A home loan is quite likely the biggest loan that you will apply for. This means that even a slight reduction in the interest rate of the home loan would make a big difference to long-term savings. Now, it is quite common to take a home loan from one particular lender and find another lender offering home loans at lower interest rates. Does this mean that you have missed out on an opportunity to get a better deal? Not at all!
This is where a home loan balance transfer comes in and saves the day. If you are coming across this term for the first time, here are a few things that you should know.
What is a home loan balance transfer?
A home loan balance transfer is also commonly known as refinancing. This is an option that almost every lender provides so that you can transfer your home loan to get a better deal. It is quite possible for your current lender to offer better terms and rates to retain you. If you have a steady repayment record and good credit score, you can negotiate for a better interest rate on your current home loan.
Here are three situations in which a home loan balance transfer would suit you:
- Your home loan’s outstanding amount is larger
You might have recently started repaying your home loan and a major portion of it is yet to be paid back. In such a situation, it makes sense for you to go for a home loan balance transfer if you are getting a better deal with a new lender. However, if the unpaid home loan amount is just between 5-10% of the total amount, it is probably better to just clear off the payment to your existing lender.
- You have just started repaying your home loan
If you have just started paying EMIs for your home loan, it is advisable for you to change lenders if the new lender is offering you a better home loan balance transfer interest rate. However, if you are at the end of the repayment tenure, transferring your loan might not be the best move. This is because the cost of transferring the home loan from one lender to another would exceed the amount you would save on the interest rate.
- Your benefits are more than the cost of a home loan transfer
When it comes to home loan balance transfers, most borrowers only look at the lower interest rates being offered by the new lenders. However, it is also important to consider the total cost you would incur to transfer your home loan to a new lender. If the benefits are higher than the costs, you can consider opting for a home loan transfer. To make life easier, simply use a home loan transfer EMI calculator. This would help you understand the savings you would make after the balance transfer.
A lot of borrowers opt for home loan transfers as this move helps them save a good amount of money. This is why it is advisable to keep your options open and stay updated on the home loan interest rates that the lenders offer.