In the last few years, the market for home loans has proven to be quite dynamic for borrowers. With factors like fluctuations in interest rates and financial institutions shifting their lending rates from fixed to floating interest regimes, existing borrowers have to compute their interest rates all over again. In such a scenario, the most important feature about their financial institutions that lenders should know about is the home loan balance transfer facility.
With an increase in the demand for housing loans in recent years, borrowers are looking for advances that can help them maximise their benefits from the same. Apart from a high loan amount, flexible repayment tenor, etc. competitive interest rates remain one of the primary factors for most individuals while choosing a home loan. This has urged many borrowers to utilise the home loan transfer facility to shift their existing loans from one lender to a second one offering more affordable interest rates.
What does this loan transfer facility entail?
When borrowers choose to transfer their outstanding repayment amount of an existing home loan from one lender to another, the process through which they can implement the same is known as a housing loan balance transfer. Upon this transfer, the outstanding loan amount is paid by the new lender, and the borrower is required to start paying EMIs to the new financial institution, according to the terms mandated by them.
This facility, offered by select financial institutions, allows individuals to avail more affordable interest rates and superior services.
Few lenders like Bajaj Finserv also offer high-value Top-Up Loans on the home loan, to help individuals finance any unforeseen additional expenses that might arise in due course of purchasing or constructing the house. Top-up loan interest rates are kept at a minimum to ensure easy repayment of the same.
Factors to consider before availing home loan balance transfer
To ensure that the loan transfer can be carried out without any hitches, individuals should consider the following factors –
● Charges levied on it
Lending institutions usually levy a processing fee or transfer fee on borrowers looking to avail of this facility. This fee can sometimes amount to quite a lot, which in turn can lead borrowers to incur a loss in the long run. Make sure you check the amount you are saving through this transfer by making use of an online home loan balance and top-up loan calculator, to compare it with the charges levied.
● Be mindful of the tenor
Most experts advise against using this facility if you are nearing the end of your loan tenor. Balance transfer towards the end of your loan tenor can lead you to incur unnecessary charges without offering substantial savings on the interest amount in return.
● Interest rate regime followed by the lender
It is crucial for you to make sure that you are transferring to the MCLR based interest rate regime from fixed-rate regime to ensure that you avail maximum benefits from the lending rates offered by the second organisation.
● Check the eligibility
You should check if you comply with the eligibility criteria put forth by the new financial lender to make sure that there are no hassles while availing of this loan transfer facility.
Also, make sure you understand how the home loan balance transfer works to maximise your benefits. If implemented successfully and under the right financial scenario, a balance transfer can help you save a significant portion on the repayment.