Should you opt for a Home Loan Balance Transfer?
04 Feb 2022
Table of Content
Transfer home loan to another bank
after how many months home loan can be transferred
Loan transfer to another bank
Switch my loan
What is home loan balance transfer?
Home loan transfer to other bank
Your home loan is probably one of your biggest financial responsibilities. Now, you may have heard of the concept of a balance transfer to ease out your payments. In this article, we will look at what a home loan balance transfer is and examine whether it makes sense to opt in for it.
What is home loan balance transfer?
A home loan balance transfer is a method of loan refinancing in which you can opt to transfer your home loan from the existing lender to a new lender. This transfer is usually done so that you benefit from lower interest rates or favourable repayment terms.
A home loan balance transfer is like taking a new home loan. The key difference is that only the outstanding amount of your home loan is transferred to the new lender. For instance, let’s say that you have taken a home loan of a total of Rs 80 lakhs. Out of this amount, you have already repaid 20%. Your home loan balance transfer will only be for the remaining amount that is due to be paid and will not include the 20% that you paid off.
The new lender will pay off the outstanding loan amount to the previous lender and close that account for once and all. A new home loan account will be then opened for you with your new lender.
What are the benefits of opting for a loan transfer to another bank?
Lower interest rate
The biggest reason why most people opt for a home loan balance transfer is a lower interest rate. If, by chance, the interest rate falls and there is a lender who is potentially willing to offer a reduced home loan interest rate, then you should consider switching your lender. A lower interest rate translates to a lower EMI and brings the total cost of your home loan down.
Allows you to change your tenure
The tenure of repayment is set before you sign the loan agreement with the lender. It cannot be then modified post that. In case you wish to reduce or extend the tenure of repayment, opting to transfer home loan to another bank can be helpful. When you do the balance transfer, you get a chance to change your tenure period and also negotiate better terms of repayment.
This can be really beneficial for long term loans like home loans. If, however, you feel that you have the financial resources to repay your loan amount in a shorter span of time, you can opt for a home loan transfer to a lender who is offering a shorter tenure.
Option of top-up loans
Top-up loans are those loans that the bank provides over and above your existing home loan. Whether it is meeting unplanned expenses at a wedding or funding your foreign education, a top-up loan comes in handy in all situations. Top-up loans can be availed easily with a home loan balance transfer.
When should you opt for a home loan balance transfer?
Here are some ideal scenarios in which you might want to consider doing a home loan transfer to other bank or lenders:
The initial the period of your tenure
Doing a home loan balance transfer will prove most useful when you have a considerable span of your tenure left ahead of you. This way, you get a longer period to benefit from a lower interest rate with the new lender. Opting for a home loan transfer in the last few years of repayment may not be advisable. Now, you may wonder after how many months home loan can be transferred.
To switch from fixed to floating interest rate
There are two types of interest rates at which home loans can be availed. They are fixed and floating interest rates. A fixed interest rate, like the name suggests is fixed throughout the course of the loan. This rate does not fluctuate with changes in the market. In contrast, a floating interest rate is a rate that depends entirely on the market situation. If you are presently on a fixed interest rate and feel that the floating interest is substantially lower and more favourable, you choose to switch it with a home loan balance transfer.
The practice can work the other way round as well. If you feel that you do not want to take a chance with the changing floating interest rate, you can opt for a fixed interest rate instead.
What are the things to keep in mind when I switch my loan?
Cost of balance transfer
Home balance transfers are not free of cost. You must pay the penalty to the existing lender and take care of the charges by the new lender as well. Moreover, some additional expenses may arise during processing. Make sure that you have enough funds in place to meet these expenses before you opt for a balance transfer. Also, make sure that the money you will end up saving through the balance transfer is more than the value of all these costs.
Along with the cost of processing, you must also consider the time that will take it to transfer your home loan to another bank.
Banks do not offer home loan balance transfers for properties that are under dispute. Therefore, you must ensure that all your property and financial documents are clear and free from any kind of legal dispute which may come in the way of your home loan balance transfer.
Bank of Baroda offers a Home Loan Takeover Scheme for resident and non-resident Indians. Our loans come with low processing charges, affordable interest rates, and many other attractive features. Get in touch today to know more.
Applying for an education loan – the procedure you need to follow
Invisible Banking - Banking that you don't have to think about
5 Key Factors That Affect Your Personal Loan Interest Rate This Year
Balancing control and flexibility a FinTech Startup would want to offer
Cloud kitchen Startups on Cloud9
How to open a fixed deposit account
Baroda Pensioners Savings Bank Account
How to Pay Off Your Personal Loan Quickly?
Beyond Organic, consider Hydroponic
JanSamarth Portal by PM Modi - A Complete Guide
What is a Home Loan Balance Transfer & How does it work?
How Does Home Loan Verification Process Works in India?
Personal Loan Vs Car Loan - Which Is Better?
Why should you choose a Floating rate Home Loan?
Know Why Your Home Loan Application May Get Rejected?
How to get an Education Loan in India – A Complete Guide
Get Education Loan for Studying MBA in Abroad
Benefits Of Early Education Loan Repayment
Government Subsidy on Electric Vehicle Purchases in India 2022: Here's How to Save Lakhs
Documents Required for Loan Against Property - A Complete Checklist
Meeting significant expenses like the cost of an overseas education, a wedding, home renovation, or medical expenses can be challenging. Your credit card may not be sufficient for meeting these costs.
6 Best Tips to Repay Your Student Loan Early
An education loan is truly a boon for students who want to pursue higher studies but cannot afford to do so on their own. Many people end up selling family assets - such as gold – in order to pursue their higher studies. With the help of an education