The home loan market in India is expected to grow at about 22% CAGR from 2021 to 2026. Such numbers throw light on its increasing popularity. The home loan market extends various facilities such as home loan balance transfer and tax deductions. Furthermore, the prevalent interest rates are quite low, which helps people secure their dream of owning a house. The lowest interest rate in India currently is around 6.75%. Additionally, paying home loan EMI is also a seamless procedure. These EMIs come with a maximum tenor of 30 years and are offered by leading institutions. This flexibility allows customers to breathe easy.
However, when viewed from a different perspective, borrowers have to dedicate a part of their monthly income towards EMIs for long periods. During this time, other banks or NBFCs may change their interest rates. Home loan interest rates propounded by any of these institutions may fall significantly.
In such cases, taking recourse to home loan balance transfer seems to be the most viable and beneficial option. Reduction in interest rate helps in saving significantly. The saved fund can then be committed towards some other requirements. Besides paving the path for decent savings, home loan balance transfer has other advantages. So, should you opt for a home loan balance transfer? How will this provision benefit you? And what is a top-up loan? Get answers to your questions with this guide.
What is a home loan balance transfer? How does it work?
A home loan balance transfer is the transfer of the unsettled principal amount to another lender. This new institution furnishes the unpaid amount to the existing lender. The original lender then gives effect to all the formalities. It releases the documents of the property and hands over a no-due certificate (NDC) to the concerned borrower. Thus, you can opt for a home loan transfer after comparing the interest rates. If any new lender offers lower interest rates, you can always opt for this transfer provision. After the transfer gets materialized, you will have to pay the EMIs at a renewed interest rate to your new lender.
This balance transfer can include processing fees and other charges. It varies from lender to lender. Before approving a loan transfer, the potential lender may look at various facets. It may conduct a thorough inspection of your repayment history with the existing lender. Some lenders may even consider the credit score. Thus, it is imperative to maintain a decent credit score. The new lender must be convinced of your repayment abilities.
Benefits of a home loan balance transfer
Home loan transfer comes with numerous advantages. It is a highly customer-friendly provision. Here’s what you can gain by availing of such a provision.
- Save on EMIs with a lower interest rate: The primary reason behind people opting for home loan transfer is when a new lender offers a much lower interest rate. Thus, if you change your lender, you will save significantly on your EMIs. You will also be able to shake off some of your monthly financial stress.
- Desirable repayment terms: Each lender has different terms and conditions. A home loan transfer may help you get a better deal with respect to repayment clauses.
- Saving despite foreclosure/ prepayment charges: Foreclosure or prepayment charges depend on the discretion of the lender. While making a cost-benefit analysis, you should also take these expenses into account. After incorporating these charges, if you still stand to benefit from the transfer, it will be an ideal choice for you.
- Top-up loan: Top-up loan is another facility accompanying home loans that have been designed to cater to the customer’s needs. In case you’re in dire need of funds, the new lender can offer you an additional amount as a loan. This facility usually comes with nominal interest rates. Thus, you can take care of other financial requirements in case of an exigency.
- Savor pre-approved offers: To catch the attention of borrowers, lenders may take various steps. Besides lowering the interest rate, they may extend an attractive offer as an incentive. Thus, you will have the opportunity to make the most of this proposal if you take recourse to a home loan transfer.
When to not opt for a home loan balance transfer?
After analyzing the pros of home loan balance transfer, you might want to avail it straightaway. However, it is not recommended to opt for it whenever there’s a small change in interest rate. You need to contemplate your decision with dedication. Moreover, home loan transfer proves to be more advantageous when you’re in the early phase of your tenor.
Home loan balance transfer calculator
You would want to make a rough estimate of the savings you can entail with the transfer. Use the home loan balance transfer calculator available online for this purpose. You just need to furnish some basic details like interest rates offered by both institutions, tenor, location of the property etc.
Home loan balance transfer is easily one of the most advantageous facilities that accompany a home loan. And due to the digitalization of the economy, you can access it without much effort. Minimal documentation, availability of information online etc. makes this transfer convenient. Analyze the benefits and go ahead with the transfer if you stand to receive maximum gain.