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A Few Factors You should Consider at the Time of Transferring Home Loan

A Few Factors You should Consider at the Time of Transferring Home Loan

| @indiablooms | 25 May 2019, 06:45 am

A home loan is a long-term commitment, as its repayment spans decades. Therefore, to make sure the task on hand is as convenient as possible, it’s important to keep a track of interest rates that competitors are offering all through the tenor, as you can apply for a home loan balance transfer if need be and make the loan more affordable even once you begin repayment.

By choosing this option, you can pay a lower interest rate on your home loan, which in turn brings down the cost of borrowing. However, to truly benefit from this option, opt for it only after taking the following factors into consideration.

Maintain your Credit Score to Enjoy Hassle-free Approval

In case of home loan balance transfer, your new lender checks your credit history and score before approving your application. So, make sure that you maintain a good credit score at all times.

Transfer your Home Loan Balance in the Initial Years of Repayment

During the initial years of the tenor, each home loan EMI comprises a greater payment towards the interest of the loan than the principal. This ratio changes with time, and towards the end of the repayment window, the interest component is lower and each EMI comprises a greater portion of the principal amount.

Since your objective is to reduce the home loan interest rate burden through a balance transfer, the best time to refinance your house loan is at the start of the tenor, when interest payments are highest. Transferring your home loan balance towards the end of the tenor is far from ideal as you would have already paid the majority of the interest amount, if not all of it.

Do a Cost-benefit Analysis to See if Refinancing is a Good Decision

Just like a home loan, the balance transfer facility also comes with various charges. This includes processing fees, EMI bounce charges, penal interest on missing or delayed EMIs, prepayment and foreclosure charges, and so on. Therefore, before switching to a new housing loan provider, do a cost-benefit analysis by comparing your total savings with the balance transfer costs. Use ahome loan balance transfer calculator to estimate your total savings and a loan EMI calculator to understand the EMIs that you will have to pay to the new lender.

Watch video to Know more about Home Loan Transfer:


Compare Lenders and their offerings toSecure the Best Deal

If a home loan transfer seems ideal, make sure to compare several lenders and their offerings before picking one. If your housing loan interest is linked to the base rate, you can opt to switch it to a lender whose interest rates are linked to MCLR to enjoy greater transparency and also benefit from rate cuts. Similarly, consider switching to a lender who not only offers a lower housing loan interest rate but also other features that elevate your experience.

Read the Agreement Carefully before Signing It

Switching your home loan means signing up with a new lender and agreeing to new terms and conditions. So apart from the interest rate, pay close attention to the balance transfer agreement. This way, you will be aware of your and the lender’s rights and obligations.

Paying attention to these factors when refinancing your home loan will help you make a wise and informed decision. Before you apply for balance transfer, also bear in mind that you must check your pre-approved offer from lender, as it will give you access to tailor-made deals and speedy financing.

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