According to recent data published by the Reserve Bank of India, housing loans amounted for nearly Rs.13.3 lakh crore, as of April 2020. One of the primary reasons behind such a tremendous growth in the demand for these credits is the increasing cost of property ownership. Today’s credit-savvy generation is not willing to divulge their savings to pay for a residential property.
However, owing to a slow economy coupled with escalated financial liabilities, many borrowers are struggling to make ends meet. While there are several methods that one can follow to somewhat alleviate his/her financial obligations, home loan transfer can prove to be a wise decision for borrowers to tackle such a situation.
What is a home loan balance transfer?
It is a facility that allows borrowers to transfer the entire unpaid home loan amount to another lending institution, primarily to avail a lower interest rate. Popularly known as home loan refinancing, it involves paying off the existing lender to transfer the debt to another financial institution, which is then repaid against a lower interest rate.
It is considered as one of the most effective ways to lower the burden of EMIs while servicing a home loan. However, this facility proves to be beneficial at an early stage of the repayment of a loan. Furthermore, home loan balance transfer also extends a host of benefits that a borrower should be aware of.
Benefits of balance transfer
Following are some of the benefits of balance transfer of home loans.
- Lower interest rates
The primary reason why borrowers opt for a home loan transfer is to avail a lower interest rate. After RBI re-evaluates the repo rates, the interest offered by the financial institutions usually changes. If the rate reduces, one can opt for balance transfer to bridge the gap and lower the EMIs significantly.
To get an accurate estimation of the current EMIs payable and the amount to be saved, one can also use an online home loan balance transfer calculator.
- Provision of a top-up loan
While availing such a refinancing facility makes provision for a way to pay-off your home loan faster thanks to lower interest, allowing for prepayments, its additional benefits are non-discountable. It also allows borrowers to avail additional funds as a top up loan, which can be utilised for a range of expenses as these do not come with any end-use restrictions. Reputed financial institutions offer as much as up to Rs.50 lakh as top-up credits to eligible applicants.
- Instant loan approval
The entire process of a home loan transfer usually takes only 15 to 20 days. A hassle-free process increases the convenience of such a credit.
- Minimal foreclosure and prepayment fees
Most lending institutions levy charges such as foreclosure and prepayment fee while borrowers transfer their home loans. However, a few reputed lenders do not charge such fees and facilitate this process conveniently.
They also extend pre-approved loan offers that make the process of loan application and approval more streamlined and quicker. Such offers are also available on different financial products, including home loans and loan against property. You can check your pre-approved loan offer simply by sharing your name and contact details.
However, it will be wiser to contact both the existing and new lender for details about additional charges that may be applicable on a home loan transfer beforehand.
Therefore, it is of utmost importance for borrowers to learn about how a home loan balance transfer works to reap all the benefits of it. Along with that, before settling for a home loan balance transfer, compare with different lenders to secure the best deals available in the market.
Additionally Read: Govt and banks now stare at the threat of personal loan default