The home loan balance transfer facility is the procedure of moving a current home loan from one lender to another. It is a beneficial facility used by borrowers to ease the burden of loan repayment.
There are several considerations to be made while applying for a home loan balance transfer facility such as the total outstanding amount, rate of interest offered by the new financial institution, remaining tenor, etc.
As such, you need to do a proper analysis of various factors before taking this decision. Market research is arguably the most important of them all. Nevertheless, there are numerous benefits of a home loan balance transfer, which makes it a favorable option for borrowers.
How Does Home Loan Balance Transfer Work?
As mentioned earlier, when you opt for a home loan balance transfer, your existing debt with a particular lender is transferred to another financial institution. It is alternatively known as loan refinancing or home loan takeover. Almost every financial organisation offers this facility with its best home loan in India.
A borrower who opts for this facility must carry out a comprehensive cost and benefit analysis. A typical cost analysis comprises four elements:
- Outstanding loan amount to be repaid
- Difference in the applicable rates between the two institutions
- Transfer fee
It is generally recommended to opt for a balance transfer when the outstanding amount and tenor are high. Otherwise, it won’t be feasible as the transfer cost involved will balance out any benefits. You can do the cost analysis easily using a home loan transfer calculator online.
A borrower should also calculate the internal rate of return (IRR) from the said balance transfer. A home loan transfer calculator computes that as well. Note that you can do a home loan balance transfer only after 18 months of EMI payments.
Benefits Of Home Loan Balance Transfer
- You Have To Pay A Lesser EMI
When you are opting for a balance transfer facility, it’s obvious that the interest rates are comparatively lower. This brings down your EMIs as well. Even if the difference between the rates is nominal, you can save a substantial amount on the interest payable, provided the remaining tenor is longer.
You can calculate the payable monthly installments using an online EMI calculator. Simply enter the outstanding amount and remaining tenor in the home loan EMI calculator, and get the exact amount instantly.
- You Can Avail A Top-Up Loan
Several financial institutions also offer a Top-Up Loan when you opt for their Balance Transfer facility. Top-up loans can help meet any additional expense arising out of a home purchase, such as interior decoration, repair works, etc. Top-up loans come with low-interest rates and without any additional documentation.
- Enjoy Flexibility On The Part Of Your New Lender
When you shift your home loan to a new lender, you may have the opportunity to negotiate for better loan terms. For instance, you can avail a more convenient tenor as per your current and future repayment abilities.
With these advantages, going for a home loan balance transfer is one of the wisest financial decisions to get lower interest rates. Evaluate all your options, check if you qualify using an eligibility calculator and then finalize on the transfer.