Many people with an active home loan account regret seeing an affordable housing loan offer. They are in panic mode and look for options like negotiating with their lenders for a lower rate.
But, it may not always work. It is where the facility of the home loan balance transfer comes into the picture. It helps an existing home loan customer switch their accounts to another lender and avail of a lower rate. Overall, it may lead to savings.
Thus, you need to consider a few factors before housing loan balance transfer! Read on!
- Check if you are even eligible for the balance transfer
Before you decide to jump on to a new offer with a reduced interest rate, you need to check out your current debt terms and conditions. It is because not all lenders may allow you to switch your housing loan to a new lender. In this case, you are left with no option but to negotiate with your existing lender for a lower rate.
- Explore the cost of transfer and know if it is worthy
It is bound to jump with joy on seeing a lucrative offer with a lower home loan interest rate. But, over excitement may lead to paying more than you can actually save. Yes, the home loan balance transfer interest rate may be lower to make you go for it. But making the switch comes with several costs. It could be processing and application fees, and more. Most banks may also levy a transfer fee charged by existing and new lender. Hence, you should calculate it and know if the transfer is indeed worth it.
- Check how much current home loan duration is left
Generally, transferring a home loan during the second half of your loan term is considered useless. It is because most of the interest laden EMIs are already paid by this time. Going with the home loan balance transfer during the early phase of the loan is good. It is because you will end up paying a reduced home loan balance transfer interest rate.
- Ensure you have all necessary documents
Opting for the home loan balance transfer means that you have to submit a No Objection Certificate (NOC) or a Consent Letter. You have to get it from your current lender and submit it to the new one. Once you do that, the bank will approve the loan amount to the old creditor. Now, it will lead to the closure of the older account. Once done, all your property documents will be given to a new creditor. Thus, it becomes vital to check if you have all documents ready and nothing is left behind.
- Check the top up loan amount offered by your lender
Leading banks and non-banking finance companies (NBFCs) in India provide the unique facility of a top up loan when you switch your home loan to them. A top up loan comes with a large loan amount. It carries the rate of interest slightly more than the housing finance and with a similar tenor. The purpose of a top up loan is to help you cover diverse monetary needs without restrictions.
- Go through the terms and conditions of your new lender
It is of utmost value that not all home loan policy documents remain the same. It is bound to change as per a lender. Hence, transferring your home loan to a new lender means you will have a completely new contract. Thus, it becomes imperative to read the loan’s fine print at least once. It will ensure that you are in complete control of hidden charges and all clauses.
Considering these vital aspects may ensure that switching the home loan account to a new lender is beneficial for you in the end. Home loans also come with tax benefits on interest paid part. You can know about all using the home loan tax benefit calculator. It is available on a leading lender’s website for free.
A lower home loan interest rate is what everyone wants, and it is now possible even if you have already availed of a loan in advance. All you have to do is – approach the switch with confidence, and for that, consideration of discussed points will surely help.