A home loan is a substantial and long-term financial commitment, and it often becomes difficult to manage it. The reasons can be plenty, and one of the most significant ones is the change in the interest rate. Nevertheless, struggling with the loan and defaulting on repayment can have serious implications, so finding a solution is the key here. This is where you can opt for a home loan transfer to help you find some relief.
What is a home loan balance transfer?
Home loan balance transfer is a convenient way to transfer your outstanding loan amount to another lender, where you get to pay the balance loan at a lower interest rate. In this method, your new lender will help you close your existing loan by paying the balance loan of your previous lender. At the same time, your new account home loan will begin with your new lender, where you will get to repay the balance loan at a lower interest rate.
Benefits of home loan balance transfer
Home loan balance transfer has plenty of benefits to offer. Some of them are listed below:
- Loan tenure can be extended
A home loan balance transfer will allow you to extend your loan tenure if the current EMI gets unaffordable. If you face trouble paying your EMI, you can opt for a home loan balance transfer that will reduce your EMI by providing you with a longer tenure.
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A lower interest rate is available
The home loan rate of interest gets lower when you opt for a home loan balance transfer. It is one of the most significant benefits of home loan balance transfer. Suppose another financial institution offers a loan with a lower interest rate. In that case, it should definitely be considered, as a little reduction in interest rates can make a huge difference and help you save a lot of money.
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Offers better loan terms
If you are unsatisfied with the terms and features your existing lender offers, you can always go for a home loan balance transfer. But before you choose a new lender to transfer your outstanding value, research properly and check if your new lender offers the features and benefits you are looking for, along with better loan terms.
For example, if your existing lender has a high-interest rate or charges for foreclosure, you can always switch to a lender that offers a lower interest rate and has fewer charges for foreclosure.
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Offers better service
Home loans are a long-term commitment. During the tenure, you can face many problems with customer service, like no response from the lender about a specific issue, repeated changes in loan terms and conditions, and more like this. Therefore, if you are not happy and content with the service of your existing lender, you can always switch to a better lender or a financial institution with better service for customers.
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The type of interest rate can be changed
You can get a home loan at a fixed or floating interest rate. Fixed interest rate stays constant throughout the tenure, whereas floating interest rate changes depending on the change in Repo rate.
If you are paying EMIs at a fixed rate and the home loan rate of interest decreases considerably, you can shift to a floating interest rate to get its benefits. Similarly, if you are paying EMIs at a floating interest rate and the home loan interest rate increases regularly, you can shift to a fixed interest rate. While switching, considering a home loan balance transfer can help you save considerably.
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A top-up home loan can be obtained
One of the most significant benefits of a home loan transfer is that you can get an extra amount on your existing loan while switching your lender. This additional amount is known as a top-up home loan facility. This top-up home loan is usually 25% of your outstanding amount that is to be transferred. This loan can also be availed at a lower interest rate and used for personal expenses like a vacation or your child’s education.
How to opt for a home loan balance transfer?
There is a step-by-step process for home loan balance transfer.
- First, compare the different terms and conditions, interest rates, and other benefits that various lenders offer before choosing one from them.
- Once you select a better deal, try to negotiate with your existing lender to see if they can make some changes to retain you as a customer.
- Once you decide to transfer your balance to a new lender, write a letter to your current lender requesting a loan transfer. Your lender will reply with a NOC (No Objection Certificate) and the remaining loan amount.
- Make sure to take all the property papers from your previous lender or ensure it has been transferred to your new lender.
- Your new lender will pay off the debt to your old lender by transferring the remaining loan amount.
- Now, you can start paying off your debt to your new lender at a lower interest rate.
In conclusion
A home loan balance transfer is a fantastic way to reduce your stress of home loan repayment. It offers lower interest rates and other benefits that can greatly help you in the long run. However, before applying for a home loan balance transfer, you should consider all the terms and conditions and benefits your new lender offers. Also, you should conduct a cost-benefit analysis before applying for a home loan balance transfer to make the most of it.
