Before finalising, potential borrowers usually conduct thorough research and compare housing loan deals across multiple lending institutions. The chosen deal might be the most suitable one while starting the credit instrument, but one can find a better lender later during the tenor.
In such cases, opting for a home loan balance transfer is a practical and feasible option. But individuals must be aware of the various vital aspects related to this procedure.
When to opt for a housing loan balance transfer?
Several individuals assume that it is ideal to switch lenders because a new lender is offering a lower rate of interest on an existing high-value loan. However, there are several other factors to consider. All these are illustrated below:
- When the outstanding loan amount is high
Like any other equated monthly instalment, housing loan EMI comprises the principal loan amount and interest. Therefore, the principal amount gets paid gradually during the repayment process, thereby lowering the outstanding loan amount.
Opting for a home loan balance transfer is ideal when the outstanding loan amount is substantial.
- When reduced interest rates are available
The Reserve Bank of India is responsible for regulating the bank rate and CRR (Cash Reserve Ratio) on a timely basis. The interest rates will decrease if there is a reduction in these two parameters. However, the rates of interest are flexible and can undergo fluctuations from time to time.
Individuals must note that their EMI burden will reduce if they opt for a new lending institution offering a lower housing loan interest rate.
- When the costs and terms involved are suitable for a borrower
Switching a housing loan across lenders every time because of a rate cut is not a practical move. Several other vital factors are involved with the entire procedure, like terms and cost of transfer.
While individuals can reduce their EMIs with a home loan balance transfer, they must analyse the terms and cost involved in the process and then make a decision. Borrowers must consider settling for the lowest transfer costs. Some reputed lenders offer additional benefits for a balance transfer and also process the disbursal within a few days.
Moreover, opting for a reputed lender allows individuals to benefit from several offers. One of them includes pre-approved offers extended to existing borrowers on secured and unsecured financial products. These offers help simplify and accelerate the lending process. Existing customers can check their pre-approved offers by providing a few details, such as their names and contact numbers.
Besides these, individuals must take into account the property authorisation factor. This implies that they should check whether the new lending institution has approved their property for the home loan.
All financial institutions have their own set of approval procedures for the housing loan process. In a majority of the cases, lenders approve a housing loan if the property involved is an undisputed one and constructed by a credible builder.
Benefits of a housing loan balance transfer
Illustrated below are the various benefits of a housing loan balance transfer:
- Reduced EMIs
Borrowers primarily opt for a housing loan balance transfer because of the reduced interest rate offered by a new lending institution. A lower rate of interest implies a reduction in the payable equated monthly instalments, thereby reducing the overall loan cost.
- Part-prepayment facility
A part-prepayment facility allows individuals to pay a part of their outstanding loan principal. It benefits borrowers in many ways like it lowers EMI, tenor and helps save on interest. The current lending institution either may not allow this facility or levy significant charges for it. Thus, individuals can choose a reputed lender offering this facility for balance transfer.
Apart from these, prospective borrowers must ensure that they use a housing loan EMI calculator prior to application. There are several benefits of calculating EMIs before taking a home loan, like it helps individuals manage their finances and repayments efficiently. Punctually repaying a credit instrument further helps individuals maintain a decent credit history.
Thus, potential housing loan borrowers must keep in mind the above-mentioned details related to the balance transfer process.