You Should know the Advantages of a Home Loan Transfer

Bydiljeet singh

With the public sector commercial lenders charging almost to the tune of 6.7% – 7% upwards for home loans, there is a higher demand among borrowers to switch to another lender and transfer their home loan. Home loan transfer involves shifting the outstanding loan amount from the existing lender to a new financial institution. Such transfer is usually undertaken to avail of lower home loan interest, which ultimately reduces the total cost of borrowing.

Significant benefits of home loan balance transfer  

Most financial institutions offer transfer facilities. If a borrower meets the eligibility criteria, the following advantages can be availed through this move –  

1- Lower rate of interest

One of the most pertinent reasons to switch a home loan to a new lender is to avail of a lower interest rate. On a reduced interest rate, the monthly outgo also decreases. Thus, home loan balance transfer helps you save money, reducing financial pressure.

  • 2- Favourable terms of repayment

The terms and conditions related to a home loan vary from one lender to another. If a new lender offers better terms, a borrower may benefit from a home loan transfer. It would enable the borrower to get a better deal in terms of loan repayment. 

  • 3- Top up loans

The balance transfer facility may also come with other indirect advantages apart from a lower rate of interest, lower monthly instalments, and better terms of repayment. One such indirect benefit is a top-up loan. Top up loans are additional credit that is extended over and above the home loan amount. Like a housing loan, a top up loan interest rate is often reasonable. 

In availing such a credit line, the borrower can determine the monthly instalment obligation across the given tenor by a top up loan calculator. Due to its end-use free application, borrowers can utilise such credit facilities without any restrictions.  

  • 4- Pre-approved offer

Lenders are also likely to offer a host of other discounts and schemes to make balance transfer an attractive option for borrowers. If you can utilise the right window to switch the loan, it will help you to avail of such special benefits extended by new lenders. 

One such benefit includes pre-approved offers extended by various financial institutions, which facilitates the application process and minimises hassle. These offers are available on a wide range of financial products, such as loans against property, home loans, etc. You would just have to submit a few necessary details like your name and contact number to check your pre-approved offer. 

When to opt for a home loan transfer 

Since balance transfers help reduce the interest cost of a loan, undertaking such a shift when the interest component is at its highest in one’s EMIs would be the wisest option. Lenders tend to recover most of its interest dues during the first half of a housing loan’s tenor. Ideally, borrowers must transfer outstanding principal during this period for optimal benefits.

While considering opting for a home loan transfer, take note of the applicable prepayment or foreclosure charges. A cost-benefit analysis must be undertaken to find out whether the benefit from such transfer outweighs the costs involved.

Lastly, before transferring your existing loan from one lender to another, keep in mind that interest rate reduction should be at least 0.5% or more for you to benefit significantly. Otherwise, opting for such an option would involve more hassle and expenses that you would end up saving. Similarly, checking the eligibility criteria for your new lender before initiating this process is crucial.