2 min
12 May 2025
Are you struggling with high home loan interest rates? Many homeowners find themselves in this situation. Home loan conversion fees might be your way out. These small charges can lead to big savings on your monthly payments.
When interest rates drop, many people wonder if they can benefit from these lower rates. The answer is yes, through home loan conversion. For a small fee, you can switch to a better interest rate without changing lenders.
This article will explain home loan conversion fees, how they work, and whether they are worth paying. We will also look at how Bajaj Finserv offers competitive options for borrowers looking to reduce their interest burden.
What are conversion charges for home loans?
Home loan conversion charges are fees that lenders collect when you switch from one interest rate type to another. You pay these charges to move from a fixed interest rate to a floating one or vice versa. The home loan conversion fee typically ranges from 0.5% to 1% of your outstanding loan amount.
For example, if you have Rs. 50 lakhs remaining on your home loan, your conversion charges could be between Rs. 25,000 and Rs. 50,000. While this may seem high, the long-term savings often make it worthwhile. Check your eligibility for better home loan rates today by entering your mobile number and OTP. You may already qualify for significant savings with a home loan from Bajaj Finserv.
Some lenders charge a flat fee instead of a percentage. These home loan conversion charges help cover the administrative costs of updating your loan terms. They also compensate the bank for potential revenue loss from your lower interest rate.
How do conversion charges for home loans work?
When you request a home loan conversion, your lender will review your application and check current market rates. If approved, they will charge the conversion fee and update your loan terms. This process usually takes 7-10 working days to complete.
Let us look at an example. Suppose you took a home loan at 10% fixed interest rate three years ago. Now, floating rates have dropped to 8.5%. By paying the home loan conversion charges, you can switch to the lower floating rate. This change could reduce your EMI by thousands of rupees each month.
The conversion fee is usually paid upfront in one lump sum. Some lenders might allow you to add it to your loan balance, but this increases your overall interest cost. Check your loan offers with Bajaj Finserv by providing your mobile number and OTP to see what conversion options are available for you.
Why do lenders charge a conversion fee?
Lenders charge home loan conversion fees for several reasons:
Many lenders, including Bajaj Finserv, offer transparent fee structures. This makes it easier for you to calculate whether conversion is worthwhile. Want to know if you qualify for a better rate? Check your eligibility today by entering your mobile number and OTP verification.
What are the benefits of loan conversion?
Converting your home loan can bring several advantages:
What are the things you must consider before opting for conversion?
Before paying home loan conversion charges, evaluate these factors:
1. Check the fee structure
Understand exactly how much the conversion will cost. Compare this amount to your potential savings. If you have a small outstanding balance or only a few years left on your loan, conversion might not be cost-effective.
Ask your lender for a detailed breakdown of all fees involved. Some may charge processing fees in addition to the conversion fee. Know exactly what you're paying for before proceeding.
Bajaj Finserv offers competitive rates with transparent terms. You may already be eligible for a better rate – check your offers now by entering your mobile number and OTP.
2. Compare new offers
Before converting with your current lender, research what other banks are offering. Sometimes a balance transfer to a new lender might be more cost-effective than paying conversion charges.
Compare the all-in costs, including processing fees, legal charges, and documentation expenses. Factor in the convenience of staying with your current lender versus moving to a new one.
3. Impact on loan tenure
When you convert to a lower interest rate, you have two options:
4. Market trends
Pay attention to interest rate forecasts before making your decision. If rates are expected to fall further, waiting might be wiser. If rates are projected to rise, acting quickly makes sense.
The Reserve Bank of India (RBI) policy changes can give clues about future rate movements. Stay informed about economic news to time your conversion well.
Why home loan interest deduction matters
Converting to a lower interest rate affects more than just your EMI. It also impacts your tax benefits under Section 24 of the Income Tax Act. This section allows deduction of interest paid on housing loans up to Rs. 2 lakhs per year for self-occupied property.
With a lower interest rate, your tax deduction amount may decrease. However, the overall financial benefit still favours conversion in most cases. The reduced interest outflow exceeds the marginal decrease in tax benefits.
For properties rented out or deemed to be let out, there is no upper limit on the interest deduction. In such cases, conversion to lower rates gives you double benefits: reduced interest payments and continued tax advantages.
