Imagine you’ve taken a home loan from a lender. You have been paying all your monthly EMIs well before the due date. And then you find out another bank is offering a better interest rate on the same loan. What would you do?
Well, you’d most likely want to explore the option of transferring your existing loan to the new lender who is promising better home loan interest rates. This is what is called a home loan balance transfer.
In other words, the moving of a loan amount from an existing lender to a new lender in search of better interest rates is called a home loan balance transfer. In this case, the bank that had initially granted the loan receives the unpaid principal amount. Moreover, the borrower has to pay EMIs as per the interest rate offered by the new bank.
If you find yourself being unsure and can’t decide if it’s the right time to opt for a home loan balance transfer, the following points can be of help:
Lower interest rates
If a bank offers a loan with a cheaper interest rate, you may want to save money by transferring it to that particular institution. However, you should note that interest rates depend on several factors and may fluctuate from time to time. The total money you save in EMIs also depends on other factors like loan tenure and unpaid principal amount.
Long loan tenure
It is a good idea to opt for a home loan bank transfer if the outstanding loan tenure is too long. Conversely, if the loan tenure is about to end, it hardly makes any sense to go for a transfer. This is because you might spend more money on additional charges than you save by switching the loan to the new lender.
If you notice that your current lender is not offering services that are satisfactory, it might be a good time for you to transfer your home loan to a different bank. However, do analyze the overall costs and go through the terms carefully. Make sure you negotiate and settle for the lowest interest rate.
You can apply for home loan balance transfer if you meet the following criteria:
- The property for which you availed the loan should either be already occupied or just about to be occupied.
- There should be no outstanding dues on your existing home loan.
Financial institutions also have Home loan balance transfer calculator to help you with the same. It lets you calculate your total monthly savings if you shift your existing loan from one bank to another.