home loan
0 0
67 / 100
Read Time:4 Minute, 37 Second

A home loan is one of life’s biggest monetary undertakings. Without meticulous planning, it can be a struggle, especially if you need to pay hefty monthly instalments due to high-interest rates. Therefore, before you decide to avail yourself of housing finance, you must exercise caution when negotiating home loan interest rates. But if you have already availed of a home loan and found a better rate elsewhere, you can easily switch your current loan for a more competitive one to reduce the overall interest cost. 

Know Details of Home Loan Balance Transfer 

A home loan balance transfer lets you shift your outstanding housing loan balance from the existing lender to a new lender, who extends a lower interest rate. Borrowers can secure favourable home loan terms from the new lender as per their repayment abilities and goals. It is especially useful for individuals who had previously obtained loans at higher interest rates, and are now eligible for lower rates as a result of improved credit profiles. 

Under this facility, the new lender repays the outstanding principal of the borrower’s ongoing home loan to the existing lender and, in turn, sanctions a new loan. Thereafter, the borrower has to repay the loan according to the new conditions as discussed with the lender including the interest rate, loan tenor, processing fees, other charges and so on.  

When Should You Consider a Home Loan Balance Transfer?

Borrowers can consider a home loan balance transfer for the following reasons:

Attractive Home Loan Interest Rates

Housing loan interest rates offered by banks and financial institutions vary widely. They are based on the credit profile of loan applicants, lenders’ cost of funds and other market-related parameters. Hence, borrowers should deliberate upon a loan transfer if other lenders show willingness in tendering home loans at much lower interest rates. 

Improved Credit Profile

Lending institutions normally add the spread and Credit Risk Premium (CRP) to their underlying benchmark rate when fixing interest rates for prospective borrowers. Both the spread and CRP are usually decided on the basis of an applicant’s credit profile. Thus, borrowers with better credit records may be charged a lower CRP/spread, which translates into reduced interest rates, and vice versa. 

The major aspects of an applicant’s credit history that ascertain the CRP/spread include the credit score, monthly earnings, job profile and employer’s profile, in the case of salaried individuals. Hence, existing borrowers, who were levied higher CRP/spread during the initial loan sanction and have improved their credit record since then, can opt for refinancing. The enhanced credit profile may make them eligible for modest interest rates.

Additional Top-Up Loans

Lenders provide top up loan to existing borrowers and/or to those securing a balance transfer, provided they have repaid a certain number of EMIs and possess good repayment history. A top-up can be availed for any number of reasons. 

Generally, lenders charge lower interest rates for top-up loans when compared to other loan options. But sometimes, borrowers may be unable to obtain top-up loans from their lenders, or they could be levied higher interest rates for the same. In such cases, they can refinance their home loan to bring down the cost of credit and, simultaneously, avail of a top-up loan.

How to Get the Best of Your Home Loan Balance Transfer

Given below are a few points that you should keep in mind before refinancing your home loan:  

Substantial Savings

Lenders appraise home loan balance transfer requests similar to fresh home loan applications. So, individuals who wish to transfer their housing loans to other lenders may have to pay processing fees, administrative fees and other charges usually levied during a fresh application. The new lender with whom you seek to shift your existing loan will also conduct a documentation assessment while processing your transfer request. Borrowers should, therefore, take into account these associated costs and efforts; and proceed with the loan transfer only if it leads to sizeable savings in the interest outgo. 

Refinance in the Initial Stages     

Monthly instalments comprise both the principal and interest components of your home loan. The proportion of the interest repayment in your EMI is normally higher in the earlier stages of your loan tenor. Then gradually, as the tenor progresses, the principal amount in the EMI increases, while the interest comes down. Hence, switch your loan during the initial phase of the tenor to maximise the savings.

Maintain the Same Loan Tenor

Borrowers must make sure that the tenor of their transferred loan and the remaining tenor on the original loan remain the same. In case you are offered a longer tenor, it will increase the interest outgo, which may nullify the primary objective of availing a balance transfer – that of reducing the interest payouts. However, one can select a flexible tenor if the monthly instalments appear too high, and you wish to restrict them to a comfortable range without straining your finances. 

Summing Up

A home loan balance transfer is a beneficial feature of home loans that allows you to restructure housing credit according to convenience. That said, one should be thorough right at the outset when securing housing loans at the best possible rates and terms. If the need arises, refinance your home loan with reputed lenders who can proffer attractive deals and services. Also, use an online home loan balance transfer calculator to get a realistic overview of your loan switch and plan appropriately.  

0 %
0 %
0 %
0 %
0 %
0 %

By Alison

Average Rating

5 Star
4 Star
3 Star
2 Star
1 Star

44 thoughts on “How to Maximise the Benefits of a Home Loan Balance Transfer

  1. hello there and thank you for your information ? I have
    definitely picked up something new from right here.
    I did however expertise some technical issues using this site, as I experienced to reload
    the site lots of times previous to I could get it to load correctly.

    I had been wondering if your web hosting is OK?
    Not that I am complaining, but sluggish loading instances times
    will often affect your placement in google
    and can damage your quality score if ads and marketing with Adwords.
    Anyway I’m adding this RSS to my email and could look out for a lot more
    of your respective fascinating content. Make sure you update this again very soon.

  2. Hi! I’ve been following your web site for a long time
    now and finally got the courage to go ahead and give you a shout out from Houston Texas!
    Just wanted to say keep up the fantastic work!

  3. Holymoly that’s crazy man! Thank you so much I really appreciate for this man. Can i show you how to do change your life and if you want to get a peek?
    I will definitly share info about how to find hot girls for free I will be the one showing values from
    now on.

  4. Howdy! Someone in my Facebook group shared this site with us so I came to
    check it out. I’m definitely enjoying the information.
    I’m bookmarking and will be tweeting this to my followers!
    Outstanding blog and outstanding style and design.

  5. I was very happy to find this site. I want to to thank you for ones
    time for this fantastic read!! I definitely appreciated every little bit of it and I have you book marked
    to look at new stuff in your website.

  6. As I am looking at your writing, majorsite I regret being unable to do outdoor activities due to Corona 19, and I miss my old daily life. If you also miss the daily life of those days, would you please visit my site once? My site is a site where I post about photos and daily life when I was free.

  7. My brother suggested I may like this blog. He used to be totally right.
    This put up actually made my day. You cann’t imagine simply how a
    lot time I had spent for this info! Thanks!

  8. Thanks for some other informative website.
    Where else may just I get that kind of info written in such an ideal method?

    I’ve a venture that I am just now operating on, and I have been at the glance out for such information.

  9. I truly love your blog.. Great colors & theme. Did you
    build this amazing site yourself? Please reply back as I’m attempting to create my own website and would like to know where you got this from or just what
    the theme is named. Thank you!

  10. Simply wish to say your article is as amazing. The clarity in your post is simply great and i
    could assume you are an expert on this subject. Well with your permission allow me to grab your
    feed to keep up to date with forthcoming post. Thanks a million and please keep up the gratifying work.

  11. Just want to say your article is as astonishing. The clarity in your post is just great
    and i can assume you are an expert on this subject.

    Well with your permission let me to grab your RSS feed
    to keep up to date with forthcoming post. Thanks a million and please continue the enjoyable work.

  12. I believe that is among the most significant info for me. And
    i am happy reading your article. But wanna commentary on few basic issues, The site taste is
    wonderful, the articles is truly great : D. Excellent process, cheers

Leave a Reply

Your email address will not be published. Required fields are marked *