Home Loan Transfer: Things to Consider Before Transferring Your Home Loan



Home Loan Transfer: Things to Consider Before Transferring Your Home Loan

Commercial banks and Housing Finance Companies (HFCs) are providing prospective borrowers with home loan deals beginning at a 6.70%* interest rate per year. Borrowers with active home loan deals repaying the loan amount at a greater interest rate should consider an alternative method. This is because an alternative method helps cushion the burden of loan repayment at a higher cost and it also saves money for future needs.

Customers can move their home loans to other lenders to enjoy better service conditions and low rates of interest. A home loan balance transfer is an effective alternative to the top-up loan option. It ensures that when you move your remaining loan amount to a different lender, you enjoy lower Equated Monthly Instalment payments (EMI). In addition, you enjoy low home loan interest rates.  

What is a Home Loan Balance Transfer?

A home loan balance transfer, also known as loan refinancing, or balance transfer, is the procedure you undertake to switch your outstanding home loan amount to a different lender, i.e. the bank or an HFC. In addition, you enjoy low home loan interest rates throughout the home loan tenor. This works when you have a current home loan with a lender, then you opt for a home loan balance transfer.

After satisfying the eligibility/criteria, the current lender allows you to move the outstanding home loan amount to a new lender of your choice. The new lender will demand a lower home loan interest rate, which you will benefit from, should the procedures for a home loan balance transfer be followed accordingly. This process is what lenders and borrowers call ‘Home Loan Balance Transfer’ or ‘Loan Refinancing.’ 

This process enables borrowers to evade the hefty rates of interest that accompany a home loan. Meanwhile, selecting a resourceful lender is a smart move too. With a resourceful lender that promises low interest rates and a less stressful EMI payment schedule, you can breathe easily. Meanwhile, the home loan balance transfer requires a considerable amount of money to effect. So, we want you to be sure that the balance transfer is what you want to go with. The major reason why borrowers opt for a home loan balance transfer is to enjoy a lower rate of interest on their current home loans. 

The typical interest rates on home loans range from 6.70% to 12%. So, if you do not want to discuss with your lender, possibly negotiate for a significant reduction of the interest rates, then consider a home loan balance transfer.

Features of Home Loan Balance Transfer

Here are some pivotal features of the home loan balance transfer. 

  • It allows you to move the remaining balance of your current home loan from one lender to another. 
  • A nominal fee (a percentage of the outstanding home loan) is paid to the new lender as a processing fee.
  • Upon completion of the home loan balance transfer, you owe the new lender the loan amount you transferred plus some applicable fees; however, you owe the previous lender nothing

Reasons to Apply for the Home Loan Balance Transfer 

Some of the reasons that warrant a home loan balance transfer include: 

  • You want to soften the burden of making EMI payments at a high rate of interest. 
  • You want to lower the sum of money as interest on the home loan. 
  • You want to enjoy better benefits and privileges that a new lender offers.

Read on to learn about the factors to consider before transferring your home loan to a new lender. Sure, you may no longer want to ensure high rates of interest and are considering a home loan balance transfer. However, we urge you to know the factors that are involved, so your eventual decision is without regret.

Factors to Consider Before Transferring your Home Loan to a New Lender 

The factors to consider before transferring your home loan to a new lender are:

  • Ensure that your new lender’s promises of reduced rates of interest and added benefits are legitimate. It is easy to be deceived by attractive promises, so we advise that you ensure that the new lender will do as advertised before you opt for a home loan. A thorough background check of the lender will solve this. 
  • Consider the time left to repay the current home loan. Before you apply for a home loan balance transfer, ensure that you have not reached the final part of the loan duration. Having a couple of years left to pay your home loan is possible when you have completed the interest payments during the early period of the home loan’s duration. Applying for a balance transfer during the final stages of your loan tenure is a wrong move and you risk an increase in the interest payable. We recommend that you consider this carefully before moving forward with a balance transfer.
  • Consider the cost of a home loan balance transfer. Before you apply for a balance transfer, see that you compare the applicable fees that accompany the process. Go through with the balance transfer only if you are confident that the move will not hurt you financially. These costs include stamp duty fees, documentation fees, etc. When these charges supersede you, reconsider your balance transfer move.
  • We advise that you read the terms and conditions of the home loan balance transfer carefully. Ensure that you are not lured into a deal that will burden you even more. We ask that you only go through with the balance transfer process only when the new lender's terms and conditions look positive. 

Final Thoughts 

Now that you know what a home loan balance transfer is and the factors to consider before opting for the move, we ask that you weigh the factors carefully before moving ahead. Check the features online on the lender’s website to make an informed decision.