When is the Right Time to Opt for Home Loan Transfer Facility?

Share this News:

20 Aug 2019, Pune : According to the Economic Times, the percentage of balance transfers among all mortgage loans sanctioned has increased to about 20% from the previous year.

A balance transfer is a facility by which borrowers can transfer an existing loan to a new lender. The current lender pays off the full loan amount to the old financial institution. Borrowers have to continue paying the remaining debt to a new lender according to the terms agreed during the balance transfer process.

Borrowers usually avail home loan transfer facility to reduce interest rates associated with such credits. Financial institutions generally reset home loan interest rates every 12 months. 

Borrowers should wait for the reset period to compare the interest rates before availing such facility. Here are 5 scenarios when a borrower can opt for balance transfer facility. 

  • When the Interest Rates Are Lowered

The Reserve Bank of India changes the repo rate from time to time to control the changes in the economy. A reduction in the repo rate will automatically lower the interest rates on loans including on home loans.

Borrowers can avail home loan balance transfer if a lender offers them a lower interest rate after reduction. It will significantly reduce the amount of EMIs and subsequently, the total cost of the loan. They can use an online home loan transfer calculator to get an idea about the monthly installment amount they need to pay after they switch to a new lender.

  • When a Lender Offers Lower Associated Costs

Transferring the loan when there is a cut in the interest rates may seem to be a feasible option, but it will not be beneficial if the related costs with the loan are high. Borrowers should consider doing a cost analysis by taking into account all the charges before they choose a home loan balance transfer.

One of the main things they should consider is the pre-payment and foreclosure charges. Borrowers can avail such facilities to reduce the interesting part of their credit. However, lenders can charge a considerable amount of penalty fee against such facilities. If a new lender offers loan terms with lesser associated costs, then a borrower can avail a balance transfer.

  • When a Lender Offers Better Repayment Terms After Home Loan Takeover

Every lender has their repayment terms and conditions. If a lender provides better repayment facilities after a balance transfer, then availing it will be a smart choice for a borrower.

Some financial institutions flexible repayment facilities that entitle a borrower to repay the debt according to their financial capabilities. They can also pay interest-only EMIs and repay the outstanding principal part at the end of the loan tenor.

  • When a Borrower Needs Additional Funds

Financial institutions offer a top up loan when a borrower avails a balance transfer facility. They can carry out any renovation or repair with that amount. Also, they can fund other expenses like medical emergencies, higher education, etc. as there is no end usage restriction. It requires minimum documentation process as the amount is credited on an existing loan.

If a borrower requires additional funds and a new lender offers a high top-up amount, then they can avail this facility. They can use a home loan balance transfer and top up eligibility calculator to determine the amount they are entitled to avail.

The above-mentioned points will provide you with a clear idea of when you should avail a balance transfer facility. Make sure that you avail this facility in the initial years of your home loan to avail benefits for a more extended period.