Getting a home loan is a long-term commitment that often spills into 20 years or more. Moreover, paying home loan instalments can take up a sizable portion your income and affect your budget. Naturally, home loan interest rates are a matter of concern for most borrowers. However, thanks to facilities like Home Loan Balance Transfer, a borrower can reduce the interest rate if he/she has paid the EMIs diligently for a few years. A Home Loan Balance Transfer is a facility offered by lenders wherein the entire unpaid principal loan amount can be transferred to another lender for a lower rate of interest. You can pay your EMIs at a reduced rate to the new lender, while the unpaid amount goes to the original lender. Almost all banks and NBFCs offer Home Loan Balance Transfer facility, provided you have been paying your EMIs regularly.
A balance transfer is a good option when you are in the early phases of the loan tenure. However, you must do a cost-benefit analysis to ensure that the balance transfer is saving you substantial interest. Moreover, if you have only a small unpaid amount left or only a few years remaining in terms of your loan tenure, a balance transfer is not a good option. This is because banks levy a processing fee for a balance transfer. Hence, if you do not weigh your options correctly, you may end up losing more money in a bid to lower your home loan interest rate. Here’s a comprehensive list of the common mistakes that you should avoid while transferring your home loan:-
Calculation of interest- At times, borrowers who opt for a Home Loan Balance Transfer opt for a lower rate of interest but end up with a longer tenure. Therefore, you should not opt for a balance transfer without calculating the total costs and savings. While a lower rate of interest will ease your financial burden initially, raising the loan tenure will eventually increase the interest costs. So make sure to calculate the total repayment amount before making the decision to transfer your home loan balance.
Credentials of the Lender – Quite often lenders may offer attractive interest rates, but don’t let that lure you. Don’t go for a Home Loan Balance Transfer unless you read the terms and conditions thoroughly. Different lenders may have different terms and conditions, and hence, you have to be extremely careful. It is also a good idea to read the reviews and testimonials of the existing terms and conditions from the lender’s website.
Rate and Type of Interest – The rate of interest is definitely one of the most important factors to consider when applying for a balance transfer of home loan. However, when you compare the interest rates, don’t forget to enquire about the type of interest rate. Fixed interest rates are higher as compared to reducing interest rates. However, reducing interest rates may cost you more in the long run as it is subject to change in the future depending on the market conditions. So ensure that you are aware of the type and rate of interest your lender is providing before transferring your home loan.
Processing Fees and other charges– A home loan balance transfer may involve additional expenses like Balance Transfer fee, the expense of stamp paper, processing charges, and other associated charges. Hence, it’s important to weigh your costs before making the final decision. At times, the Balance Transfer fee may also depend on factors such as type of income a person has; for e.g., a salaried person may be charged differently as compared to a businessman. So make sure to ask the prospective lender about all the charges before signing the dotted line.
Foreclosure Charges – If you get additional funds in the future, you may wish to foreclose your home loan. Hence, it’s important to check the foreclosure charges levied by the prospective lender before proceeding to transfer the loan to a different lender. If the lender charges heavy foreclosure fees, it may further add to the cost of the loan.
Timing of Balance Transfer – Many borrowers make the mistake of transferring the loan when just a few months of the loan tenure are remaining. Opting for a Home Loan Balance Transfer at the end of the tenure will only increase the burden further. To avail maximum benefit from a Home Loan Balance Transfer, you should transfer the loan before the first half of the loan tenure ends. Doing so will help you save on interest costs. However, if you have already crossed half of the loan tenure, it is better to wait until the loan maturity or take a fresh loan.
Mortgage/ Collaterals – Most lenders require collateral for the big-ticket loan. Collateral or mortgage helps the lender minimize its risk on loan repayment. Therefore, do not make the mistake of offering a higher value collateral than the required loan amount.
A Home Loan Balance Transfer can offer you some great advantages. However, it’s important to be careful while taking this step. It is not a decision to be carried out in a hurry since it involves a huge sum. Transferring a loan haphazardly without proper analysis might lead to excessive payment and increase of loan burden. With Bajaj Finserv Home Loan Balance Transfer, you can reduce your EMIs and switch to a lower interest rate of 8.80%. What’s more, you can also get an additional top-up loan up to Rs. 50 lakh and unique benefits like as pre-payment facility and nil foreclosure charges. You can also use our Home Loan Balance Transfer Calculator to compute your savings and check your top-up loan eligibility. However, in order to avail the Home Loan Balance Transfer facility with us, you should have completed the payment of more than 12 EMIs without any dues/bounces. To apply or know more about Bajaj Finserv Home Loan Balance Transfer, visit Finserv Markets.
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