A suitable home loan can allow you to fulfill your dream of being a proud homeowner. Be it a flat in an apartment complex or an independent house, a home loan will allow you to choose the right house as per your requirements. You can get a home loan easily from banks or private housing finance companies. What’s more, with the help of an online home loan EMI calculator, you can instantly know about the EMI payments. While availing a housing loan, you should also keep in mind that as per the rules, you also get the option of home loan balance transfer.
Understanding home loan balance transfer: A home loan balance transfer is the process of switching your existing home loan from one lending institution to another. Remember, because of rise in inflation and other factors, lending institutions – be it banks or housing finance companies – can revise their interest rate on housing loans, thereby making it higher. As a borrower, this can have an adverse impact on your finances. If you find yourself in a situation where the lending institution has a comparatively higher interest rate on the existing home loan, then you can opt for home loan balance transfer. This will ensure that you can properly manage your finances through affordable EMIs. Additionally, this refinancing option can also provide you access to a wide range of associated benefits, like access to a top-up funds, complimentary insurance cover and zero prepayment fees. Here’s a list of the top six things to consider before you avail this option:
- Consider the remaining repayment tenure: The foremost factor before opting for home loan balance transfer is to consider your remaining repayment period. According to market experts, you can avail the benefits of such refinancing, only if the remaining repayment tenure is more than 5 years. If you switch the housing loan for a repayment tenure of less than 5 years, it can eat into the refinancing gains through various miscellaneous charges such as loan processing fees. Also, you will not be able to enjoy the benefits of low interest rates over the long-term.
- Check your CIBIL score: Before opting for home loan balance transfer, always remember to check your CIBIL score. This is a three-digit number reflecting your creditworthiness. If you have defaulted on some EMI payments, then it would have an adverse impact on your CIBIL score. Remember, lending institutions will typically check your CIBIL score before allowing you to avail this option. A poor CIBIL score will render you ineligible to avail home loan balance transfer.
- Check for fees and charges: According to RBI’s guidelines, lending institutions can’t levy prepayment penalty after a minimum lock-in period, or after a specific number of years for which you have completed repayments. This is applicable for both fixed and floating interest rates on housing loans. But, while availing home loan balance transfer, the new lender can include a prepayment penalty or certain charges. You must ensure that your finances are not burdened by penalties, charges and fees while availing the refinancing option.
- Negotiate on interest rates and loan processing fees: While opting for home loan balance transfer, you must negotiate with the new lender for a low-interest repayment rate. If you have a good CIBIL score along with the requisite repayment capacity, the lending institution might provide a lower rate of interest as compared to what was initially quoted. Alongside, you can also negotiate for waiver of loan processing fees, which is usually applicable for refinancing options.
- Have the property documents in place: When you approach a new lending institution for home loan balance transfer, then make it a point to ensure that you have all the property-related documents in place. The new lender will only accept the refinancing proposition after thoroughly evaluating your documents. In case of discrepancies in documentation, your proposal can be rejected.
- Go through the terms and conditions with due diligence: While availing the option of home loan balance transfer, do remember to read the terms and conditions carefully. At times, there can be hidden costs involved in the new lender’s refinancing policy’s wordings.
Conclusion: Thus, the above-mentioned steps can help you in opting for home loan balance transfer. While availing this option you can also use the online home loan EMI calculator to know about your repayment schedule. If you want to avail this refinancing option, or are looking for a new home loan, always remember to select a trusted and reputed housing finance company.