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Seeking for a New Home Loan Lender? This is When You Should Actually Transfer Your Home Loan!
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You might research well to find the best lender and maintain a high credit score to get the lowest interest rates on a home loan. However, interest rates could drop after a few years.
Thankfully, you have the option of a balance transfer. With a home loan balance transfer facility, you can transfer the loan to get a lower interest rate and save money. However, reduction in interest rates should not be the sole reason to transfer the loan. You must know when it is the right time to transfer the loan. Read on to find out.
What Is a Home Loan Balance Transfer?
A home loan balance transfer is a facility where you can transfer your home loan from one lender to another. When you opt for a balance transfer, the new lender repays the outstanding loan amount to the old lender in full. Once your loan is closed with the existing lender, you can repay the remaining EMIs to the new lender at their interest rates. The following are the benefits of opting for a home loan balance transfer.
Things You Must Consider While Transferring Your Loan
While balance transfer can help you save, it is not true in all cases. You must carefully analyze all aspects before you transfer the loan. Here are a few things that you must consider.
You must ensure that you fulfil the new lender’s eligibility before you apply for home loan refinance. Over time, your credit score can drop or the new lender could have different eligibility. Therefore, before you apply for a loan transfer, check the eligibility.
To ensure that you save by opting for a home loan refinance, you must check the difference in the interest rates of both lenders. Experts believe that you must transfer the loan when there is a difference of at least 50 base points in the interest rates.
It is usually not a wise decision to transfer the loan in the later years of the tenure. It is because, until that time, you have paid a major portion of the interest component of the repayment amount. Therefore, you must transfer the loan in the initial years of the loan.
While you transfer the loan, you must assess the cost of refinancing to check your savings. You can use a home loan refinance calculator to ensure that you would save money by transferring the loan. If the cost of transfer is more than the total savings, it would be better to stick to the existing lender.
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