A home loan is a big-ticket and long-term financial tool that offers ample funding and is normally repaid over a decade or two. Given that repayment stretches for so long, it can be tough on your finances if you are stuck with an expensive loan deal. For instance, your housing loan interest rate may be well over the current rates being offered. If you find yourself with a less-than-ideal home loan and know of better alternatives, know that you can carry out a home loan balance transfer and refinance your loan on more cost-effective terms.
Here is a rundown on the benefits and the process of conducting a home loan balance transfer.
Pay lower interest with a reduced interest rate
Your main reason to switch lenders should be to clear your debt more affordably and quickly. When you find a lender offering a significantly lower interest rate than your current rate on home loan, you can weigh the pros and cons of a balance transfer.
While a balance transfer helps you reduce home loan EMI payments, the move may not always be profitable. When you carry out a balance transfer, you repay your outstanding balance at a new, lower rate. Now, for this to be effective, the new housing loan interest rate should be significantly lower, the unpaid amount should be sizable, and the remaining tenor should allow for sufficient interest savings. Else, the amount you spend on balance transfer costs may outweigh your benefits.
All said and done, if the math is in your favour, a home loan balance transfer can help you notably reduce your debt payments. Ideally, switch lenders in the early phases of repayment. Here, even a small change in the housing loan interest rate makes a big impact.
Refinance your loan over a convenient tenor
During a balance transfer, it is likely that you will get a reduced housing loan interest rate. This means that your EMI reduces, your tenor reduces, or both. You can discuss this with your new lender and if you are looking to get debt-free faster, consider a tenor reduction.
However, if you are servicing a lot of fixed obligations, you may want, along with a lower interest rate, an extended tenor. This allows you to keep your EMI small. You can view the relationship between your tenor and EMI on an EMI calculator for home loan repayment.
Get access to a top-up loan
Lenders extend an additional amount over and above your existing principal as a top-up loan and you can avail of this facility when carrying out a home loan balance transfer. The advantage is that top-up loan funds can be used for any purpose, not just housing-related expenses. Further, the interest rate applicable will be marginally higher than your housing loan interest rate. Hence, taking a top-up loan when conducting a balance transfer can be much more economical than taking a fresh personal loan.
Benefit from better home loan terms and services
Also, you may benefit from prompter customer service, a seamless digital portal for loan management, customised schemes, and more. While these factors may not influence your decision as much as the interest rate, they are important, nonetheless.
Steps to switch your home loan to a new lender
You will first need to meet the eligibility criteria, which normally require you to have paid a certain amount of EMIs, have no outstanding dues and possess a property that is or can be occupied. Then do a cost-benefit analysis. Once satisfied, you can:
● Apply for a balance transfer with your new lender and get approval
● Write to your current lender and obtain a NOC
● Submit to your new lender documents such as KYC, bank statements, outstanding balance, and the list of property documents from existing lender
● Wait for your new lender to clear the outstanding balance and finish foreclosure formalities
● Submit property documents to your new lender and take balance loan amount
When you refinance your loan with Bajaj Housing Finance Limited, you are assured of a quick and hassle-free home loan balance transfer process. You get an attractive rate of interest and access to a substantial top-up loan along with a flexible repayment tenor. You can apply online to get started with a balance transfer today!This is a partnered post.