Home loan balance transfer in Nepal: switching banks for a lower rate

A friend in Bhaktapur took a Rs 60 lakh home loan in 2022 at 12.5% floating. By early 2026 his balance was down to about Rs 50 lakh, but his bank had only trimmed his rate to 11% even as the base rate across the system had halved. A newer bank offered him 8.5%. He did the arithmetic on the back of a delivery receipt: roughly Rs 7,600 a month, the price of his kid's monthly tuition, sitting on the table because of which logo was on his loan statement.

He almost didn't bother, assuming the paperwork and penalties would eat the saving. They didn't. After the swap fee, a fresh valuation, and re-registering the collateral, his total cost to switch was under Rs 1 lakh. He recovered that inside the first year.

Why loan swapping took off in Nepal

When the base rate falls, existing borrowers expect their floating rate to fall with it. The premium (spread) on top of the base rate is fixed at sanction and cannot legally be increased afterwards, so a falling base rate should pull every floating EMI down at the next reset. In practice many banks dragged their feet, leaving older customers on rates a full percentage point or two above what a new customer could get walking in the door.

The gap between old and new rates is what created the swap market. The numbers behind it:

Period	Average commercial bank base rate
Ashwin 2081 (mid-Oct 2024)	7.35%
Ashwin 2082 (mid-Oct 2025)	5.60%

The weighted average lending rate across the system tells the same story: 13.03% at the FY 2022/23 peak, 9.93% in mid-July 2024, 7.85% in mid-July 2025, and 6.90% by mid-March 2026, a historic low. A borrower who locked in during the 2022 peak and never had their rate revised is overpaying by a wide margin. Nepali banking rules let any borrower in good standing move that loan to the bank of their choice, and that is exactly what people started doing.

What a swap actually costs

There are two sides to the bill: a fee at the bank you are leaving, and fees at the bank you are joining. Take them in order.

The old bank can charge a prepayment fee, but only if the outstanding amount being paid off is above Rs 50 lakh. On a balance of Rs 50 lakh or below, there is no prepayment fee at all. Above that threshold, the fee is a slice of the service charge you originally paid, scaled by how long you have held the loan:

Time since loan disbursed	Prepayment fee
Within 2 years	100% of the original service charge
2 to 5 years	50% of the original service charge
After 5 years	25% of the original service charge

If your original service charge was 0.75% of a Rs 50 lakh loan (about Rs 37,500), the prepayment fee lands at roughly Rs 37,500, Rs 18,750, or Rs 9,375 depending on the band. An older loan is cheaper to walk away from.

The new bank charges a service fee to take you on, and NRB caps it:

Lender class	Maximum swap service fee
Commercial bank (Class A)	0.75%
Development bank (Class B)	1%
Finance company (Class C)	1.25%

Most home loan swaps happen between Class A banks, so 0.75% of the transferred balance is the number to plan around. The new bank does not charge a separate application fee on a swap.

The mechanics: how the loan actually moves

A swap is not a single transaction; it is your old loan being closed and a new one being opened on the same day, secured by the same property. The steps:

1. Get a sanction letter from the new bank. You apply as a fresh borrower. The new bank assesses your income, runs a CIB check, and issues a sanction letter stating the loan amount, rate, premium, and tenure.
2. Fresh valuation of the collateral. The new bank sends its own engineer to value the property, because it will not lend against the old bank's valuation. Valuation by a Nepal Valuers' Association engineer typically runs Rs 5,000 to Rs 15,000 for a standard residential property.
3. The new bank pays off the old balance. On settlement day, the new bank disburses funds straight to the old bank to clear the outstanding amount. You do not handle the cash.
4. Release and re-registration of the dhito. The old bank lifts its lien (rokka) on your Lalpurja at the Land Revenue Office (Malpot), and the new bank registers its own mortgage deed (drishti bandhak) in its place. This is a re-registration of the lien, not a sale, so the 4% to 5% malpot transfer fee that applies when property changes hands does not apply here. You pay deed-registration charges, a lawyer or facilitator, and revenue stamps, commonly bundled into a few thousand rupees.
5. Sign the new agreement and start the new EMI. Your loan now runs at the new bank's rate, with the premium fixed at this fresh sanction.

The collateral re-registration is the step people underestimate. It involves two government offices and two banks' legal teams, so build in two to four weeks. The cost, though, is modest compared to the interest at stake.

