Why balance transfer your home loan?

27-Sep-2022

Wondering how much you could save in terms of interest and principal amount if your existing home loan was at a much lower interest rate? With home loan interest rates in India circling around 7.5% currently, chances are your earlier home loan was taken on a higher interest and you are most likely paying too much for it. Since a typical home loan is a big EMI paid over a long term, even a 1% lower interest rate can mean huge savings for you.

In this scenario, thinking about a home loan balance transfer makes a lot of sense. Transferring your remaining loan amount on lower interest rates is always a great idea. You can save big on your remaining interest amount and can also avail a host of benefits.

However, before you go about a home loan balance transfer, weigh the pros and cons to assess the savings and other factors of switching your home loan balance transfer to another lender.

Your decision to go for a balance transfer can depend on multiple factors. Sounds overwhelming? Don’t worry, we have researched your options to familiarise you with all the important aspects of a home loan balance transfer.

What is a Home Loan Balance Transfer? And How Does it Work

The transfer of an existing home loan to another bank or lender offering a lower interest rate is called a home loan balance transfer. Customers with an existing home loan at a higher interest rate often go for it to save money on interest. And these savings can be significant over the long term. We’re talking about lakhs in interest payment savings over the loan period.

Here are 3 Key Things to Remember:

1. Old Loan to New Loan – A home loan transfer means that your previous bank/lender transfers your outstanding loan balance to a new lender. The new lender books your loan into its account while the old lender is paid to close their loan account with you. Then, you begin your new home loan at a lower interest rate with your new lender.
   In many ways, balance transfer is similar to taking a new home loan. However, you don’t have to go through the same level of documentation and screening procedures as you would for a new home loan. Provided of course, the documentation done for your current loan is complete in all respects.
2. Cost of Home Loan Balance Transfer – Always consider the costs associated with a home loan balance transfer. While you will get the benefit of lower interest rates, expect certain processing fee, file charges and other legal and technical costs associated to be levied again by the new lender. So it’s important to consider how these costs affect your savings before you transfer your loan. To weigh both sides, you must be clear about the cost of home loan balance transfer and long-term savings it offers you.
3. Eligibility Criteria – Before you apply for a Home Loan Balance Transfer, consider if you meet the lender’s eligibility criteria. You should have paid  a min. of a 12 EMIs previously without any default . Proof of stable income, good repayment record, a high CIBIL score, loan-to-property value ratio, and complete paperwork are some things that your new lenders will most likely ask for.

In India, nearly all public and private banks offer to lower your interest with balance transfer home loans. Some of these are SBI Home Loans, ICICI Bank Home Loans, HDFC Bank Home Loans, Axis Bank Home Loans, Kotak Mahindra Bank Home Loan, Bank of Baroda Home Loans, PNB Home Loans, Citibank Home Loans, and others.
A large number of NBFC (Non-Banking Financial Companies) like LIC Housing Finance, India Bulls Housing Finance Ltd., Reliance Capital, L&T Finance, Sundaram House Finance, Power Finance Corporation Ltd., and many others offer home loans.
To know your instant savings on balance transfer of home loan, check out www.testmyloan.ai and see how much you can save on interest costs, monthly EMIs or the amount of top-up loan you can get while doing a balance transfer.