More and more people are investing in residential property in India. And they prefer financing their dreams with a Home Loan. In the financial year 2022, banks have sanctioned around INR 2 trillion in housing loans.
With adequate research, you may obtain the best Home Loan. Still, there are chances of unmanaged finances or financial burdens in different scenarios, like changing market or policy rates. So borrowers might be facing an issue of increased Home Loan EMIs. In such situations, a Home Loan balance transfer is a smart move. Borrowers may use a housing loan calculator to evaluate their savings with a Home Loan transfer facility.
About the Home Loan Transfer Facility
A Home Loan balance transfer means shifting the loan account from one lending institution to another. In this process, the total outstanding amount of the existing Home Loan is paid to the existing lender, and the new lending institution sanctions a new Home Loan.
The primary purpose of Home Loan transfer is to reduce the EMI by lowering interest rates. Lending institutions charge a nominal fee for their Home Loan transfer services. One may need to assess all the charges properly before choosing a new lender.
Home Loan transfer charges may include –
- foreclosure fees
- processing fees
- stamp duty for the new loan agreement
Key Things to Consider for Home Loan Transfer
The Home Loan transfer process from one bank to another is easy. And benefits, like reduced interest rates and EMIs, adjusted loan tenure, and top-up loan facility, are the key drivers for Home Loan transfer.
Borrowers should consider some crucial aspects before initiating the process for maximum benefits.
– Type of Interest Rate
Borrowers should know the interest rate the new lender will apply to their Home Loans. It can be a fixed or variable interest rate. A fixed interest rate is considered a good option for borrowers when the interest rate is low, and an increase is expected.
On the other hand, floating interest rates may be changed during the loan tenure, depending on market fluctuations. It is considered an ideal choice during a reducing interest rate scenario in the market.
So it is necessary to know the type of interest rate applied to the new Home Loan.
– Foreclosure Charges
One of the expenses associated with the loan transfer process is foreclosure charges. In the case of a Home Loan transfer, this fee is paid to the existing lender as the borrower closes the loan account before completing the loan tenure.
So it is necessary that the borrower ask the new lender about prepayment or foreclosure charges. If a borrower has spare funds, they may want to make a prepayment to close the loan account soon.
– Processing Fees
The new lender may levy the processing fee as they treat a loan balance transfer as a new Home Loan application. The borrower is advised to ask the lender about the processing fee for the Home Loan transfer process.
– Suitable Time to Opt for Loan Balance Transfer Facility
It is considered best to transfer the Home Loan during the earlier stages of the loan duration. Typically, lenders allow individuals to transfer a Home Loan after 6-12 months of EMI Payment, depending on their lending terms.
Transferring the loan may not be beneficial if the borrower has already repaid much of the Home Loan. Simply because borrowers have paid most of the interest component in the earlier stages of the loan tenure.
– Calculate Savings in the Overall Interest Cost
With the Home Loan transfer facility, lenders aim to serve customers with low-interest loans. Before transferring the loan to a new lender, borrowers must compute the total repayment amount. Individuals need to ensure that they calculate the savings on interest with the new loan. They can use a housing loan emi calculator provided by lenders on their official website to know their savings on interest.
– Top-up on Home Loan Balance Transfer
It may be a challenging task to get a new and quick loan, like a personal loan with an ongoing long-term Home Loan. Borrowers can request a top-up loan with a loan transfer facility to meet their additional financial needs. The new lender can provide a top-up loan to the borrower.
These are the crucial aspects to consider by borrowers to make informed decisions and get the most out of the Home Loan transfer facility with the new lending institution.