What you should know about home loan balance transfer
Home Loan Balance Transfer is the process of transferring your existing home loan to another bank or NBFC. Applicants may choose an alternative lender because of lower rates of interest or better services.
There are widespread differences in home loan interest rates provided by various lenders and customers are likely to seek new ways of getting lowered rates and lower their monthly EMIs.
Balance transfers are one of the most feasible options in this scenario. However, you should always discuss re-pricing options with your existing loan provider prior to balance transfer.
The home loan balance transfer process is almost identical to getting a new home loan for yourself. There are several interim procedures that you are required to follow.
Why you should opt for home loan balance transfer?
Experts advise there are a number of advantages towards switching your loans. But always check out a home balance transfer calculator before you proceed.
- More competitive home interest rates – You can consider a balance transfer whenever you see a fall in market rates and yet you’re paying higher interest rates for your existing loan.
- Extension of repayment tenure – You can ensure this by shifting the loan to another organization willing to do the same. Your existing loan provider may not allow the same.
- Top-up loans – You can definitely get a top-up loan more easily from a new loan provider by switching your existing loan.
- Improved services – Assistance is also a major advantage in this regard.
How does balance transfer work?
Balance transfer procedures are quite similar to getting new home loans. There are interim processes like field investigations, documentation, verification and technical and legal evaluation. You will also require a no objection certificate from your existing loan provider. This may take a few days to be processed. You should also collect all existing loan documents and submit them to your new loan institution.
How does balance transfer affect interest repayment and EMIs?
EMIs are usually seen to reduce after loan balance transfer. Most people prefer to go with the original tenure to reduce their EMIs considerably. However, it may often be advisable to choose the balance tenure. This will give you considerable benefits on the interest.
When it comes to pre-payment charges, you should watch out. In case your original loan agreement contains any such clause of pre-payment charges, you should see if a high amount is being charged by the lender. This may lead to insignificant savings while transferring the loan to another institution. In this case, a transfer may not be a good decision.
What you should always keep in mind
You should always bear in mind that movement of original documents is a process that takes place between two financiers. This always has the risk of any loss of documents or any other human errors that might lead to them being misplaced. You should always verify the list of documents being transferred.
Try and transfer your loan if required in the early stages. In the initial years, the interest component of the EMI is much higher while the principal component is lower. As a result, making a home loan balance transfer in the first few years will lead to your interest component going down considerably. This will give you a distinct benefit in terms of overall costs.
However, transferring in the later stages will lead to you paying higher interest since you have already repaid a major chunk of the interest component. Bear in mind that you have to fork out all charges which otherwise apply on new home loans including legal charges and processing fees. The process itself is time consuming and requires immense patience on your part. You should always get a clear idea of all the terms and conditions involved before going ahead.
Compare interest rates and services offered by your lender with those offered by Bajaj Finserv. Identify a better deal for yourself today.