In today’s flexible financial landscape, buying a dream home with the help of Home loan is not a difficult task with many options available with banks. But with increasing interest rates in the past few years, the borrowed amount becomes significantly large with each passing day. At such point of time, transferring the home loan from one bank to another that offers a lower interest rate proves to be fruitful.
A Home Loan Balance Transfer helps an individual in reducing the burden of High EMIs by transferring the outstanding loan to other banks with the lower interest rate. A loan borrower can get additional top-up loans, and enjoy features such as Flexi Hybrid Home Loan, pre-payment facility, and nil foreclosure charges which vary from bank to bank.
While transferring home loan balance looks quite beneficial, but the above benefits vary from borrower to borrower and on the various terms and conditions. So read this blog carefully and keep in mind these three crucial facts before transferring home loan:
Fixed and floating rate of interest
A home loan includes two types of interest rates – Fixed and floating rates. The fixed interest rate remains constant for the entire loan tenure and the rate of interest doesn’t vary according to the rise and fall in the market. On the other hand, a floating interest rate fluctuates with the market scenario. The floating rates offered by a bank or non-banking financing company (NBFC) are usually lower than the fixed rates it offers its customers.
But if you are thinking to opt for this alternative, first must check that if the maximum portion of the loan amount has been paid off at a fixed rate of interest. In such case, no need to switch as you have to pay additional processing fees to the other lender/banks.
The second crucial factor which an individual must keep in mind before switching the home loan balance is the proper calculation of hidden charges by the banks. Many lenders levy hidden fees while transferring the loan amount.
According to home loan experts, borrowers should evaluate competitive offers from banks and NBFCs before finalising any offer as many have hidden charges.
So, just by looking at the various eye-catchy offers by banks, an individual must not change your lending institution.
Difference in Interest rates
If you have decided to transfer your home loan balance, then you must research rate of interest offered by different banks. For instance, if there is a difference of just 5 to 25 basis points and 70 percent of the loan amount has already been paid off, then there is no need to transfer the loan balance. But, if the difference in interest rates is more than 25 basis points, then it is advisable to switch to that lender which is offering less interest rate on repayments.