Remember that principal repayment qualifies for deduction under Section 80C, up to Rs. 1.5 lakhs per year. This benefit remains unaffected by interest rate changes. Check your eligibility for better home loan rates with Bajaj Finserv. Simply enter your mobile number and verify with OTP to see your personalised offers.
How to apply for Bajaj Finserv home loan
If you decide that a new loan with Bajaj Housing Finance is better than conversion, here's how to apply:
Eligibility criteria to get home loan from Bajaj Finserv
To qualify for a Bajaj Housing Finance Home Loan, you must meet these criteria:
Conclusion: Making the right choice for your home loan
Home loan conversion can be a smart financial move when interest rates drop. By paying a one-time home loan conversion fee, you can potentially save lakhs of rupees over your loan term. However, careful analysis is needed to ensure the benefits outweigh the costs.
Bajaj Finserv offers attractive home loan options with interest rates starting from 7.99%* p.a. and loan amounts up to Rs. 15 crore*. Whether you're looking to convert your existing loan or apply for a new one, their flexible terms can be tailored to your needs.
Key benefits of Bajaj Housing Finance Home Loans include:
Remember, the right decision depends on your specific financial situation. Take time to calculate the potential savings and consider all factors before proceeding with a home loan conversion or new application.
When interest rates drop, many people wonder if they can benefit from these lower rates. The answer is yes, through home loan conversion. For a small fee, you can switch to a better interest rate without changing lenders.
This article will explain home loan conversion fees, how they work, and whether they are worth paying. We will also look at how Bajaj Finserv offers competitive options for borrowers looking to reduce their interest burden.
What are conversion charges for home loans?
Home loan conversion charges are fees that lenders collect when you switch from one interest rate type to another. You pay these charges to move from a fixed interest rate to a floating one or vice versa. The home loan conversion fee typically ranges from 0.5% to 1% of your outstanding loan amount.
For example, if you have Rs. 50 lakhs remaining on your home loan, your conversion charges could be between Rs. 25,000 and Rs. 50,000. While this may seem high, the long-term savings often make it worthwhile. Check your eligibility for better home loan rates today by entering your mobile number and OTP. You may already qualify for significant savings with a home loan from Bajaj Finserv.
Some lenders charge a flat fee instead of a percentage. These home loan conversion charges help cover the administrative costs of updating your loan terms. They also compensate the bank for potential revenue loss from your lower interest rate.
How do conversion charges for home loans work?
When you request a home loan conversion, your lender will review your application and check current market rates. If approved, they will charge the conversion fee and update your loan terms. This process usually takes 7-10 working days to complete.
Let us look at an example. Suppose you took a home loan at 10% fixed interest rate three years ago. Now, floating rates have dropped to 8.5%. By paying the home loan conversion charges, you can switch to the lower floating rate. This change could reduce your EMI by thousands of rupees each month.
The conversion fee is usually paid upfront in one lump sum. Some lenders might allow you to add it to your loan balance, but this increases your overall interest cost. Check your loan offers with Bajaj Finserv by providing your mobile number and OTP to see what conversion options are available for you.
Why do lenders charge a conversion fee?
Lenders charge home loan conversion fees for several reasons:
- Administrative costs: Processing your request requires paperwork and staff time.
- Risk management: Banks use these fees to offset the risk of changing economic conditions.
- Revenue protection: Lower interest rates mean less income for the bank.
- System updates: Your loan details need to be updated in their records.
Many lenders, including Bajaj Finserv, offer transparent fee structures. This makes it easier for you to calculate whether conversion is worthwhile. Want to know if you qualify for a better rate? Check your eligibility today by entering your mobile number and OTP verification.
What are the benefits of loan conversion?
Converting your home loan can bring several advantages:
- Lower interest rates: The most obvious benefit is reduced interest costs over your loan term.
- Reduced EMI burden: Lower rates mean smaller monthly payments, easing your budget.
- Shorter loan tenure: You can keep the same EMI but reduce your overall loan period.
- Protection from rate hikes: Converting to a fixed rate can shield you from future increases.
- No need to change lenders: You can stay with your current bank, avoiding the paperwork of a balance transfer.
