After a huge flow in deposits because of the demonetization, the interest rates charged has dropped down subsequently. The latest charged rates are the lowest compared to last six to eight years. However, the rate cut will only benefit the new Home Loan buyers, which means the existing applicants still have to pay the same interest.
If you are an existing Home Loan buyer, you might feel the need for a balance transfer after knowing the current market rates. By availing a Home Loan Balance Transfer, you can lower your interest rates as you can transfer your loan account to another scheme or a different lender. But before taking any further steps, it is important that you go through the following factors that can help you to decide whether a balance transfer is required for you or not.
Save on interest payouts:
Savings can be a major reason for transferring the Home Loan for many people. Nevertheless, only avail a Home Loan balance transfer, if the overall savings is higher than the cost earned while getting the balance transferred. Normally, the new lender charges various fees which include processing fees, conversion fees and administrative charges.
It is essential not to forget that the earlier you opt for a balance transfer, the higher will be the savings earned on the interest pay-outs. Suppose, you have a Home Loan of INR 50 lakh for a tenor of 20 years with an interest rate of 9.1% with just three years outstanding. If you are planning to transfer the loan account to a lender offering 8.6% interest rate, you will save a total interest amount of about INR 11,901/-. On the other hand, if some other Home Loan buyer wishes to transfer the account with the same loan amount, tenor and same interest rate but has 15 years remaining, the person will save INR 2, 36,748 on his/her interest pay-outs. Therefore, it is suggested to avoid a balance transfer if your loan is close to the maturity period.
Unapproved Top-up loans:
Financial institutions offer a Top Up Loan to the existing Home Loan buyers when they are stuck in a fiscal emergency. Instead of availing a personal loan, borrowing a Top-up loan over a Home Loan is much easy and convenient. You can avail this loan to fund your various financial needs. If your existing lender does not approve the Top-up loan or charges you a high-interest rate, you can opt for a Home Loan balance transfer. You can select a lender who offers a good rate of interest on the Top-up loan.
Negotiation of terms and conditions:
When you transfer your Home Loan account to the new lender, it is similar to borrowing a new Home Loan. Wherein, the new financial institutions will have their new set of terms and conditions. Thus, it can be used to reset your Home Loan EMI and tenor as well as the Top Up Loan. In case if your current lender is not ok with re-setting the terms and conditions of the loan, you can go for a Home Loan balance transfer.
Concluding with, you should only opt for a balance transfer if you are left with a long Home Loan tenor. Since there is no room for a rate cut down in future; it is suggested to go for a Home Loan balance transfer if you are currently paying a high-interest rate or are not ok with the services offered by the existing lender.