 73,30,100 | 73.30% |
| 18 | 18,52,215 | 81,47,785 | 81.48% |
| 19 | 9,69,384 | 90,30,616 | 90.31% |
| 20 | 0 | 1,00,00,000 | 100.00% |
Principal milestones
- 10% repaid – Between Year 4 and 5
- 20% repaid – Around Year 7–8
- 30% repaid – Around Year 10
- 50% repaid – Around Year 14
- 70% repaid – Around Year 17
- 90% repaid – Around Year 19
This clearly shows why switching late hardly helps — because most interest is already paid.
When should you actually switch? (Practical rules)
Best time to switch
Years 1 to 5
- Very high outstanding balance
- EMI mostly going to interest
- Even a 0.25–0.40% reduction saves lakhs
Good time to consider switching
Years 6 to 10
Savings still around Rs.2–4 lakh.
Worthwhile if switching charges are low.
Think twice
Years 11 to 15
Savings shrink to Rs.50,000 – Rs.1.8 lakh.
Switch only if the new rate is significantly lower or switching is free/cheap.
Not advisable
Years 16 to 20
Savings are almost zero.
Most EMI is principal.
Switching is simply not worth the hassle.
Checklist before switching
1. Is your rate difference meaningful?
- Greater than or equal to 0.30% ? Good
- Greater than or equal to 0.40% ? Very good
- Greater than or equal to 0.50% ? Switch immediately (early years)
2. Are the switching costs low?
Add:
- Processing fee
- Legal & valuation
- MOD cancellation charges
- Stamp duty
- Admin charges
Compare total cost vs savings table above.
3. Will you stay with the loan long enough?
If you plan to:
- prepay in next 1–2 years
- sell the property soon
Then switching may not be useful.
4. Did you try internal conversion?
Sometimes your existing bank offers a lower rate for a small conversion fee — easier than a full transfer.
Final Summary
So, when should you switch your home loan?
- Years 1–5: Switch without hesitation – Highest savings
- Years 6–10: Still good – Moderate savings
- Years 11–15: Only if low fees or big rate cut
- Years 16–20: Don’t switch – Savings are negligible
By understanding how principal and interest behave over your loan’s life, you can make a smart, confident switching decision that saves money without unnecessary paperwork.