What are the things you must consider before opting for conversion?
Before paying home loan conversion charges, evaluate these factors:
1. Check the fee structure
Understand exactly how much the conversion will cost. Compare this amount to your potential savings. If you have a small outstanding balance or only a few years left on your loan, conversion might not be cost-effective.
Ask your lender for a detailed breakdown of all fees involved. Some may charge processing fees in addition to the conversion fee. Know exactly what you're paying for before proceeding.
Bajaj Finserv offers competitive rates with transparent terms. You may already be eligible for a better rate – check your offers now by entering your mobile number and OTP.
2. Compare new offers
Before converting with your current lender, research what other banks are offering. Sometimes a balance transfer to a new lender might be more cost-effective than paying conversion charges.
Compare the all-in costs, including processing fees, legal charges, and documentation expenses. Factor in the convenience of staying with your current lender versus moving to a new one.
3. Impact on loan tenure
When you convert to a lower interest rate, you have two options:
- Keep your EMI the same and reduce your loan tenure
- Keep your tenure the same and reduce your EMI
4. Market trends
Pay attention to interest rate forecasts before making your decision. If rates are expected to fall further, waiting might be wiser. If rates are projected to rise, acting quickly makes sense.
The Reserve Bank of India (RBI) policy changes can give clues about future rate movements. Stay informed about economic news to time your conversion well.
Why home loan interest deduction matters
Converting to a lower interest rate affects more than just your EMI. It also impacts your tax benefits under Section 24 of the Income Tax Act. This section allows deduction of interest paid on housing loans up to Rs. 2 lakhs per year for self-occupied property.
With a lower interest rate, your tax deduction amount may decrease. However, the overall financial benefit still favours conversion in most cases. The reduced interest outflow exceeds the marginal decrease in tax benefits.
For properties rented out or deemed to be let out, there is no upper limit on the interest deduction. In such cases, conversion to lower rates gives you double benefits: reduced interest payments and continued tax advantages.
Remember that principal repayment qualifies for deduction under Section 80C, up to Rs. 1.5 lakhs per year. This benefit remains unaffected by interest rate changes. Check your eligibility for better home loan rates with Bajaj Finserv. Simply enter your mobile number and verify with OTP to see your personalised offers.
How to apply for Bajaj Finserv home loan
If you decide that a new loan with Bajaj Housing Finance is better than conversion, here's how to apply:
- Click on the 'APPLY' button on the home loan page
- Enter your full name, mobile number, and employment type
- Select the type of loan you wish to apply for
- Verify your phone number with OTP
- Provide additional details like monthly income and required loan amount
- Enter your date of birth, PAN number, and other requested information
- Submit your application
Eligibility criteria to get home loan from Bajaj Finserv
To qualify for a Bajaj Housing Finance Home Loan, you must meet these criteria:
- Nationality: You must be an Indian citizen residing in India
- Age: Salaried applicants must be 23-67 years old; self-employed professionals must be 23-70 years old
- CIBIL Score: 725 or higher is ideal for home loan approval
- Occupation: You must be a salaried employee, professional, or self-employed individual
- KYC documents (identity and address proof)
- Income proof (salary slips or P&L statement)
- Business proof (for self-employed applicants)
- Bank statements for the last 6 months
Conclusion: Making the right choice for your home loan
Home loan conversion can be a smart financial move when interest rates drop. By paying a one-time home loan conversion fee, you can potentially save lakhs of rupees over your loan term. However, careful analysis is needed to ensure the benefits outweigh the costs.
Bajaj Finserv offers attractive home loan options with interest rates starting from 7.99%* p.a. and loan amounts up to Rs. 15 crore*. Whether you're looking to convert your existing loan or apply for a new one, their flexible terms can be tailored to your needs.
Key benefits of Bajaj Housing Finance Home Loans include:
- Fast approval in 48 hours*
- Flexible tenure up to 32 years
- No foreclosure charges for floating rate loans
- Top-up loan facility up to Rs. 1 crore
- 5000+ approved projects for quick processing
Remember, the right decision depends on your specific financial situation. Take time to calculate the potential savings and consider all factors before proceeding with a home loan conversion or new application.
