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