The Buyt Desk
It is not advisable to do a Home Loan Balance Transfer at any time. Apply only if it is the right time for the transfer. Let us see when the good time for applying is.
A home loan is a huge commitment as it is long-term anywhere between 8 to 30 years. You need not continue your home loan with the same lender until complete repayment. There is an option to change lender if you find it beneficial for you. Reasons can be anything from a lower rate of interest to better terms and conditions.
What is a Home Loan Balance Transfer?
Home Loan Balance Transfer is moving your outstanding Home Loan from your lender to a different lender for your benefit. How this works is – when you shift your home loan to a new lender, the latter pays off the outstanding balance to your current lender, so that your existing home loan account is closed. And, your new home loan account starts with a new lender who offers you better deals. With a new lender, you may be paying a lower rate of interest and having better loan terms and tenure.
A home loan balance transfer is the act of shifting your ongoing home loan to a new lender for a lower rate of interest, better service, or better terms. You may be thinking that switching the home loan lender as soon as you are offered a lower rate of interest is a good option. But that may not be the case. You need to consider many other factors too. Almost all banks and housing finance companies nowadays offer Home Loan Balance Transfer facilities with many benefits. Lenders are more attracted to offering pre-approved Home Loan Balance Transfers to borrowers with very good credit scores. Banks offer all these offers and promotions to attract the borrower towards them. But you have to check whether it is a win-win situation for both you and the bank. You need to learn the art of shifting your ongoing home loan to a new lender to ease your repayment burden.
Few scenarios when you should apply for a home loan balance transfer –
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Interest rates lowered – The CRR and bank rate is regulated by the Reserve Bank of India from time to time. And these two will directly affect the interest rate. The interest rates are flexible and hence can vary from time to time. When should you apply – you can consider transferring the home loan if the potential new lender is offering the home loan at a lesser interest rate which will in turn reduce your monthly EMI burden significantly.
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Cost and terms – Every time there is a reduction in interest rate, transferring your home loan is not an option. There are terms and conditions to be considered like the transfer cost and the terms of transfer. Study the costs involved and the terms thoroughly and carefully. Switch your home loan if you are okay with the costs involved and the terms and unhappy with your existing lender. When should you apply – you can consider transferring the home loan if offered the lowest transfer costs and pleasant terms. Even consider the time taken to do the transfer.
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Outstanding loan amount – When the outstanding loan amount is big it is advisable to transfer the home loan. A home loan EMI like any other EMIs comprises the principal amount and the interest amount. The principal amount will reduce as it gets paid gradually as the loan matures. This reduces the outstanding loan amount. When should you apply – you can consider transferring the home loan when the outstanding loan amount is higher. Consider the transfer if a good chunk of the home loan is still pending and another lender offers you a better deal.
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Property authorization – Check in advance with your potential new lender if they have approved your property for a home loan. Each bank or financial institute has different approval lists and procedures. When should you apply – you can consider transferring the home loan when your property is authorized by the new lender. The property will be approved if it is undisputed and built by a credible builder.
Summing up
Consider the terms and conditions of the new lender, rate of interest offered, property authorization, and outstanding loan amount to decide the right time for transferring your home loan. Now that the home loan transfer is an online procedure. Since it is online, everything will be in place and hassle-free.
