Home loan balance transfer means transferring an existing home loan to another lender at a lower interest rate. And that in itself is a great idea!! If your bank is charging a high-interest rate on your home loan, then you can simply opt for a balance transfer alternative. That way one gets to save on the remaining interest amount and also enjoy a lot of other benefits.
But like any other financial decision, this too should be made after a lot of research and thought. Let’s get to know what things one should keep in mind before going for a home loan balance transfer-
Residual tenure on your existing loan
If you are only a few more years away to pay off your existing home loan, then opting for a home loan balance transfer won’t be a good idea. As by then, you must have already cleared the interest payable on the loan. A new loan will only give you an increased interest fee, so it is always advisable to opt for refinancing your home loan in the earlier half of the tenure.
1. Interest rate track record of the new lender
Always research well and find out ample information on the new lender’s interest track record. Check properly if the interest rate offered by the lender is genuine and not just a marketing gimmick.
2. Eligibility for home loan transfer
There might be a possibility that few banks and policyholders would not allow you to transfer your loan from one lender to another. Hence, go through the terms and conditions of your current loan properly. If such appears to be the case, then try and renegotiate the loan terms with your current lender.
3. Credit score
A poor credit rating makes you less eligible for a home loan balance transfer, as the new bank will evaluate your credit score along with other factors. If you’ve defaulted in repaying credit on time, it will automatically bring your credit score down.
4. Reviews about the new lender
It is also important to know well about your new lender’s market status and customer services before making a switch. Read their reviews and testimonials thoroughly to evaluate their credibility and if their customers are overall happy with their services.
5. Charges involved
The process of home loan balance transfer involves processing fees, application fees, inspection fees, other legal and technical costs associated with the property, etc. Calculate and check if the cost of a balance transfer is less than your interest amount.
6. Terms and conditions of the new loan
Read the fine print of the terms and conditions of the new home loan carefully. You might come across irresistibly low-interest rates, but it might just be a gimmick! Hence, go through the T&Cs offered by your new lender properly and choose whatever seems to be useful.
The transfer of home loan balance helps a lot as it reduces EMIs and your home loan tenure, brings up your credit ratings, etc. Still one should be cautious and absolutely sure before making the switch. It should not, in any way, hurt your long-term financial goals. Consider factors like interest rate, outstanding home loan amount, remaining home loan tenure, etc. and make a wise decision!