Benefits Of Home Loan Balance Transfer
Home loan balance transfer is a viable option for investors to switch from one lender to another that offers a better perspective to them
Home loan balance transfer is a viable option for investors to switch from one lender to another that offers lower interest rates. The new lender approves the takeover of your home loan and pays the outstanding amount to the current lender. Post receiving the pending amount, the existing lender releases the property documents and also issues a no due certificate to the borrower. These documents are handed over to the new financier. Once this process is complete, you have to pay all the remaining future Equated Monthly Installments(EMIs) to the new lender as per their interest rate norms. In this option, you close the old home loan account and open a new account with a different lender with better benefits like lower Rate of Interest (ROI), lower tenure etc.
Features of a home loan balance transfer:
- Balance Takeover (BT) of your home loan is equal to the process of obtaining a new loan.
- Your home loan is eligible for a takeover only after a certain period.
- When another bank takes over your home loan, they transfer your outstanding principal amount to the existing lender.
- This process usually involves nil takeover charges with your existing lender (when loan is obtained in individual capacity), although not fixed and may vary with different Financial Institutions.
- Before considering home loan transfer, you should maintain a good track record of repayment with the current lender.
- Some Financial Institutions also require a good credit score and history before approving such transfer.
Futher, this balance transfer also provides a host of benefits:
- Lower interest rates:
The most common reason for opting a home loan transfer is reduced interest rates. Reduction in ROI leads to lower EMI and hence more monthly savings. It may also reduce the overall tenure of your home loan.
- Good repayment track record may get you good Rate of Interest (ROI):
When opting for transfer, you can negotiate the terms and conditions of your home loan by citing your track record of payments, your credit score, and other points. This may help you in obtaining a lesser rate of interest, or better benefits than your current lender.
- You can get a top-up loan:
Many financial Institutions offer a top-up loan when you are transferring your home loan to them. You can avail these loans at competitive rates and use them to pay off your immediate debts or use it for home renovation. Your current lender might not offer this top-up loan even when there is an increase in the real estate price/ market value for your home. However, the new lender will definitely consider the current market value of your property as the benchmark and may also offer a top-up loan.
Other than these reasons, you may also get better customer service, shorter duration of loan tenure, EMI and/or other many other benefits that are not offered by the current lender.This balance transfer can also boost your credit score rating.
Nowadays, transferring a home loan is quite an easy process as banks have embraced modern technology. All information about the borrower, including their credit score, is available online. This reduces the hassle of documentation and you can avail home loan balance transfer easily. Managing monthly expenses alongwith a running Home Loan EMIs may cause financial stress especially when you pay a higher interest rate. To avoid such hassles, opt for home loan balance transfer to enjoy lower rates and shorter duration of EMIs or tenure.
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Written by Sheetal Chhabra, Policy Manager- IIFL Home Finance Limited
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