In this article we will discuss What are the benefits of a home loan balance transfer? The current home loan interest rate is the lowest in decades. If you pay your EMI for your home loan using your previous rate, you should consider transferring the balance.
What is a balance transfer? How does it benefit you?
- 1 What is a balance transfer? How does it benefit you?
- 2 What is a balance transfer?
- 3 Among the benefits of transferring home loan balances are:
Transferring your home loan balance to another bank can lower its interest rate, offer better terms, and provide other benefits. In addition to negatively impacting your financial health, high interest rates can inhibit your growth. You can also avoid inconvenience by foreclosing your mortgage before the loan reaches its tenure.
Foreclosing on a big loan is not easy. It would be of great benefit for you to transfer the balance of your Home Loan.
What is a balance transfer?
A home loan balance transfer involves transferring the outstanding balance of an existing home loan to a new lender. The new lender pays you to close the existing loan. Borrowers must apply with their current lender as well as a new lender when requesting a balance transfer.
The new lender will pay the existing lender the outstanding balance and open up a new loan account for the same amount with them. The existing lender releases the property documents and issues a no-due certificate upon receiving the outstanding amount. Borrowers need to submit all required documents to the new lender and pay all their remaining EMIs to complete the switch.
Among the benefits of transferring home loan balances are:
By lowering the interest rate, the EMI is reduced:
Balance transfers are often chosen because of a reduced interest rate. An advantage of a balance transfer over a loan with a higher interest rate is that you can switch your loan to a new lender who will offer a lower interest rate. This further reduces your EMI and saves you money.
Gets you better terms on your loans:
The terms of the loans offered by different lenders differ. Your existing home loan may not be in your favor if you transfer it to a lender offering better terms.
Prepayment charges and foreclosures:
The Reserve Bank of India has lifted foreclosure charges for home loans that use floating interest rates in its mandate from 2012.In contrast, banks have the right to charge a closing fee of between 2% and 4% for home loans at a fixed interest rate.
For this reason, borrowers with floating interest rates who wish to prepay or foreclosure their home loans should do so.
Loan top-up amount:
In addition to the balance transfer, top-up loans are an additional benefit. You might also be eligible for some additional funds in addition to your outstanding balance when you transfer your debt.
Here are a few things to keep in mind before you make the move to a balance transfer.
- Make sure there are more than five years remaining until repayments are due
- Verify you haven’t defaulted on your existing loan EMI payments.
- Be sure to have all property-specific documents at your disposal.
Therefore, a home loan balance transfer can be an excellent tool for reducing your EMI/debt burden. In addition to lowering your interest rate, you can also acquire a top-up loan, negotiate better loan terms, and receive personalized offers.