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What are the things to consider before applying for Home Loan Balance Transfer

By Finserv MARKETS - Jul 29,2019
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Things to consider before applying for Home Loan Balance Transfer

Borrowers take on home loans to cover for expenses related to the purchase of their new dream home. Buying a new home can be a major life goal to ensure security and stability for an individual. To leverage on this demand, leading financial providers such as the ones hosted on Finserv MARKETS are offering innovative and affordable products to help consumers avail of the financial avenue with ease. In addition, they are providing home loan transfer or top-up options on existing loans at nominal interest rates – all without the need for additional documentation.

Home loans are long-tenure loans with repayment tenures that can go up to 300 months. A majority of borrowers spend a large amount of money in servicing these borrowings. During the tenure, more than 50% of the Equated Monthly Installment (EMI) component consists of the loan interest amount that is needed to be paid. As a borrower, you might easily feel overwhelmed with the existing interest rate offered by your current loan provider. However, with the home loan balance transfer option, you can switch to a more competitive offering to avail easy-to-access and affordable finance.

How does it work?

When you transfer a home loan, the new lender repays the loan balance amount to the previous lender in full and initiates EMI payments to cover for the expense. It is recommended that you transfer a loan in the initial phase of the tenure period – between four and five years of the commencement of the loan – as the interest component is considerably higher in these years. It is not viable to switch institutions in the middle or towards the end of the tenure as you would have already paid a higher interest rate to the existing lender. Therefore, before you decide on taking on the home loan transfer option, you should conduct thorough research keeping in mind the difference in interest rates, the outstanding amount, the charges associated with making the switch, and the pending tenure period. Let us talk about these considerations in more detail.

  • Home loans are now based on MCLR if they are taken up from a bank or Non-Banking Financial Company (NBFC). However, the system is not applicable to housing finance companies. These types of institutions base their interest rate on market standards and the competition in the market. It is recommended that you compare interest rates from all avenues before making a final decision.
  • A home loan balance transfer should be undertaken if and when the interest rate that you are currently paying is above the existing market rate. In this way, you can lower your Equated Monthly Installment (EMI). The interest rates on home loans are ideally revised at the end of each year after you complete the initial period of one year on the loan.
  • Your credit rating is an important tool used to assess and decide on the sanctioned amount. If your credit rating is impacted in a negative manner between the time you take on the loan and choose to make the transfer, it could significantly affect your chances of being qualified for a loan transfer.
  • It is recommended that you do not switch your home loan provider towards the middle and end of the tenure or if you are planning on selling your home in the near future.
  • Banks might also charge a processing fee to transfer the loan amount. Fees by banks may include foreclosure charges and part-payment charges. A Bajaj Finserv Home Loan Balance Transfer, available on Finserv MARKETS, does not have these charges.
  • Generally, the fee is up to one percent of the outstanding loan amount. Therefore, you should carefully assess the total costs associated with the transfer before making the switch. You can speak to your new loan provider in detail on the associated fee before making a final decision.
  • The entire process takes up to 20 days. However, if you are moving from the base rate to MCLR with the same bank, the waiting period could be significantly shorter.

Before deciding on a loan transfer, you should carefully consider the above-mentioned factors. If you are still confused about avenues to access information, you should log on to a digital platform such as Finserv MARKETS to know more about home loan balance transfers right from the comfort of your home. Finserv MARKETS hosts leading products in the market such as the Bajaj Finserv home loan balance transfer. The balance transfer interest rates are competitive and provide top-up facilities and flexible tenures. You should speak to your financial advisor today or access information on the portal before you decide to make the switch.

Also, read about how to reduce home loan EMI.

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522