Home Loan Balance Transfer is the procedure of transferring your existing Home Loan from one bank or NBFC or lender to another for a lower rate of interest. Transferring your Home Loan from one lender to another helps you to save money on your interest payments.
For instance, let us say that you take a Home Loan of Rs.50 lakhs for a tenor of 20 years at a fixed rate of interest of 10% per annum. With a fixed interest rate, you cannot save much money.
When the market interest rates fall, you request your existing bank to switch your loan to a floating interest rate. But the bank declines your request.
In such a case, Home Loan transfer comes into the picture. In this case, you can transfer your outstanding loan to another bank or NBFC that offers you a lower rate of interest.
Features of Home Loan Balance Transfer
Let us have a look at some of the key features of balance transfer facility to understand how beneficial it can be:
Lower Interest Rate - If you have a Home Loan at a fixed interest rate and the market interest rates have fallen down, then you can easily transfer your existing loan to another bank or NBFC or loan provider to enjoy a lower rate of interest.
Lower EMI – Balance Transfer lowers your monthly EMI thus helping you to save more money and repay off your loan faster and comfortably.
Top-up Loan – If you are looking for the renovation of your home and your existing loan provider does not provide a Top Up Loan, then you can transfer your Home Loan to a new lender. The new lender will provide you a top-up loan at a lower rate of interest as well.
Better Services – You can get better additional services if you opt for a Home Loan balance transfer in terms of an online application process, instant online approval, no hidden charges, minimum documentation, online loan account access, customized insurance cover, and the like. With so many benefits at one switch, it is certainly beneficial to transfer your loan account to another loan provider.
Points to Remember before Applying for a Home Loan Balance Transfer
Below is the list of some key points that you should remember before applying for a Home Loan Balance Transfer:
You should Always Opt for a Balance Transfer at an early stage of your loan tenor. This is because you have already spent a lot of time and money in repaying off your Home Loan. If you transfer your loan at a later stage, you will end up paying more money in terms of interest and fees to the new lender.
Make Sure to Keep an Eye on all the hidden costs, if any. Most banks include documentation charges along with the processing fee. You should transfer your Home Loan only if the value of the benefits is more than the total costs incurred while transferring the loan.
Most Loan Providers Charge a prepayment penalty charge or a foreclosure charge when you are planning to transfer your loan. In case of fixed rate Home Loan, you will have to pay a prepayment penalty while transferring your loan. In case of floating rate Home Loan, there is no prepayment penalty.
The Bottom Line
The Balance transfer is a time-consuming process and hence, you should carefully analyze its benefits before revising your Home Loan. This will help you to enjoy lower interest rates and also save more money on your loan repayment.
Watch video to know more about balance transfer:
About This Author
Anamika Verma A financial Advisor Joined: December 18th, 2017
