A home loan can stretch across a few decades. In this duration, there could be many changes in the economic conditions, interest rates and your finances. Your income could increase and you might find a home loan at a lower interest rates and better terms. During such times, you need not get stuck with your old loan with a high EMI. Instead, you can opt for a home loan balance transfer. Read on to know more about in detail.
What Is a Balance Transfer?
Home loan Balance Transfer enables you to switch your existing home loan from one lender to another to avail a better interest rate and other benefits. Home loans involve huge amounts of money, due to which even a slight fluctuation in the terms can make a substantial difference. In such a scenario, you can save a lot of money by transferring and benefitting from the new loan’s terms.
How Does Balance Transfer Work?
When you transfer your home loan, the new lender repays the outstanding balance to the existing lender. You have to then pay all the future EMIs as per the new lender’s interest rate. To transfer a loan, usually, you need to request the existing lender to close the loan and apply for a new loan with the new lender.
Advantages of Opting for a Balance Transfer on Your Home Loan
Taking a home loan balance transfer offers you unique benefits.
- Better interest rate
This is one of the primary reasons for opting for a balance transfer. Transferring your account to a lender with lower interest rates reduces your monthly EMIs and hence, the overall cost of the loan.
- High top-up loan
Many lenders offer Top Up Loan Facility on Balance Transfer as an additional benefit. This is provided only by the new lenders based on the current market value of your property. This amount can be used at your discretion. You can use it to pay off your immediate loans, or medical expenses or house renovation.
- Better terms and negotiations
You can also opt for a home loan balance transfer if you are not satisfied with the services of your existing lender. Moreover, if you have a good payment track record, you can cite your credit score to negotiate for terms like better ROI or reduction in processing fee, etc.
The availability of a balance transfer facility allows you to switch to a better home loan anytime during the tenure of the loan. However, it is suggested not to transfer your loan in the later years of the tenure, as the interest component is already paid by then. You might have to pay certain charges for the transfer. Therefore, it is best to weigh the benefit of a home loan balance transfer as compared to the cost involved to ensure that it is beneficial for you.