Currently, the home loan interest rates have fallen to the lowest in decades. But, if you are the one who is still paying your home loan EMIs on the previous rate, then it’s time for you to go for a home loan balance transfer.
What is a Home Loan Balance Transfer? And how it Benefits You?
A Home loan balance transfer is a process of transferring your existing home loan from one bank to another in terms to avail better interest rate, terms, and other benefits.
High-interest rates have a direct impact on your finances and can prove to be an obstacle to your financial growth. Also, staying in debt for long can be stressful, and foreclosing your Home Loan before the tenure period can be the one thing that saves you. However, foreclosing a big-ticket loan is not easy for all, and opting Home Loan balance transfer can be the key that can help you out and save a lot of money for you in such a situation.
How Does Balance Transfer Work?
In a home loan balance transfer, the outstanding loan amount of your existing home loan is transferred to a new lender. And the new lender provides you with money to close your existing loan.
For this, the borrower needs to submit an application form with his existing lender requesting a balance transfer and needs to apply with a new lender as well. If the new lender approves the takeover of the existing home loan, the new lender will pay the outstanding amount to the existing lender and open a new loan account for the same amount with themselves.
Once the existing lender receives the outstanding amount, they need to release the property documents and also issues a no-due certificate to the borrower.
All these documents need to be submitted to the new lender and the borrower has to pay all the remaining EMIs to the new lender at their particular offerings.
Benefits of Home Loan Balance Transfer:
Reduces the Interest Rate and hence the EMI:
One of the major reasons for choosing a home loan balance transfer is the reduced interest rate. When you are paying a higher rate of interest for your loan and other lenders are offering the loan at lower rates, going for a balance transfer works in your favour and allows you to switch your loan to the lower rates with a new lender. This further reduces your monthly EMI and thus saves a lot of money for you.
Helps you get better terms on your loan:
The different lenders offer different terms for their loan offerings. And in case you have availed of a home loan whose terms are not in your favour then transferring your loan to a lender who is offering the same loan at your favourable terms can help you out.
Foreclosure and prepayment charges:
The Reserve Bank of India in its mandate dated 2012, lifted foreclosure charges from home loans that are on the floating interest rate.
However, for the home loans at a fixed rate of interest, banks are free to charge a par-closure fee varying from 2%-4% of the outstanding amount.
So, borrowers who are on a floating rate of interest and want to prepay or foreclosure their home loan should definitely go for it.
Top-up loan amount:
Home loan balance transfer also comes with an additional benefit which is – the top-up loan facility. Once you go for a balance transfer you can also get some additional amount over and above your outstanding amount.
But, before you go for a balance transfer, here are few things which you need to ensure.
- Ensure that the remaining repayment period exceeds five years
- Ensure you have not defaulted on EMI payments with the existing loan.
- Ensure that you have all the property-specific documents ready.
To sum it up– Home loan balance transfer is a great facility that helps you to reduce your EMI/debt burden. Home loan balance transfer also helps you to – reduce the interest rate, get a top-up loan, get favourable terms on your loan, and also customized offers in some cases.