A home loan is a long-term credit option, and the interest rate charged on it occupies a significant portion of its repayment. So, if an individual observes that their home loan’s monthly instalments and interest rate are putting an added burden on their budget, they can opt for a home loan balance transfer.
In this facility, eligible borrowers can transfer their housing credit from the existing financial institution to a new one extending a lower interest rate to save on interest outgo. However, individuals must know the right time to opt for this facility to get the maximum benefits.
Things to check before opting for a home loan balance transfer
Consider the following situations to opt for a loan balance transfer:
• Financial institution offers lower interest rate
An interest rate on home loan varies with each lender. However, a slight difference in interest rate can make a significant difference in their monthly instalments. Thus, individuals must opt for a loan balance transfer only when they get a lower interest rate than the previous one.
• Getting a suitable costs and terms
It is essential to check the cost of transferring a home loan to a new financial institution. This includes processing fees charged by the new lender. At the same time, borrowers may need to pay penalty charges to the previous lender for closing the loan account before time. Thus, perform a cost-benefit analysis, then proceed to apply for this facility.
Besides, individuals must look for flexible terms and conditions and minimal document requirements for transferring the existing home loan.
• Considerable loan tenor is left
Individuals can benefit from a housing loan balance transfer during the initial years of borrowing a loan instead of transferring it at the end of a repayment tenor. This is because the cost of transferring a home loan may be higher than the amount an individual can save after the transfer. For instance, if the tenor of a home loan is 25 years, the right time to opt for this facility is between the initial 5 to 8 years.
• Check for pre-approved offers
Individuals who are looking to opt for a home loan balance transfer should also look for financiers extending pre-approved offers. Leading financial institutions extend this facility to streamline the loan application process and save time. These offers are applicable on home loans, LAPs, etc. Individuals can submit their names and contact details to check their pre-approved offers.
• Check the terms of service
It is imperative to check the terms of service of a lender before opting for a housing loan balance transfer. The reason is, proper customer service is essential to incase you face any difficulties or needs to resolve any queries.
What are the benefits of a home loan balance transfer?
Individuals can enjoy the following benefits if they opt for a housing loan balance transfer:
• Home loan at a reduced interest rate
The primary reason for transferring a home loan is to get a lower interest rate from a new lender. This decreases the EMI and overall borrowing cost.
• Additional funds with a top-up loan facility
Individuals availing of a home loan balance transfer can opt for a top-up loan facility. A top-up loan is borrowed over and above the existing housing loan and features no end-use restrictions. Therefore, individuals can meet a range of financial requirements.
Individuals can use an online home loan balance transfer calculator extended by selected financial institutions. Users need to enter details like loan amount, existing and new interest rate etc., to know the savings after availing of home loan balance transfer, eligible top-up loan and new home loan amount.
• Allows restructuring terms of the loan
A home loan balance transfer allows applicants to restructure their home loans. This includes changing repayment tenor, terms of monthly instalments etc., making it convenient for them to manage their home loans efficiently.
Thus, keep these pointers about the home loan balance transfer in mind to obtain its benefits. However, check the eligibility criteria set by the new financial institution before availing of this facility.