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Important Step by Step Guide for Transferring Your Home Loan to a New Lender Amidst Rate Changes!
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If you are servicing a home loan, you might feel that you are paying more Equated Monthly Instalments (EMIs) than you should over a prolonged tenure. While your EMI is dependent on various factors, this could be true if the interest rates of home loans have dropped down. In such a situation, to save your interest, you can opt for a balance transfer. After all, even a one percent difference in interest rates can save you a significant amount of money, and hence a home loan balance transfer can help you lower your cost of borrowing. However, while it looks alluring, promising you reduced rates, you must gather enough knowledge and details about it before you proceed. If you are new to home loan balance transfers, here is a handy step-by-step guide about the process.
What is a home loan balance transfer?
A home loan balance transfer, or refinancing as it is also called, is a facility provided by lenders to transfer your loan to another lender. When you opt for a home loan refinance, the new lender pays your outstanding loan amount to the existing lender. Once your loan is closed, you can repay the remaining loan amount to the lender at their offered interest rates. By switching your loan, you can get lower interest rates, revised repayment terms, better services and facilities, top-up loan facility, preapproved offers, etc.
A step-by-step guide to transferring your loan
Things to keep in mind while switching your loan
While transferring your loan can help you save money, you must consider the cost associated with a home loan balance transfer. You might have to pay a foreclosure charge for closing your loan. You will also be required to pay the administration charges, processing fees, and other home loan charges to transfer the loan to the new lender. Hence, consider these charges and do a cost-benefit analysis while transferring your loan.
Lenders want to retain their customers as losing a borrower can affect their business. Therefore, you can negotiate with the existing lender to revise your interest rate. If you have been diligent in repaying your EMIs, you might succeed and need not transfer your loan.
If only a small amount of the home loan is left to repay, you might lose more money by transferring the loan. Usually, it is best to transfer the loan only when your loan is in the initial years. It does not make sense to incur transfer costs in later years as you have paid substantial interest already.
A home loan balance transfer can help you save a significant amount on your housing loan interest rate. However, you must make an informed decision after considering all the different factors and costs to get the best deal.
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