Home loan interests keep on changing with time. As per the latest market rates, interest rates are comparatively lower. If you are someone who is paying the EMI on the previous rates, a home loan balance transfer can help you. How? Read on to know what it is and how you can reap its benefits.
In this overly expensive world, paying a huge part of your salary or business’s profit on EMIs can affect your finances. Additionally, being in debt for a long period of time can cause a lot of stress and financial burden. To avoid this, your only grace is repaying the loan amount much before the tenure period. But, not everyone has the luxury to do so. For those, we have the home loan balance transfer option.
How does home loan balance transfer work?
Under this process, you transfer your pending loan amount to another lender; the new lender pays off the pending amount and your existing loan account gets closed. In this situation, you would be required to submit an application to your existing lender, requesting them for balance transfer. You also need to submit another application with your new lender, stating that you need them to take over your existing loan. Once this is approved, your new lender will pay the outstanding loan amount to your existing lender and also open a new loan account under your name. Meanwhile, the existing lender will have to release the property papers and also give a no-due certificate to you. Once you have these documents, you will have to submit them to your new lender and start paying your EMIs at the new interest rate.
Benefits of Home Loan Balance Transfer:
Lower EMIs or the reduced rate of interest is the major reason why people opt for home loan balance transfer. When you transfer your home loan to a new lender who is offering a lower interest rate, you get to save a lot on your monthly EMIs. This helps you save a lot of money and reduces financial stress to quite an extent.
Helps you get better terms on your loan
When it comes to home loans, different lenders have different terms. If you think that your existing lender is not offering you the same benefits as the other lender, you can opt for a home loan transfer and enjoy better and favourable terms.
Foreclosure and prepayment charges by RBI
In the 2012 mandate, the Reserve Bank of India has clarified that banks will not be able to charge foreclosure charges for prepayment penalties on any floating rate term loan sanctioned, for purposes other than business, to individual borrowers with or without co-obligant(s).
However, the same does not apply to home loans that are taken at a fixed rate of interest. For fixed rate loans, banks generally charge a par-closure fee of 2-4% of the remaining amount. So, in case you have taken a home loan on a floating rate of interest, you should choose to prepay or foreclosure your home loans.
Top-up loan amount
With home loan balance transfer, you can also avail the additional benefit of a top-up loan facility. If you choose a home loan transfer, you also get an option to ask for an additional amount over your pending amount.
Home loan balance transfer comes with a lot of benefits. However, before opting for it, you need to check on the below points.
Make sure you have all your important property papers ready.
Check that the repayment for the existing loan is not more than five years.
There should be no default or late payment on your existing loan. If that is there, there can be a problem.