Top Benefits of Transferring Your Home Loan Balance to Another
Home loans are big-ticket expenses that last for decades. The tenor on these loans can stretch up to 30 years. Most borrowers avail of a home loan after careful planning and borrow what they can easily repay. Unfortunately, life does not always go as planned. Sometimes, unforeseen circumstances arise and events that we weren't prepared for happen, causing us to find it difficult to find our balance back in life. If you are struggling to pay your EMIs due to unforeseen events that you have been compelled to deal with, a home loan balance transfer may bring you relief.
A home loan balance transfer is a facility using which borrowers can transfer their home loan from their current lender to another offering better loan terms and conditions. In general, borrowers go for a home loan balance transfer when the interest rate offered by the new lender is lower than the interest being charged by the borrower's current lender. Sometimes, some borrowers also apply for a home loan balance transfer when they want to change the tenor on their loan or the interest rate regime.
Borrowers must know that their new lender will treat their home loan balance transfer application as a new home loan application altogether. Therefore, borrowers planning to apply for a home loan balance transfer must go ahead with their loan application only if they meet the home loan transfer eligibility requirements of their new lender. Further, they must remain patient as the whole home loan balance transfer process can take up to a few days.
A home loan transfer must be performed after performing proper cost-benefit analysis. Home loan transfers involve a transfer fee, which is often charged as a percentage of the total loan amount. This fee varies between .5% to 1% of the total loan amount. Since home loans are big-ticket loans, the home loan balance transfer fee turns out to be a hefty amount. A borrower must, therefore, opt for a home loan transfer only when the money saved through the home loan transfer is enough to cover the transfer fee and help a borrower save money as well.
Let us now look at the benefits of home loan balance transfers.
Benefits of a Home Loan Balance Transfer and Why and When Borrowers Must Opt for this Facility
1. Low Interest Rates
One of the biggest benefits of a home loan balance transfer is the low interest rates. Home loans are big-ticket and long-term loans. The commitment easily lasts years. Sometimes, it becomes difficult for borrowers to afford their EMIs. In such a case, refinancing the loan at a low interest rate can help one bring down their EMIs.
So, if you are planning to switch lenders, do your research and opt for a home loan balance transfer when the remaining tenor is at least 10 years and the difference in the old and new interest rates is at least 25 bps. To increase your chances of availing a housing loan on a low interest rate, maintain a stable job, include all additional sources of income in your loan application and maintain a high credit score.
2. The Option to Change One's Interest Regime and Loan Tenor
Borrowers who avail of a loan on fixed home loan interest rates are charged a lower interest rate than the interest rate charged on floating interest rate home loans. The reason is simple: floating interest rate home loans carry higher risk for the lender. Fixed interest rate prove beneficial and must be opted for when the borrower knows that the home loan interest rates will only increase in future.
Sometimes, borrowers opt for a fixed rate simply because fixed-rate home loans are cheaper. However, eventually they realize that moving to floating interest rates maybe more beneficial. Similarly, sometimes borrowers opt for a short loan tenor to try and become debt-free as soon as possible but eventually find their EMIs becoming too burdensome.
3. You Can Avail of a Top-Up Loan
When you apply for a home loan balance transfer, most lenders will give you the option of availing of a top-up loans. Home loan top-ups have several benefits. To start with, these loans are sanctioned at low interest rates. Further, they come with a long and flexible repayment tenor. However, most importantly, home loan top-ups come with zero end-use restrictions. Borrowers can use the money as they please.
In conclusion, a home loan transfer offers several benefits. However, the decision to transfer one's home loan must be taken after doing a proper cost-benefit analysis. NBFCs today offer home loans up to Rs.5 Crore or higher, basis eligibility. The interest rates start as low as 8.60%* per annum and the repayment tenor can go up to 30 years.
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Topics : Home Loan
First Published: Jun 14 2023 | 9:52 AM IST