Purchasing a home is a huge financial decision as it requires a large amount of money. Due to the increasing cost of real estate, purchasing a house through outright payment has become extremely difficult. This is where availing a home loan can prove to be extremely helpful. Home loans are secured loans, wherein the purchased home acts as a collateral. With the increase in financial institutions and online lenders, applying for a home loan has become comparatively easier in today’s time. Since home loans are long-term loans, you should always look for a financial institution that offers the most competitive interest rates. This will help you save a large amount of money in the long run.
However, you might have to settle for a home loan at a higher interest rate if you have a low credit score. But once you have worked towards the improvement of your credit score and enhanced it significantly, you have various options to reduce the rate of interest on your housing loan. The most effective option is to go for a Home Loan Balance Transfer.
A home loan balance transfer, also known as home loan refinancing is a process of transferring your outstanding home loan amount from one lender to another.
Some of the major reasons to go for home loan refinance are stated as under:
- Lower home loan interest rates: Most borrowers opt for a home loan balance transfer if they find a lender that provides a comparatively lower home loan interest rate. This is because even a slight reduction in interest rate can help them save a large amount in the long run. Since home loans are pledged with collaterals, a lot of financial institutions offer loans at lower interest rates.
- Moving from floating rate to fixed rate loans or vice versa: If home loan borrowers are paying a high floating interest rate, they can refinance their home loan to settle for a fixed rate. On the other hand, if borrowers are stuck with a fixed rate home loan, and the floating interest rate witnesses a substantial decline, they can consider refinancing their home loan to enjoy the benefits of the reduced floating interest rate.
- Pre-payment facilities: The home loan balance transfer does not block the facility of loan pre-payment. Therefore, the loan can be pre-closed at your discretion.
- Top-up value: As a result of the high top-up value, the loan repayment can be made faster with fewer amount towards interest.
- Poor service of the current lender: Borrowers can consider refinancing their home loan if their existing lender doesn’t provide quality service, for example, doesn’t issue loan statements, has bad customer care service or, is slow in reacting to changes in interest rates.
- Change in financial status: Any change in your monthly income would affect your repayment capacity. If your monthly income has decreased, or some other financial obligation has come up, then you can consider refinancing your home loan by replacing it with a comparatively longer tenure loan. This would consequently reduce your monthly EMI and allow you to make the repayment without straining your finances.Whereas, if your financial status improves over time, then by refinancing your home loan, you can increase your EMI and get rid of the debt sooner. Therefore, it is advisable that you keep a track of your financial status and refinance home loan accordingly. Ensure that you make a note of refinance home loan rates before you go ahead with it.
Now that you know the benefits of a home loan balance transfer, ensure that you make the most of it by accessing all the aspects related to it.
There are other factors too, that you should consider before availing a Home Loan Balance Transfer. Some of them are mentioned below:
- Check the number of EMIs remaining and calculate the interest that has to be repaid.
- Check if your existing loan-provider permits to refinance home loan.
- Check with your new lender regarding the additional charges levied such as processing the charge, legal and technical report expenses, etc.
- Lastly, do not forget to compare the total savings that you would be making by availing the Home Loan Balance Transfer.
The process of a home loan balance transfer is stringent and requires heavy documentation. It is recommended that you should be ready with all the required documents before applying for a home loan balance transfer.
With Bajaj Finserv Home Loan, you can avail a home loan at the most competitive interest rate. You can also calculate your monthly installment beforehand with the help of housing loan EMI calculator. Before applying for a home loan, make sure that you calculate your home loan eligibility with the help of a home loan eligibility calculator. This will reduce the chances of rejection of your home loan application.
You can also get to know about the perfect CIBIL score for home loans.
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