The decision to avail a
home loan is followed by taking into consideration various aspects, including
the rate of interest, the period of repayment and other associated details in a
thorough manner.
However, it happens far
too often that after availing the funds, borrowers get to know that another
financial institution is offering more favourable repayment terms or a lower
rate of interest. In such instances, the loan may be refinanced by what is
known as a home loan balance
transfer.
What does the balance transfer of home loan encompass?
In case of a home loan
balance transfer, it is the outstanding debt that is transferred to another
lender to lower the applicable rate of interest. Most of the financial
institutions offer the facility of a balance transfer. So, if a particular
borrower meets the minimum eligibility, home loan may be transferred for better
terms.
Benefits of home loan balance transfer
1.
Lower EMI and
interest rate
The main reason for home
loan balance transfer is to avail a lower interest rate offered by another
lender. Consequently, the EMI outgo will also be less, reducing the overall
financial burden in connection to the home loan.
2.
Better terms
Financial institutions have
different terms and conditions for home loan repayment. So, if there is another
lender who is offering better terms and conditions than the existing lender, it
will be favourable to opt for a home loan balance transfer.
3.
Pre-approved
offers
Lenders,
at times, offer various schemes and discounts to allure borrowers avail loans
from them. Such a window of discount is one of the main reasons for choosing
home loan balance transfer and enjoying the benefits it offers.
Leading financial
institutions extend pre-approved offers to existing customers, which make the
process of availing loan much simpler. Mostly, such offer includes various
financial products, including home loans and loans against property. Check your
pre-approved offer online by providing few basic details such as name and
contact number.
4.
Top-up loans
Apart from a lower rate of
interest and better terms of repayment, balance transfer offers other benefits
as well. For instance, a top up loan may be offered by lenders, which is an
option for additional funding over and above the transferred loan outstanding.
These advances do not come with end-use restrictions, allowing borrowers to
utilise the sum according to their unique requirements.
5.
Charges
There are a host of
associated charges concerning home loans such as prepayment or foreclosure
charges. Such charges are levied if the amount is repaid before the tenure.
Before opting for the home loan transfer, the cost-benefit analysis of these
charges should be done. Even after considering the charges, transfer of loan to
another lender looks like an attractive option; then it may be the right step
to take.
It should, however, be
noted that home loan balance transfer can yield advantage only if a borrower
meets certain criteria. It is important to undertake a cost-benefit analysis
before opting for such transfer to another lender.
If better terms of the home loan have been identified with another lender, then the borrower can request the existing lender to revise the rate of interest based on credit score and track record of repayment. It is possible that the existing lender may renegotiate on the terms and offer a lower rate of interest. This is something a borrower needs to know about home balance transfer among other essential factors already mentioned. Make sure to decide on such a refinancing option only after considering all other aspects of the financing facility.
