Top Consideration You Should Follow Before Transferring Your Home Loan

Recently, numerous individuals are opting for home loan transfer due to multiple factors like rising expenditure, high rate of interest and inflation. Essentially a refinancing option implies transferring a home loan acquired from a particular lender to another lender. There can be various reasons for such a home loan transfer. For instance, if a present lender is charging a high interest rate or if a borrower is getting overburdened by high EMIs.

Loan transfer usually involves several benefits for borrowers:

• Lower interest rates

• Affordable EMIs

• Extra top-up amount

• Insurance cover

• Zero penalties for prepayment

Nevertheless, several aspects should be taken into consideration before transferring a home loan. Some of them are:

Credibility of a new lender

Even if a new lender is offering a lower rate of interest, the borrower willing to opt for a balance transfer must consider doing a background check on the new lender in order to check the lender’s credibility. 

Tenor remaining on the current loan

It is wise to opt for a home loan transfer if considerable amounts of current loan tenure are remaining. Having less time to pay off an existing home loan implies that the loan's interest has already been cleared.

Maintaining all property specific documents

Documentation plays a significant role when it comes to home loans. All documents related to property and personal documents must be maintained properly so that the loan transfer process does not face any hurdle. The borrower must ensure that the old lender dispatches all property documents to the new lender within a set time period. These documents would be considered as collateral till the entire loan is repaid.

Calculating the cost of balance transfer

There are several charges involved in a home loan transfer like application fees, fees for inspection, processing fees, administration fees, etc. Besides all these charges, both the financial institutions, which are involved in the transfer, charge certain amounts from the borrower. Such expenses may be considerably more than the interest amount one saves. In such cases, a balance transfer would actually end up as a losing proposition.

Borrowers must calculate and ensure that balance transfer charges are less than the amount of interest. Calculations would help make a better-informed decision about whether it would be worth making a transfer after making payments for all the charges.

Negotiation for interest rate

There is also an option for negotiating with the current lender for lowering the current home loan interest rate on the basis of a punctual repayment record and good credit history. Loyal association with the lender, a good credit record, and a capacity for loan repayment might allow the lender to consider the borrower’s request for lowering the interest rate. It can also open options for the borrowers to avail of a top up loan.

Terms and conditions of the new loan 

Again, even though a new lender may offer a lower interest rate, the new loan's terms and conditions must be carefully read. One must opt for a home loan refinance if the terms and conditions are beneficial.

A home loan balance transfer calculator enables a potential borrower to calculate the benefits of transferring a home loan from one financial institution to another.

A home loan transfer would greatly benefit several individuals who feel overburdened by EMI repayments. However, the above points would act as a guide that should be taken into consideration before opting for a transfer.