A worked example: Rs 50 lakh, 11% to 8.5%

Take a concrete case. You have a Rs 50 lakh balance with 15 years left, currently at 11%, and a new bank offers 8.5%. The loan was disbursed three years ago, so you fall in the 2-to-5-year prepayment band. The switching cost, line by line:

Cost item	Amount
Prepayment fee (50% of Rs 37,500 service charge)	Rs 18,750
New bank service fee (0.75% of Rs 50 lakh)	Rs 37,500
Fresh valuation	Rs 15,000
Deed re-registration, lawyer, stamps	Rs 20,000
CIB report	Rs 1,000
Total one-time cost	Rs 92,250

Now the saving. At 11% over 15 years the EMI on Rs 50 lakh is about Rs 56,830; at 8.5% it drops to about Rs 49,237. That is Rs 7,593 a month back in your pocket, roughly Rs 91,000 a year. Over the full 15 years remaining, the lifetime interest falls from about Rs 52.3 lakh to about Rs 38.6 lakh, a saving near Rs 13.7 lakh (Kharchapatra calculation, straight EMI formula, assuming the rate holds).

Break-even: Rs 92,250 of cost divided by Rs 7,593 of monthly saving is about 12 months. Everything after the first year is money you would otherwise have handed the old bank for no reason. The EMI math post walks through the exact formula if you want to plug in your own numbers.

When a swap is and isn't worth it

The rate gap and the balance size decide everything. A small drop on a small balance gets eaten by the fixed costs of switching. A meaningful drop on a large balance pays for itself fast. A rough break-even table, holding the switching cost near Rs 90,000 on a Rs 50 lakh balance with 15 years left:

Rate move	Monthly saving	Break-even
9.5% to 8.0%	Rs 4,429	about 21 months
10.0% to 8.5%	Rs 4,493	about 20 months
11.0% to 9.0%	Rs 6,117	about 15 months
11.0% to 8.5%	Rs 7,593	about 12 months

(Kharchapatra calculation. Smaller balances or shorter remaining tenures push the break-even out, because the fixed switching cost is spread over a thinner saving.)

Two rules of thumb fall out of this. A rate gap below 1 percentage point rarely justifies the hassle unless the balance is very large. And the longer your remaining tenure, the more a swap pays, because you collect the monthly saving for more years.

Floating, fixed, and the negotiation you should do first

If your loan is floating, the swap question is really a premium question: the base rate moves the same for everyone, so what you are chasing is a lower spread or a bank that resets more honestly. If your loan is on a fixed-rate period, swapping out early can trigger the prepayment fee in full, so the math is tighter. The floating vs fixed post covers which structure suits which borrower.

Before you spend a rupee on valuation or registration, do the one move that costs nothing: tell your current bank you are leaving. Show the relationship manager the new bank's sanction letter and ask them to match the rate. For larger loans the spread above the base rate is at the bank's discretion, and they would rather cut your rate than lose the relationship to a competitor. If they match, you keep your existing collateral registration, skip the entire switching cost, and pocket most of the saving anyway. Banks are not obliged to revise your rate on their own, so the ask has to come from you.

A note on standing: the new bank runs a fresh CIB check, and a swap is only open to a borrower with a clean record. Missed EMIs or a flag at the bureau will stop a swap cold. If you are dealing with that, the CIB blacklist post is the read to fix it first. And if you are still deciding how large a loan your salary can carry before any of this, start with how much home loan you can take on your salary.

A quick gut-check on the friction

The malpot re-registration is the line people get wrong, so it is worth saying plainly: moving a lien from one bank to another is not a property sale. The heavy 4% to 5% registration fee that applies when ownership changes hands does not apply to a swap. You are paying deed-registration charges and a facilitator, usually a few thousand rupees, plus the bank fees above. For the full picture of what the malpot stack looks like when you actually buy, the property registration costs post breaks it down.

What you actually need to know

1. A loan swap moves your loan to a cheaper bank with the same property as collateral. NRB caps the new bank's service fee at 0.75% (Class A), and the old bank can charge a prepayment fee only on balances above Rs 50 lakh, scaled down the longer you have held the loan.
2. On a large balance with a real rate gap, the math is decisive: a Rs 50 lakh loan dropping from 11% to 8.5% saves about Rs 13.7 lakh over 15 years and breaks even in about 12 months (Kharchapatra calculation). A sub-1% gap on a small balance usually isn't worth it.
3. Negotiate before you switch. Show your bank the competing sanction letter and ask them to match. If they do, you get the lower rate with zero switching cost, no fresh valuation, and no re-registration.

If you are weighing a specific swap offer, email me at parjanya57@gmail.com with your current balance, current rate, the competing rate, and how many years are left. I can usually tell you the break-even month before you spend a rupee on valuation.

This post is part of the Nepal Money Basics guide — the Big-Ticket Decisions section.