The Reserve Bank of India slashed repo rates by 40 basis points in May 2020, taking the current repo rate to just 4%.
It thus makes it the perfect time to opt for home loans. Existing borrowers can avail also take advantage of a lower rate of interest through a home loan transfer (if their current lender is not lowering the rates).
Before proceeding to learn about the balance transfer process, one should first understand what such a transfer entails.
What is a Home Loan Balance Transfer?
Balance transfer refers to shifting an existing home loan from the current lending institution to a different lender. The primary reason to undertake such a loan balance transfer is to take advantage of lower interest rates on offer from the other lender.
One can significantly limit his/her EMI liabilities by transferring outstanding balance to a different HFC.
Steps to Follow for a Home Loan Transfer
To ensure a hassle-free and streamlined balance transfer process, ensure you follow the steps mentioned below.
Step 1: Start by checking your existing rates and calculate whether a balance transfer would lead to significant interest savings on the said loan. Use a home loan balance transfer calculator to determine the exact benefits of such a move.
Step 2: Consider the various charges and expenses related to such a transfer. Before finalising the shift, you should determine whether the associated costs outweigh the interest savings. If so, then avoid transferring your existing loan balance.
Step 3: Choose the new financial institution where you want to opt for the home loan balance transfer facility. Furthermore, acquire the property documents from your existing lender, alongside the loan foreclosure letter.
Step 4: Apply for the loan at the other HFC by providing all necessary documents.
Step 5: After loan approval, acquire the sanction letter from your new lender.
Step 6: Obtain the original property documents from the previous lender and submit it to the new financing company.
One should follow the above-mentioned process to maximise the benefits of a home loan balance transfer. Using the same procedure, a borrower can also apply for a top-up loan during this transfer.
What Is a Top-Up Loan?
Top-up loans are specialised credit offered over and above the home loan quantum. One should be an existing housing credit borrower to avail these loans. Furthermore, such top-up loans do not come with any end-use restriction, meaning that a borrower is free to use the proceeds of such a credit any way they deem fit.
Thus, these advances are similar to personal loans in this manner. One can easily fulfil urgent financial needs with these top-up loans.
Also Read: Proven Benefits of Home Loan Transfer
Things to Consider Before Home Loan Refinance
One should never approach balance transfers blindly. Instead, he/she should consider all associated factors to gauge whether such a move would result in particular monetary gains.
Here are a few things you need to remember -
Find out the associated costs for such a move
Keep in mind that lenders treat loan balance transfer as a fresh loan application. Thus, when applying for such a switch, borrowers need to pay a processing fee and other expenses as well. Often, the cost of shifting a loan is often more substantial than the potential for savings. In such cases, you are better off sticking to your current lender.
Determine the service quality of the new lender
Some lenders may use low-interest rates as a gimmick to attract borrowers without providing the necessary quality of service to go with it. This is why it is often best to stick to reputed financial institutions for a balance transfer.
Thus, find out everything about home loan transfers before undertaking such a move. If one can execute it perfectly, this transfer can lead to substantial savings.