With the slashing of R.B.I repo rate and home loan interest rate over the year, the concept of home loan balance transfer is gaining momentum among home loan borrowers.
Here we will discuss some key details about this concept and how you could be benefitted from it.
What is Home Loan Balance Transfer?
It is a scheme offered by almost all lenders (banks and NBFCs) by which a borrower can transfer the balance loan amount from the existing bank to another lender. This can provide the benefit of lower interest rates to the borrower, along with the prospect of better services.
What are the benefits of Home Loan Balance Transfer (HLBT)?
You may avail the following benefits from home loan balance transfer-
Lower interest rates and reduced EMI
A higher rate of interest means a heavier chunk of your income being eaten away by your home loan EMI every month. With home loan balance transfer, you can avail the benefit of lower interest rates offered by lenders nowadays and reduce the total interest payout on your balance loan amount. As lenders these days are offering lower interest rates than they were five years back – continuing to pay at the old rate is a sheer waste of money. The reduced rate will lower your EMI considerably and imagine saving money this way, say, for another 10 years from now on!
2. You may save on the prepayment charge
Till a couple of years back, most banks used to charge a fee against every prepayment made by the borrowers but this has largely become a thing of past by now. If the string of the prepayment charge is still attached to your existing home loan, it’s time you change your lender and move on to a new one that asks for no charges on prepayment. Thus, you can save a good amount of money, for all prepayments to be made in the future.
3. You may get better offers from the new lender
Home loan balance transfer can provide you other benefits too, apart from just saving money. While moving on with the new lender, you may negotiate with them to avail better services and offers in terms of top-up requirements and other investment options.
Things to check before you opt for home loan balance transfer
You must check the following things before you opt for the home loan balance transfer-
1. Compare different lenders
You would do well to compare different lenders and find out the best rates as well as the overall savings for yourself. The new lender considers your home loan balance transfer application as any fresh application for a home loan and hence various charges and fees( administrative charges, processing fees etc) are usually levied on you. Therefore, it is highly imperative that you compare these charges levied by different lenders and choose the one that counts for the maximum overall savings. The whole idea of home loan balance transfer is to save money on your EMI.
Check the tenure of your existing loan
2. Long Repayment Period –
Home loan balance transfers will be more rewarding for you if you have more years to repay the loan. For instance, you have booked 2 BHK flat in Noida and the tenure of your existing home loan is 20 years and you have already paid your EMIs for 3 years by now; going through the grinds of home loan balance transfer may be worth for you.
3. The timing of application
A nice piece of advice for you is to apply for home loan balance transfer during any festive season when lenders are most likely to offer better deals to potential home loan buyers. Due to the prevailing cut-throat competition among banks to woo the prospective buyers, they usually launch new and attractive schemes during festive times. You can negotiate with different lenders to get the best possible deal for yourself.
The bottom line:
Home loan balance transfer is indeed a helpful ‘tool’ for you as a home loan borrower, if you want to cut down on your EMI and want to avail other benefits too. But, in order to get the best out of it, you need to apply a lot of thought and use this ‘tool’ with a bit of caution.