A home loan balance transfer is a process by which borrowers can shift the outstanding principal of existing credit to a suitable lender.
This process’s primary motto is to gain an affordable interest rate and EMI outgo on a home loan. The credit form, which offers considerable credit to purchase a residence, also obligates borrowers to a repayment structure.
Hence, looking for lucrative savings options becomes a necessity. Refinancing is a method that can back up the need for better disposable income.
Why opt for a home loan balance transfer?
Existing home loan borrowers are in a constant search for better lending options. Refinancing, therefore, helps in availing the best facilities like an affordable home loan interest rate. However, lenders perform strict scrutiny before approving the application of home loan balance transfer.
The interest and EMI levied, thereby, is based on an applicant’s repayment record and credit score. It is advisable to negotiate with the existing lender before submitting a balance transfer application as there are significant charges levied on the process.
There are chances the current lender would reduce the monthly repayment obligations. However, if the terms don’t suit the needs, one can look for HFCs providing better ones. Apart from the interest rate, one can also find pre-approved offers and better services against home loan transfer.
How can one benefit from a home loan balance transfer?
Refinancing can be lucrative for borrowers fulfilling all the eligibility criteria. However, it is advisable to look for all the linked factors for an informed decision.
- Lower EMIs and interest rates
Typically, the primary reason for opting for a home loan balance transfer is when another lender offers a lower interest rate. This is a smarter way of reducing the overall interest rate and total interest cost.
- Better repayment terms
The lending rate usually differs from one financial institution to another, depending on their internal policies. However, for existing home loan borrowers paying a high monthly outgo, refinancing can work as a boon. This process aids in finding better deals and making savings on disposable income for future endeavours. To assess the amount of interest saved, individuals can use a housing loan EMI calculator.
- Prepayment charges and foreclosure
Individuals planning to go for refinancing must have a clear idea about the foreclosure and prepayment charges. It is crucial to evaluate the costs for better fund management. If a lender offers a good deal with lucrative interest terms, opting for a transfer makes sense. However, availing refinancing is beneficial during the initial loan tenor years. This is because the interest component in EMIs is highest during the first months and continues reducing as the tenor progresses.
- Top-up loans
Refinancing also comes with multiple advantages. A lower EMI, personalised benefits, affordable interest rate, and suitable repayment terms fall under a balance transfer’s direct benefits. Top-up loans are the feature offered by lending institutions that provide additional amount over and above housing loan. These funds come with the flexibility of usage, making it a perfect liquidity source or finance source to purchase a house’s interior decoration.
- Pre-approved offers
Many financial institutions offer seasonal discounts to attract more borrowers. This an indirect benefit of refinancing. However, one must focus on these customised offers for refinancing as this can affect the finances. Hence, a home loan balance transfer is lucrative for borrowers obligated to high EMI and interest outgo for a longer tenor. However, one must be sure of their repaying capability and strength to cover the added charges. Avoiding this factor would add to unwanted worries like debt trap or expensive prepayment and foreclosure charges. Thus, if you follow these you will be benefited by Home Loan Balance Transfer.