RBI’s
decision to bring down the repo rate by 0.5% in 2019 instilled urgency among
prospective consumers looking to avail home loans. This also included
homeowners who had already availed a loan and were now looking for home loan
balance transfers.
A
balance transfer, also known as home loan takeover, transfers any outstanding
balance to another financial institution. By doing so, the individual can not
only experience a lower rate of interest but other benefits as well.
Here
are a few things you should look out for in a financial institution when
considering a home loan takeover.
● Availability of Pradhan Mantri Awas Yojana Scheme
The Pradhan Mantri Awas Yojana (PMAY) was an
initiative introduced by the government to provide affordable housing solutions
for the:
-
Economically weaker section (EWS)
-
Lower-income groups (LIG)
However, it was later reworked to introduce the
middle-income groups (MIG) as well, under the credit-linked subsidy scheme
(CLSS). This enabled individuals living in cities, with a maximum annual income
of Rs.18 lakh to also benefit from the program.
The PMAY policy provides additional subsidies over
the home loan interest within a range of 3% to 6.5%. The borrower’s total
annual income determines the subsidy amount.
If you are considering a home loan balance transfer
and fall under the CLSS policy, ensure you choose an HFC which supports the
PMAY initiative.
● Top-up loans
Top-up loans enable individuals to borrow an
additional amount over the already existing home loan. Benefits of top-up loans
are as follows:
-
The
nominal rate of interest- Rate of interest charged on
a top-up loan is similar to that of the
existing home loan. They are not treated as personal loans, and you can fulfil
any urgent financial needs at a nominal cost.
-
Extended tenor.
-
Easy approvals as you have already provided necessary documents
for the home loan transfer.
-
Additional tax exemptions if you use it for home management, such
as repairs, renovations and construction.
● Hassle-free home loan balance transfer facilities
Even top financial companies can take a while to
complete the entirety of the balance transfer process. Thus, it is best to
consult HFC regarding their processing times and fees beforehand.
● Part-prepayment and foreclosure facilities
Every HFC charges a certain pre-payment fee or
foreclosure fee when you switch to another financial institution. Search for
HFCs charging the lowest part-prepayment and foreclosure fees in order to
ensure affordability in balance transfers.
With the help of a home loan foreclosure calculator,
you can easily calculate the liable funds required for such a task.
● Flexible tenor
Borrowers can reduce their home loan tenor and save
lakhs, which they would otherwise spend in clearing the additional interest.
As a result, it is advisable to choose an HFC that
offers flexible tenor. You can even use a balance transfer calculator to find
out the total cost associated with the process.
Since pre-payments require a substantial fee, you
can consider a home loan balance transfer and avail better interest rates and
shorter tenors at the same time.
● Early transfers
A home loan refinances should take place during the
first 5-7 years of the repayment period. As the EMI mostly consists of the
interest component during this time, transfers result in a greater benefit for
you.
A
home loan takeover is a significant financial decision. Top financial
institutions offer various features that allow for a seamless loan takeover
process.
These
points can help you find the ideal financial institution for a home loan
balance transfer. Nonetheless, before proceeding with the takeover, carefully
consider the small print and charges associated with the refinance.
