Many people find it challenging to pay off the Equated Monthly Installment when faced with a home loan with a higher interest rate (EMI). A balance transfer can save the day in this situation! It lowers the EMI each month and makes timely payments possible, which before might not have been possible. With a balance transfer, you can move your home loan from one lender to another. You can transfer at a reduced interest rate and lower your financial commitments. It is now obvious that you will save money with a balance transfer.
Home loan balance transfer
Transferring your existing home loan to a different lender in order to receive better services and lower interest rates is known as a home loan balance transfer. Technically, when you transfer your home loan to a new lender, the old lender receives payment for the remaining loan balance. Also your existing home loan account is closed. In parallel, your new home loan account with your new lender opens. And you start paying a somewhat lower interest rate there.
Home loan balance transfers are now available from numerous banks and housing finance firms. They offer a variety of offers and advantages. Lenders are becoming more and more eager to provide pre-approved Home Loan Balance Transfers to customers with great credit. Even if all of these promos and incentives are meant to sway the borrower in their direction right away. The borrower should make sure that both parties stand to benefit and that the terms are stable.
How to calculate EMI on balance transfer
The following elements will affect how much money you can save:
- Principal amount of your home loan
- Current EMI paid per month
- Current tenure of the loan
- Rate of interest provided by new lender
Process of home loan balance transfer
- Do your homework and compare the interest rate, costs, and product features before choosing a loan.
- To avoid the trouble of transferring the loan and administrative fees. You might even try to negotiate the interest rate with your current lender.
- If you choose to undertake a balance transfer. Submit an application to the new bank or home financing firm of your choice.
- Request a No Objection Certificate from your current lender (NOC).
- Send the NOC and other necessary paperwork to the new lender.
- Once the new lender has repaid the balance on the outstanding loan, your current home loan account will be canceled.
- Your new Home Loan with the new lender begins at a lower interest rate. It is after the balance transfer process is complete.
Why should you choose for a home loan balance transfer
You may have done enough research before applying for a home loan. It is to believe that your lender is providing the best interest rate available. We fully agree that your lender may have provided you with the best interest rate when you first applied for the loan. There is a potential that someone else is currently providing a better rate of interest. May it is combined with additional advantages that might meet your needs.
The home loan interest rate is higher than average compared to the rest of the world. It range from 6.50% to 12% per annum. Additionally, home loan amounts are typically very high. Therefore, even a slightly lower interest rate might have a significant impact on how much you ultimately pay.
When should you choose home loan balance transfer
Many individuals believe that if another bank or housing finance firm offers a better interest rate, the housing loan should be transferred right away. However, there are a lot of things to consider before you transfer the rest of your housing loan. To determine exactly how much they will save if their current loan is moved to a new lender, borrowers must conduct a cost-benefit analysis. Continue reading to find out when it makes sense to transfer the balance of a housing loan.
Low rate of interest
The most frequent justification for moving a loan is a cheaper interest rate. It should undoubtedly be taken into consideration if another bank or housing financing firm offers a lower interest rate. The total amount you pay can vary by even a negligible 0.5% annual change in interest rates. It also helps to lessen the monthly cost of the EMI.
Cost of balance transfer
Many people believe that the only expense associated with a house loan that must be taken into account when transferring balances is the interest rate. However, there are several expenses connected with it. It include making a long-term commitment to a home loan balance transfer that demand equal consideration. A balance transfer is equivalent to taking out a new loan with fees and other costs. So be careful to conduct a cost-benefit analysis. Simply put, the benefits you receive must outweigh the costs incurred during the process.
Longer loan tenure
When you still have a longer loan term remaining, think about a home loan balance transfer. You can save the most money at the lowest interest rate. It can be taken by taking out a loan for a longer period of time. Transferring a loan while the loan’s term is coming to an end is not a wise decision. Even though you might save some interest by refinancing a home loan with only a few years left on the term. You might wind up spending more for the transfer fees.
Higher outstanding amount
You must ensure that the outstanding amount is higher while transferring the loan. When only a tiny amount of your debt is unpaid, switching loans is not advised. The time and effort required to choose the best lender and transfer the loan should be justified. It can be done by the outstanding balance and the money you will save.
Change the type of interest rate
You can get a home loan with a fixed or adjustable interest rate. Throughout the term of the loan, the fixed interest rate remains the same. A variable home loan interest rate, however, fluctuates in response to changes in the repo rate. The sort of interest rate a borrower is paying might be changed with a housing loan balance transfer.
Better product offerings
Every housing loan that banks and housing finance businesses give will be different in some way. It is advised to switch your loan to a different lender if you are dissatisfied. Also if you need some special features that your current lender does not provide. But before you transfer your outstanding debt, make sure the new lender has the features you need. Also it will save you money.
Better customer service
Most individuals favor excellent customer service because home loans typically last for a longer period of time. You could have a variety of problems after obtaining a loan. such as untimely assistance at a service desk, the failure to update personal information despite extensive follow-up, frequent changes to the terms and conditions, etc. Therefore, if you are unhappy with the services provided by your current lender, you can change to a different lender. But before switching lenders, be sure to look into all the alternative possibilities.
The easiest approach to benefit from a lower interest rate and the other perks listed above is through a housing loan balance transfer. Even if you can use a balance transfer for any purpose, it’s best to review the terms and conditions of the new lender. Also weigh the financial advantages before applying for one. Because a housing loan balance transfer is also a long-term commitment, much like a housing loan, you must make an educated choice.