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What You Should Consider for Home Loan Balance Transfer?

Submitted by admin on June 13th, 2024

A home loan balance transfer takes place when you switch to a new lender with your current outstanding. Borrowers usually look for a home loan balance transfer when they need a lower interest rate, extended loan tenures or a mix of both.

Why to Choose a Home Loan Balance Transfer?

Home loan balance transfers are usually chosen when borrowers look for a better deal in terms of a lower interest rate without any prepayment penalties. If a loan is switched off, it means clearing the remaining balance of the existing loan and borrowing a new one from a new lender.

The borrower starts paying off the EMIs to the new lender. The amount of savings depends on the outstanding amount, loan tenure and difference in the rate of interest rate and other charges.

Check Your Credit Profile

You should have a clear understanding of the process before going with the option. Start by checking your credit profile to ensure that all information is updated and accurate. If you have missed payments or defaulted, it will negatively affect your credit profile. In that case, you should avoid opting for a home loan transfer.

Your credit profile is the first and most credible source of your credit status and hence, any lender will check it first. If your credit profile is not good, it is most likely to suffer rejection. Once it is rejected, you are not entitled to reapply with the same lender for the next 6 months.

Therefore, you should try to correct your credit profile if it is not strong and then, apply for a home transfer loan. However, if you have a good credit record, we will recommend looking for a new lender.

What to Consider When Opting for a Home Loan Balance Transfer?

 Here are a few factors that you should consider when choosing a home loan balance transfer:

Interest Rate Negotiation: You should always negotiate with your existing lender for better rates. If you have been an excellent borrower, you must have developed good relationship with your banks and there are higher chances that they would hate to lose you as a customer. It may work in your favour and help you get a renewed and favourable interested rate and loan tenure.

A home loan balance transfer is an ideal solution as you will have a lower EMI burden without having to pay application fees, processing fees, foreclosure charges etc. Find out if the new lender has a plan to overwhelm you with hidden charges or offers lower interest rates as promised.

Lenders often resort to marketing gimmicks like extended tenure, insanely lower interest rates and many more tricks. To ensure that you will receive what is promised, ask the lender to detail everything in black and white.

Total Expenses of Loan Transfer: A home loan transfer involves various types of charges including application fees, processing fees, etc. Most banks demand transfer fees. However, you should request the new lender for a waiver of these fees. Actual, real expenses involve what you will have to incur on balance transfer. Only after calculating the total expenses, you can decide if the transfer is worth your consideration.

Last but not the least, check the new lender’s credentials before deciding whether it’s worth a choice in your case.