An average home loan is for 20 years or more, making it a significant long-term financial commitment. A significant percentage of your salary may also be spent on home loan payments, which will have an effect on your budget. Of course, the majority of borrowers are anxious about the cost of their home loans. Lending institutions offer a service known as a home loan balance transfer that enables borrowers to transfer their whole outstanding home loan debt to another lender in exchange for a lower interest rate.
With the leftover balance going to the original lending institution, you can make your EMI payments to the new lending institution at a lower rate. Almost all lending institutions give you the choice of shifting your home loan balance if you have been consistent about making your EMI payments on schedule. Almost all lending institutions give you the choice of shifting your home loan balance if you have been consistent about making your EMI payments on schedule.
Factors To Consider Before You Do A Home Loan Transfer
Home loan remaining term: A balance transfer is advantageous if your loan is still in its early stages. If your loan tenure is set to expire, it makes little sense to pay the transfer charge.
The outstanding loan balance: If you still owe a substantial percentage of your home loan and you can get a better interest rate with a new lending company, you should transfer. However, altering your home loan won’t make sense because unpaid loans only make up approximately 5 to 10% of the total.
Overall lower costs: When moving a loan, the majority of borrowers solely take the lower interest rate into account. You should be aware that it will cost money to move your home loan to a new lending organization. Before considering the advantages of the loan transfer, consider what it would cost overall. If the advantages outweigh the disadvantages, you may use the home loan transfer feature.
Benefits Of A Home Loan Balance Transfer
Lower interest rate: A lower interest rate is the most common argument for transferring a home loan. If another lending institution has a lower interest rate than your current one, you ought to take it into consideration. Interest rates might vary by as low as 0.5 percent annually in terms of the total amount you pay. It also helps to lessen the monthly cost of the EMI. Home loan balance transfers are becoming more common due to current home loan rates.
Smaller EMIs: You should think about moving your home loan balance if you have the choice of a loan with smaller EMIs. It will lessen your financial load each month.
Longer tenure: If you still have a longer loan term, think about transferring the remainder of your home loan. You can save the most money at the lowest interest rate by taking out a loan for a longer period of time. It is not a good idea to transfer a debt as it is coming to an end. Even though there may be some interest savings if you refinance a home loan with a short remaining term, you may pay more in transfer fees.
Top-up loans: Home loan balance transfers also have the important benefit of enabling borrowers to acquire a top-up loan, which is an additional sum in addition to their present loan. This extra money is known as the top-up loan facility. A top-up loan’s maximum amount is normally equal to 25% of the balance you are transferring. It can be acquired with a reduced interest rate and applied to any individual goal, such as house renovations, children’s education, etc.
Prepayment option: You can pay a portion of your outstanding loan principal with part prepayment. This facility shortens the term or lowers your EMI. You can also reduce your interest costs by partially prepaying your loan. Your existing lender can forbid partial prepayment or even impose steep penalties. As a result, you can transfer the remaining balance of your home loan to another lender that provides this service.
Customer support and additional services: Most borrowers want to refinance their mortgage in order to take advantage of improved features like lesser penalties, waived foreclosure fees, or superior customer support. If you currently have a house loan but think your lender’s service standards are lacking, you can move to one that provides better terms and conditions.
A house loan balance transfer may be advantageous and cost-effective for the borrower. But keep in mind that before choosing a choice, it is crucial to thoroughly weigh all of the aforementioned criteria.
