Tired of paying hefty EMIs on your home loan? Chances are you took the loan some time back when the interest rates were much higher. Don’t worry, there’s help at hand with a home loan balance transfer, also known as refinancing your home loan. Transferring an existing home loan outstanding from one lender to another is known as a balance transfer of a home loan. You can take advantage of lower rates currently being offered by banks to refinance your loan for significant savings on your overall interest cost. Benefits from reduced interest rates and savings on interest are the primary reasons to opt for a balance transfer loan.
But before you start applying for a balance transfer, these are the key things you need to consider, if you want the refinancing to benefit you financially.
Obviously, the biggest reason to go for a balance transfer is when you are getting a lower interest rate from another bank. By switching your loan, you can save on your monthly EMIs, reduce your loan tenure and get better terms to help you save on the overall interest burden significantly. This could range from a few lakhs to a tens of thousands, depending on your loan amount, interest and tenure.
A home loan balance transfer allows you to reduce your long-term financial liability and make space for a higher disposable income. Financial experts recommend a cost-benefit analysis to figure out how much you will save before deciding on a balance transfer.
If your new home loan interest rate being offered is significantly lower than your current rate, then a balance transfer of a home loan makes sense. You can easily do the maths on Test My Loan to see what you can save in terms of monthly EMIs and overall interest cost.
It’s important to consider long-term savings impact when you do a cost-benefit analysis on your existing home loan. What’s the point of transferring your loan if end up incurring more costs on your home loan balance transfer. However, if a balance transfer helps you save a significant amount over time, it makes a lot of sense.
Before you decide to transfer your home loan to another lender, you must always check with your current lender if they can offer you better terms. With lower and improved home loan interest rates being offered to new customers, lenders are willing to renegotiate terms and can lower your rates easily rather than lose you as a customer.
If successful, renegotiation with your existing bank can save you the effort of a fresh application, the associated costs, and, of course, time. Most reputed banks or housing finance companies will consider your request for reduced home loan interest rates for reasons mentioned earlier. So before finalising a home loan balance transfer decision, it’s always a good idea to have a clear discussion with your bank about a reduction in the interest rates.
If you have stable record of income, loan repayment and sound financials, chances are that many banks will give you pre-approved offers. There are many lenders who want to attract existing home loan borrowers with easy top-up loans, fee waivers, and lots more. If the overall package you receive from a new lender is highly lucrative and beneficial, we recommend transferring your loan immediately.
Credit rating or credit score is a dynamic measure of your loan repayment ability. If your credit score has improved from the time when you applied for your existing home loan, you could be eligible for lower interest rates.
For any balance transfer application to go through, your new lender will carefully look at your EMI payment history and how good your credit rating is. A better credit rating means better or lower interest rates. Even your existing loan provider should be willing to readjust your home loan EMIs based on your improved credit score. So before deciding on a home loan transfer, check with your existing bank first.
Experts recommend transferring your home loan balance as early in your tenure as possible. If you have less than five years left, then your EMI will mostly be the principal amount as most of the interest cost has already been recovered from you through the previous EMIs. So, even if you get a lower interest rate from another bank, it won’t really impact your long-term savings much, as you’ve paid the bulk of the interest cost already.
Conclusion
While savings remains the biggest reason to opt for a housing loan balance transfer, you should always weigh your options and be aware of the costs involved. The idea is that refinancing should help ease up your finances, without negatively affect your long-term financial health in any way. So, carry out the cost-benefit analysis thoroughly and read the fine print to avoid hidden expenses and conditions.
And if all of this is too much to digest, you can always visit www.TestMyLoan.ai or WhatsApp on +917304500637 to get a clear picture of your total interest savings, the extent of reduction on your home loan EMI and even to know how much top-up loan you can get at low home loan interest rates.
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