13 is an unlucky number for many. However, for those considering a home loan balance transfer, the number 13 can mean that fortune is smiling. In this article, we shall study A to Z about home loan balance transfer (HLBT) and how it can translate into 13% reduction in your EMI.
First, let’s understand why you should consider a home loan balance transfer?
Factors that influence decision to opt for balance transfer:
Interest rate deductions
One must stay abreast of the key developments in the economy like RBI’s monetary policy or other events that would result in an interest rate cut by the lenders. If there is a significant rate reduction, it is prudent to lock into a lower interest rate with reduced EMI burden, by opting for loan transfer.
Additional loan sanction
Often, despite appreciation in property prices, the existing lender is unwilling to sanction a top-up loan. In such a case, it would be prudent to take a balance transfer. The new lender would consider the prevailing market value to refinance the remaining loan amount and grant a top-up facility.
The way forward in the Home Loan Balance Transfer:
Compare Interest Rates
The first step would be to survey and compare the rates and terms of home loans like features, any restrictive conditions and suchlike, offered by various lenders. One can use the home loan balance transfer calculator available online to get accurate results.
The next step would be to negotiate with the existing lender for optimal rates.
Ask the expert
In case one is not familiar with the terminology and the parameters to be evaluated, it is best to consult a financial expert who would have ready data on the loan terms being offered by the competitors.
Process for a Home Loan Balance Transfer:
- Firstly, one needs to apply to a new lender for transfer of outstanding loan amount. This needs to be accompanied with submission of relevant documents like ID proof, address proof, income proof, property title details, details of the primary lender, home loan agreement, etc. This would help evaluate the creditworthiness and eligibility of the borrower.
- The secondary lender would conduct a thorough check and due diligence of the borrower and accept the transfer application within 2-3 weeks.
- The borrower needs to inform the existing lender and obtain the exact outstanding loan amount.
- The new lender takes over the remaining loan after paying off the first lender and takes possession of the property documents.
- The borrower commences home loan repayment on the balance amount to the new lender after the loan transfer is completed.
An example to compute the potential savings from HLBT:
Consider a home loan amount of Rs 1 crore with a tenure of 240 months. The prevailing rate of interest is 10.5% and the revised rate after the HLBT is 8.5%. The old EMI works out to Rs 99838 per month. The revised EMI is computed as Rs 86782 per month. The savings per month is Rs 13,056. This, as a percent of the home loan amount of Rs 1 crore is an almost 13% benefit each month.
Costs involved in HLBT: New lenders generally charge a one-time processing fee. In case of significant savings in interest rate it would be prudent to bear this one-time charge in return for a reduced EMI throughout the loan tenure.
In conclusion, it makes economic sense to avail HLBT in case of a significant reduction in the interest rate. After all, a reduction in rate of interest (ROI) results in a great return on investment (ROI) of 13%.
Now that you know everything about why a HLBT is the best step forward to reduce your EMI burden, don’t wait! Apply for a Home Loan Balance Transfer facility on Finserv MARKETS, today! We can assure you that the entire process is easy, quick and completely hassle-free. What’s more? You get a plethora of other advantages like customized offers, top-up options and many more.
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