The interest rates on home loans are at their lowest point in decades right now. However, if you are still making your home loan EMI payments at the old rate, it is time for you to apply for a home loan balance transfer.
What is a home loan balance transfer?
A home loan balance transfer involves moving your home loan from one bank to another in order to take advantage of a lower interest rate, terms, and other advantages.
Your finances are directly impacted by high-interest rates, which can also function as a barrier to your financial growth. Additionally, having a lot of debt might be stressful. Foreclosing on your home loan before the tenure time may be your only chance for survival. Foreclosing a large debt, however, is not easy for everyone. In this circumstance, choosing a home loan balance transfer can help you and save you a lot of money.
How does a balance transfer work?
The outstanding loan balance of your current home loan is transferred to a new lender during a home loan balance transfer. Additionally, the new lender gives you money to pay down your existing loan.
For this, the borrower must submit an application form to both his current lender and a new lender, asking for a balance transfer. If the new lender agrees to assume the existing home loan, they will pay the remaining balance to the current lender and start a new loan account with themselves for the same amount.
The property documents must be released and a no-due certificate given to the borrower once the present lender has received the outstanding sum.
The borrower must submit all of this documentation to the new lender and pay all of the outstanding EMIs at the new lender’s specific rates.
Benefits of home loan balance transfer
Reduce the interest rate and hence the EMI
The lower home loan interest rate is one of the major points for choosing a home loan balance transfer. Going for a balance transfer works in your favor and enables you to convert your loan to the lower rates with a new lender when you are paying a higher interest rate on your loan and other lenders are offering the loan at lower rates. This further lowers your EMI each month, saving you a sizable sum of money.
Helps you obtain a loan with better terms.
For their loan options, many lenders offer a variety of terms. Additionally, moving your loan to a lender who is offering the same loan at terms that are more favorable to you can aid you if you have taken out a home loan with unfavorable terms.
Foreclosure and prepayment charges
In a 2012 directive, the Reserve Bank of India abolished foreclosure fees for home loans with floating interest rates. However, banks are entitled to impose a par-closure fee ranging from 2% to 4% of the outstanding balance for home loans with a set rate of interest. Therefore, borrowers who want to prepay or foreclose on their home loan and are paying a floating rate of interest should without a doubt do so.
Top-up loan amount
The top-up loan facility is an extra benefit of home loan balance transfers. When you transfer your balance, you may potentially receive some money in addition to the sum that is still owed.
But there are a few things you should be sure of before you move your amount.
- Check to see if the remaining repayment duration is longer than five years.
- Verify that you haven’t fallen behind on your EMI payments for the current loan.
- Make sure you are prepared with all the documentation related to the property.
Conclusion
Home loan balance transfers are a fantastic tool for easing your debt and EMI stress. Home loan balance transfers can also help you lower your interest rate, receive a top-up loan, get better loan conditions, and in some situations, get specially tailored offers.
