FinanceHow to make most of Home Loan Balance Transfer...


How to make most of Home Loan Balance Transfer to save to EMIs?

When you take a home loan, you generally make a comparison and choose a lender that is offering the best interest rate. At the start, it might seem to be the best deal. However, with time, you may realize that the other lender is charging lower home loan interest rates. In such cases, you may want to opt for a balance transfer of a home loan.

If you are struggling to pay higher EMIs due to increased interest outgo, then it’s time for you to explore the home loan balance transfer facility offered by several banks and financial institutions. A home loan balance transfer or refinancing lets you switch from an existing lender to a new lender that is offering a home loan at a lower rate. Many people opt for a home loan balance transfer facility in order to reduce the interest outgo and pay EMIs affordably.

Why one needs to consider balance transfer?

A home loan balance transfer can be extremely beneficial if you genuinely are making higher interest payments and are not satisfied with the existing banking solutions. If the new lender offers a lower interest rate and you are qualified for the facility, then it can help you save a lot on interest. As an eligible candidate for a balance transfer, you cannot just make a switch to a new lender. Balance transfers come with certain costs and limitations.

Usually, a balance transfer fee must be paid by you— which is 3% to 5% of the amount transferred. Although the interest rate is the primary reason for borrowers to make a switch, it is maybe a wrong decision if you are almost reaching the end of the tenure in order to offset the interest load.

The best way to know whether a home loan balance transfer will help you save on EMIs is by using a home loan EMI calculator. This will help you know the difference between the current and the new EMI. In case the difference is significant, you may want to consider making the switch. Here’s how you can make it work:

  • Compare interest rates: If you know a lender is offering a lower interest rate on the home loan in comparison to your existing one, then you should opt for it. Along with this, you should also assess the customer experience offered by the new lender.
  • Keep an eye on the changing interest rates: Whether you have an ongoing home loan with a fixed or floating rate, it is always advisable to be updated on the changing home loan interest rates. Look for seasonal interest rate offers and how they would help to reduce your EMI load.
  • Get documents in order: Applying for a home loan balance transfer and applying for a fresh loan doesn’t have a lot of difference. You will be required to produce basic documents including Know Your Customer (KYC), salary slips, ITR, property papers, among others.
  • Calculate additional charges relates to Balance Transfer: You can come to know whether the new EMI is affordable once you evaluate the additional charges you would incur while opting for balance transfer. Assess the admin charges, processing fees, and any other charges you would have to pay.

What are the other benefits derived from home loan balance transfer?

Apart from lower interest rates and savings on home loan EMIs, you can also be eligible for top-up loans, foreclosure without penalties, part-prepayment facility, etc. offered by the new lender.

A home loan balance transfer is a win-win proposition for a borrower. However, one needs to assess several factors to make an informed decision. Don’t fall into the trap of short-term offers provided by lenders.

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