When should you refinance your home loan?

I took out a ₹38 lakh home loan at 9.25% interest in 2022. With rates softening slightly, I’m considering refinancing. However, I also have a car loan and a personal loan, and my credit score is 715. Should I wait until rates drop further or switch now? What factors should I evaluate? Will refinancing frequently affect my credit profile?

–Rajeev T., Ahmedabad

Rajeev, great to see that you’re actively monitoring your loan health. Most borrowers lock into a loan and forget to review, but the reality is that loans need to be managed, just like investments.

Also Read: Why joint home loans could be a smart move for homebuyers

Let’s break this down.

Should you switch now or wait?

A 9.25% rate in today’s softening environment is on the higher side. If you're being offered a rate reduction of at least 50-75 basis points, switching could make sense, but only if the savings outweigh the switching costs.

Use a simple rule: If your remaining tenure is 10+ years, even a 0.50% drop can lead to substantial savings. But if you're nearing the halfway mark of your loan, savings may not be significant unless you reduce EMI and redirect surplus to prepayment.

Things to evaluate before switching

Current outstanding vs. processing fee and foreclosure charges.

Ensure the cost of switching doesn’t eat into your long-term savings.

Credit score (715)

It’s decent but not great. Lenders may charge slightly higher interest rates for scores below 750. It may be worth waiting a couple of months and improving your score by paying down the personal loan or maintaining a 30% credit utilization ratio.

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Loan type

Switching from a fixed to a floating rate—or vice versa—must be backed by clear projections about rate movement. Don’t switch just because it’s trending; switch if it aligns with your repayment strategy.

Does frequent switching hurt a credit score?

Not directly. But multiple enquiries and repeated balance transfer applications can lower your credit score temporarily. More importantly, lenders may see it as credit-hungry behaviour. Be strategic—switch once for real savings, not as a habit.

Don’t chase a marginal rate drop. Instead, check if:

You’re saving at least ₹1.5– ₹2 lakh in interest over the remaining tenure.

Your EMI is getting lighter, or your tenure is shorter.

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Your credit score is healthy enough to fetch the best transfer offer.

Smart switching isn’t about following the trend; it’s about knowing when the numbers work in your favour.

Himanshu Panchmatiya, co-founder and head of home loan business, SwitchMyLoan.