A home loan balance transfer involves the transfer of an existing home loan from one lender to another for better benefits. These benefits could include a better interest rate, longer repayment tenure, a top-up loan, and so on. Since home loan interest rates have been moving downhill in the past couple of years, it is wise to keep an eye out for new loan plans in order to get a better deal on your current home loan.
Going for a home loan transfer can be very beneficial in making savings on the total cost of the home loan. However, before going for this transfer, there are a few things you need to keep in mind:
- Maintain a good credit score
No matter what type of loan you apply for, a lender will always review your credit score. This helps lenders in understanding the repayment record based on which they decide whether to approve or reject the loan application. If there have been inconsistencies in paying off credit on time, the credit rating will get affected. A poor credit score means that even if the lender approves the loan application, the loan will have a high-interest rate. However, with a positive credit score (750 or more), it is quite possible for the lender to offer a low-interest rate and a big loan amount.
- Try and negotiate the interest rate
Once you have a good credit record, you are in a much better position to get a good deal with a lender. Also, your income has most likely risen from the time you got the existing home loan. All these factors can be used to negotiate with the lender regarding the home loan interest rate.
- Focus on the charges applied
A lot of borrowers make the mistake of only focusing on the low-interest rate that the new lender is offering. However, it is also important to look at the charges involved in this transfer. A home loan balance transfer usually involves administration charges, application fees, processing fees, and so on. Make sure to calculate all these and check whether your savings are exceeding these expenses.
- Go for such a transfer in the initial years of repayment
If the existing home loan is at the end of its repayment tenure, it is not advisable to opt for a loan transfer. This is because you might not be able to make significant savings, and considering charges like processing fees, you might actually end up on the losing side. However, if the repayment tenure has just started, it is advisable to go for such a transfer, as this would help in saving money on the interest of the loan. Make sure to use a home loan balance transfer EMI calculator to understand how much of a difference transferring the loan would make.
Apart from these points, do not forget to check with the new lender about the documents required for home loan balance transfer. This will make the whole process of transferring the home loan more convenient.
