Presently, the home loan interest rates have dropped to the lowest in decades. But, if individual are the one who is still paying their home loan EMIs on the previous rate, then it’s time for them to go for a home loan balance transfer.
What is a Home Loan Balance Transfer? And how it Benefits individual?
A Home loan balance transfer is a procedure of transferring individual existing home loan from one bank to another in terms to avail better interest rate, terms, and other benefits.
High-interest rates have a direct influence on individual finances and can prove to be a hindrance to their financial growth. Also, staying in debt for long can be stressful, and excluding their Home Loan before the tenancy period can be the one thing that saves them. However, excluding a big-ticket loan is not easy for all, and opting Home Loan balance transfer can be the key that can aid them out and save a lot of money for them in such a situation.
How Does Balance Transfer Work?
In a home loan balance transfer, the outstanding loan amount of individual existing home loan is transferred to a new moneylender. And the new lender provides them with money to close their existing loan.
For this, the borrower requires to submit an application form with his existing lender requesting a balance transfer and desires to apply with a new creditor as well. If the new lender accepts the takeover of the existing home loan, the new lender will pay the outstanding amount to the existing lender and open a new loan account for the same amount with themselves.
Once the existing lender accepts the outstanding amount, they need to release the property documents and also issues a no-due certificate to the borrower.
All these documents necessity to be submitted to the new lender and the borrower has to pay all the outstanding EMIs to the new lender at their specific offerings.
Benefits of Home Loan Balance Transfer:
Reduces the Interest Rate and hence the EMI:
One of the major reasons for selecting a home loan balance transfer is the bargain interest rate. When individual are paying a higher rate of interest for their loan and other moneylenders are offering the loan at lower rates, going for a balance transfer works in individual favor and permits them to switch their loan to the lower rates with a new lender. This more decreases their monthly EMI and thus saves a lot of money for them.
Assistances individual get better terms on their loan:
The diverse moneylenders offer different terms for their loan offerings. And in case they have availed of a home loan whose terms are not in their favor then transferring their loan to a lender who is offering the same loan at their favorable terms can help them out.
Foreclosure and prepayment charges:
The Reserve Bank of India in its mandate dated 2012, lifted foreclosure charges from home loans that are on the floating interest rate.
However, for the home loans at a fixed rate of interest, banks are free to charge a par-closure fee varying from 2%-4% of the outstanding amount.
So, borrowers who are on a floating rate of interest and want to prepay or foreclosure their home loan should certainly go for it.
Top-up loan amount:
Home loan balance transfer too comes with an additional benefit which is – the top-up loan facility. Once individual go for a balance transfer they can also get some additional amount over and above their outstanding amount.
But, before individual go for a balance transfer, here are few things which they need to ensure.
• Ensure that the remaining repayment period exceeds five years
• Ensure individual have not defaulted on EMI payments with the existing loan.
• Ensure that individual have all the property-specific documents ready.
To sum it up– Home loan balance transfer is a great facility that aids individual to reduce their EMI/debt burden. Home loan balance transfer also aids individual to – reduce the interest rate, get a top-up loan, get favorable terms on their loan, and also modified offers in some cases.
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