As of May 2021, the Reserve Bank of India had kept the repo rate unchanged at 4% for the fifth time. This decision was undertaken to ensure the economic revival and increase credit lending.
Additionally, the RBI has also announced special liquidity facilities for public and private lending institutions offering home loans.
These measures indicate a suitable time for existing housing credit borrowers to opt for a home loan transfer and reap the benefits of the lowest interest rates.
Why a balance transfer?
Home loan Balance transfer is a facility that allows existing borrowers to switch their outstanding loan amount to a suitable lender offering a reduced interest rate.
This option can be useful for existing housing loan borrowers who have been paying a high- interest rate and straining their disposable income. Through home loan transfer, one can easily shift from fixed to the floating interest rate at a minimal cost. Borrowers can also compare different lenders and find the one offering additional benefits like top-up loan and pre-approved offers.
Such offers make loan application swift and hassle-free. Typically, one can find these offers on financial products like LAP, home loan, etc. Check the pre-approved offer by entering your name and contact number.
What are the factors to check before opting for a balance transfer?
Before opting for home loan refinance, every borrower must assess his/her repayment capability.
- Charges levied on refinancing
As discussed earlier, refinancing is lucrative for existing home loan borrowers repaying a high-interest rate and EMI. However, like the two sides of a coin, refinancing comes with certain charges. Lenders usually levy charges like application fees, processing fees, administration charges and more. Coping up with expenses can be problematic for individuals facing a financial crunch.
Though the charges are more, if the repayment tenor is longer, an individual can proceed with the refinancing. This can work as an investment made for efficient savings in future. To calculate the transfer cost and EMI saved, one can make use of free tools like a home loan balance transfer calculator.
- Finding a suitable lender
Apart from evaluating the transfer charges, an applicant must also take note of the EMI and overall interest outgo. This would again facilitate healthy savings on disposable income. One can compare different lenders and prepare a table highlighting the benefits and offers. This is a smart way to find exclusive services like limited or no pre-payment and foreclosure charges.
Negotiating with the existing lender, if the credit scores are remarkable, can be a time-saving option. Maintaining a good relationship with a lending institution or loyalty association can be beneficial.
- Repayment history
Many lending institutions assess a borrower’s repayment history to deduce creditworthiness. Typically, credit score and history mirror an applicant’s reliability and timely repayment habit.
Hence, lenders scrutinise this factor before accepting a home loan transfer application. Home loan borrowers must, therefore, practice methods to improve their CIBIL score, like paying credit card bills on time and clearing outstanding debts.
- Suitable time for the loan transfer
Selecting the right time for a home loan balance transfer is again vital. Ideally, an applicant is unable to access his/her account till the process ends. Hence, it must be opted for only when there is no emergency financial requirement.
Apart from considering these factors, individuals must keep a tab on the updated regulations set by different lenders regarding home loan transfer. This would help gain knowledge on the charges levied and the amount saved through the process.
In this regard, every individual must remember that it is safer to go for refinancing when the repayment tenor is longer, like 15-20 years. Opting for balance transfer for a short tenor can increase the expenditure over the savings made.
So, choose wisely and opt for a balance transfer only when the situation is favorable.