Is it Wise to Opt for a Home Loan Balance Transfer?
When you take a loan to buy a home, the tenure often extends to 20 years or more. And longer the tenure, the more interest you’ll end up paying in the long run.
Clearly, the rate of interest has a major part to play in your repayment strategy. If you aren’t happy with the interest rate of your existing Home Loan, there’s a way out. You can opt to transfer your Home Loan from your current financial institution to someone offering a better interest rate.
Reasons to Transfer your Home Loan and Opt for a Top up Facility
One of the greatest Home Loan Balance Transfer advantages is that homeowners can opt for a lower rate of interest on their loan and save a lot on interest payments.
Apart from lower interest rates, there are other Home Loan Balance Transfer benefits you stand to gain.
- If you want to lower you EMIs and increase your tenure but find that the lender is not willing to agree to these terms, you can transfer your loan to a new lender.
- If you want to start a home renovation project but your current lender doesn’t provide a loan top up facility, you can opt for a Home Loan Balance Transfer to a lender who does. The biggest advantage of opting for a top up facility from the bank you’re moving your home loan to, is that you get to avail of lower interest rates on the Top Up Loan as well.
- The Top Up Loan can be used for any purpose and the lower interest rate, especially when compared to a Personal Loan, makes this a great alternative for the borrowers.
- If you aren’t satisfied with the overall service and facilities offered by the lender, you can transfer your loan to another institution. There are lenders, like Bajaj Finserv, in the market who offer customer-friendly features like Online Application Process, Instant Online Approval, Minimum Documentation, Additional Top loan at attractive rates, No Hidden charges, Customised Insurance Schemes, and Online Account Access. They also offer facilities like NIL Part Pre-Payment charges, NIL Foreclosure charges, 3 EMI Holiday.
Analyse the Cost Benefits of the Transfer
Before you head over to the lender and request a balance transfer, it’s always wise to analyse your current loan status. Only then will you be able to recognise if you’re saving on Balance Transfer.
Here are few guidelines to follow to analyse if your loan transfer will be financially beneficial.
- If your Home Loan tenure is too long, you might end up paying more money. In this case, transferring your loan to lender who offers a lower rate of interest, which means a shorter tenure, is advisable.
- Generally, most financial institutions might charge a penalty if you decide to prepay or foreclose your loan. If you’re repaying your Home Loan based on a fixed interest rate, then you will have to pay a prepayment penalty in order to transfer your loan.
- Make sure to look out for hidden costs in the loan transfer process. For instance, some banks may not include documentation charges in the processing fee. Also, a stamp duty document must be prepared when a new Home Loan is taken and a separate charge will be levied on that.
- Always opt for a balance transfer in the early stages of your loan tenure. If you’ve already spent a considerable time repaying your loan, then it’s not advisable to go for the transfer. You would have already paid a major portion the interest and when you transfer your loan, you will end up spending more on the fees.
Remember, you can only enjoy the benefits of a Home Loan Transfer if you’ve paid your EMIs on time to your existing lender. Your new lender might not agree to the Home Loan Balance Transfer have if you have defaulted in your EMI payments in the past.
Finally, you shouldn’t transfer your loan just because of the more attractive lower interest rate. It’s always wise to think before you leap and to analyse every possible scenario before transferring your loan.