Everything You Need to Know about Home Loan Balance Transfer
Ever thought of switching your home loan to a new lender, especially when you see a lower interest rate advertised?
When you take a home loan, you research and compare the best deals. Finally, you choose the lender that suits your requirements the best. It might be the best deal when you started your home loan, but chances are now another lender is offering a better deal for your requirements.
It is completely feasible and practical to transfer your home loan to a new lender for better terms, in such a situation. The process is called home loan balance transfer. Here, we look at what it entails.

What is home loan balance transfer?
Home loan balance transfer is also known as refinancing. Almost every lender offers a home loan balance transfer facility. As a borrower, if you have the required eligibility, you can switch your home loan and get a better deal.
Though the lenders try their best to retain good customers by offering the best terms and rates. One way of looking at it is, if you are getting a better deal, you can ask your existing lender to take another look at your interest rate based on your repayment track record and credit score. Your existing lender might renegotiate the terms with you.

Why opt for a balance transfer?
The main reason is lower interest rate on your home loan. Apart from that, revised repayment terms, preapproved offers or better services are a few more reasons to opt for a home loan transfer.

When does a balance transfer make most sense?
You can’t transfer your home loan to a new lender every time there is a rate cut. Here are a few situations when a home loan balance transfer is advisable:
1. When the remaining home loan tenor is longer
When your home loan is in the initial years, a balance transfer is profitable. If you are approaching the end of your home loan, it doesn’t make sense to incur the cost of transferring the home loan.
2. When the unpaid home loan amount is bigger
If major portion of the home loan is remaining to be unpaid and you get a lower interest rate with a new lender, it makes sense to transfer the home loan. On the other hand, if the amount of unpaid home loan is just 5 to 10% of the total home loan amount, it won’t be a wise decision to transfer your home loan.
3. Overall reduced cost
Most borrowers just look at the lower interest rate while transferring the home loan. You must know there will be a cost involved for transferring your home loan to a new lender. Consider the overall cost of transferring the home loan and then look the benefits involved. If the benefits are higher than the costs, you may proceed with the home loan transfer facility.

Cost-benefit analysis: An important factor for a home loan balance transfer
You must have been advised to weigh your options before you transfer your home loan. Here’s a look at what you should weigh in terms of costs and benefits while transferring your home loan.

The Costs:
1. Consider each and every cost involved: The cost can be from the existing lender as a penalty for closing the home loan before time. The other cost can also be as a processing fee from the new lender.
2. Consider the hassles: There won’t be just monetary costs involved. Few things can’t be measured but they come as an additional liability. Consider, the hassles in processing your home loan transfer like the documentation or running around.

The Benefits:
1. Consider the savings: This would be a direct impact of transferring your home loan. The reduced cost in terms of your monthly EMIs would be your savings.
2. Consider the non-monetary benefits: There will be certain benefits that won’t be reflected immediately in your savings, but then they will help you have a better experience in terms of your home loan. For instance, Bajaj Finserv offers facilities like top-up loans, online loan applications, minimum documentation, and nil prepayment charges. Such benefits should be considered while transferring your home loan.

Home loan balance transfer process:
Here is a step-by-step process for home loan balance transfer:
1. Shop around: Start by comparing the interest rates, features and costs involved.
2. Negotiate with existing lender: If you get a better deal, speak to your existing lender if they can negotiate the terms to retain you as a loan customer.
3. NOC from existing lender: Once you make up your mind, submit a letter to your existing lender requesting a loan transfer. Your existing lender will issue a ‘No Objection Certificate’ along with the remaining loan amount.
4. Collect important documents: Ensure you take the property documents from the existing lender or they transfer it to the new lender. Also, take back any post-dated cheques submitted to your existing lender.
5. Submit the documents to the new lender: Meanwhile, start the procedure with the new lender to transfer your home loan.
6. Repay and close the existing loan: Your new lender will pay off your unpaid home loan by transferring the remaining amount to your old lender.
7. Start a fresh home loan with better rates: Now, you can start a fresh home loan with the new lender, with reduced interest rate.

A home loan balance transfer is a win-win situation for a borrower. But, make sure you make an informed choice and don’t fall into the trap of short-term offers advertised by lenders.

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