Factors to Consider Before Opting for Home Loan Balance Transfer

Home Loan Balance Transfer refers to the process of transferring your Home Loan balance from one lender to another for a better interest rate along with other competitive terms. When you opt for a balance transfer, the new lender repays the balance loan amount to the previous lender. After this, you continue to repay the loan through EMIs to the new lender, as per the loan agreement. 

It is advised to opt for a balance transfer during the early years of a loan when the interest component is still high. When you opt for a Home Loan Balance Transfer during the initial years of your Home Loan journey, the new, lower interest rate offered allows you to save a considerable amount of funds. 

Let us now look at the benefits of a Home Loan Balance Transfer in detail. 

Why Should You Choose Home Loan Balance Transfer?

1. Better Savings

You can opt for a balance transfer for better interest rates. The interest rate is the key component, among other factors, that determines the feasibility of a loan. A higher interest rate may result in increased EMI payments and can raise the likelihood of a payment default. If your existing EMI is relatively high, you opt for a Home Loan Balance Transfer to benefit from a reduced interest rate resulting in a lower EMI. This way your overall interest expenses will decrease leading to more savings.

Additional Read: How a Home Loan Balance Transfer Works 

2. Top-up Loans

When you apply for a Home Loan Balance Transfer, lenders can give you the option to avail of a sizeable Top-up Loan amounting to Rs.1 Crore* or more, basis eligibility. Flexibility in the end usage is one of the key features of Top-up Loans. You can use the funds to meet any housing-related expenses. Further, Top-up Loans draw a nominal interest rate. You can also benefit from a flexible repayment period with this loan. The repayment period for your Top-up Loan will be the same as the remaining period for your Home Loan. Therefore, Top-up Loans are one of the quickest and most economical ways of arranging funds.

3. Switch from Fixed to Floating Interest Rates

As discussed earlier, housing loan interest rates play a significant role in determining the feasibility of loans. Fixed interest rates remain constant until reset by the lenders at a predetermined date. These rates are unaffected by external market conditions. A fixed interest rate allows you to predict your expenses, which makes budgeting easier. On the other hand, floating interest rates are affected by the market conditions. If you are currently on a fixed interest rate, you can switch to floating interest rates while making a Home Loan Balance Transfer. 

Also Read: Differences Between Fixed and Floating Interest Rates 

4. Better Service

You can choose to transfer your Home Loan balance to a new lender for better customer service, additional features or benefits, such as improved online banking capabilities, customer support, or more flexible repayment options.

5. Longer Tenure

Lastly, when you opt for a Home Loan Balance Transfer, you get the chance to extend your loan tenure and make your EMIs manageable. This will allow you to repay your loan comfortably. However, it should be noted that opting for a longer tenure can increase your total interest outgo. While planning a balance transfer, you can use a Home Loan EMI Calculator to estimate your EMI and interest amount in advance. 

Additional Read: All About Home Loan Refinancing

Home Loan Balance Transfer: Step-by-Step Process

If you are planning to opt for a Home Loan Balance Transfer, you will have to follow these steps:  

1. Do your research and figure out the Home Loan lender to whom you wish to transfer your Home Loan.
2. Inform your current lender about your intent to seek a Home Loan Balance Transfer.
3. After that, your current lender will release an NOC or a No Objection Certificate.
4. Submit this certificate along with other documents to your new lender. 
5. Once your Home Loan Balance Transfer application is approved, your new lender will clear your pending loan amount with the old lender. 
6. Once this is done, you will have to start paying EMIs to your new lender.

A Home Loan Balance Transfer is a financial facility that allows you to make your housing finance feasible and manageable. With a balance transfer, you can benefit from a reduced interest rate, a Top-up Loan, a flexible repayment tenure along with better lending terms. 

Read Also: A Quick Guide to Securing a Better Interest on Home Loans

*Terms and conditions apply.