Balance Transfer of Your Existing Home Loan To Another Bank

Balance Transfer of Your Existing Home Loan
Balance Transfer of Your Existing Home Loan To Another Bank

The  balance  transfer  of  your  existing  home  loan  to  another  bank  or  refinancing  is  an  easy  option  through  which  most  of  the  people  avail  the  benefit  of  lower  interest  rates  prevalent  in  the  market. Most  of  the  Indian  banks  in  home  loans  do  offer the  option  to  transfer  existing  home  loan  to  another  bank. So, you  can  avail  of  this  option  to  save  on  home  loan  interest  rates.

Reasons  for  switching  Home  Loan  

Sometimes,  the  existing  customers  are  unhappy  with  the  high  rates  due  to  a  high  disparity  between  interest  rates  for  existing  and  new  customers. Then,  it’s  time  for  you  to  transfer  your  home  loan  to  a bank  offering  a  lower  interest  rate. This  is  easy  now  as  the  pre-payment  penalty  on  floating  rate  loans  has  been abolished.

Often,  after  taking  a  home  loan  from  a  bank,  you  find  later  that  the  terms  and  conditions  of  the  home loan  are  not  according  to  one’s  expectations. You  might  want  to  re-negotiate  certain  terms  and  conditions with your  bank. For  example,  you  might  want  to  extend  the  tenure  of  your  loan  and  lower   the  amount  of your  EMI  but  your  bank  does  not  agree  to  that, then  you  can  shift  to  a  bank  that  offers  the  same.

If  the  value  of  the  property   is  climbed  up  much  higher  in  comparison  to  its  original  price  then based  on  this  you  want  a  top-up  loan  to  meet  further  financial  requirements  or  for  a  home  renovation  perhaps. If your  lender  is  not  open  to  finance  this  you  might  opt  for  a  new lender.

Sometimes  you  are  not  happy  with  your  bank’s  service  and  accessibility  and  wish  to  transfer  the  loan.

You  should  always  try  to  switch  the  loan  in  the  early  tenure  of  the  loan. It  is  not  advisable  to  transfer  your  loan  after  2-3  years  of  loan  payment. As  you  have  already  repaid  most  of  the  interest  amount. The  interest component  of  your  equated  monthly  installment  (EMI)  remains  very  high  in  the  initial  years. The  higher  the rate  of  interest  or  loan  tenure,  the  slower  is  the  reduction  in  principal  in  the  first  few  years  of  the  loan.

Remember  that  a  loan  switch  will  not  be  possible  if  you  have  been  irregular  with  your  loan  repayment  with your  current  lender.

You  should   do  proper  market  research  before  switching   home  loans.

Check  the  benefits: Too  much  spending  in  the  process  of  the  home  loan  balance  transfer  is  not  a very good  idea. You  should  always  check  all  the  benefits  and  facts  thoroughly  before  transferring  your  loans  such as  the  processing  fees,  legal  charges, valuation  fees,  stamp  duty, technical  charges   and  other  charges  that  a  new  bank  would  charge. Then  compare  it  between  the  two  offers.

The  processing  fees  can  range  anywhere  between  0.5  percent  and 1 percent  of  the  total  outstanding  loan. Some  banks  may  even  waive  the  fee  if  you  bargain  hard. If  you  feel  there is  a  significant  amount  of  interest to  be  saved  from  the  move,  then  you  can  make  a  profitable  switch.

Compare  the  total  outflowIf  you  get  your  loan  tenure  increased  by  the  new  lender  by  reducing  your EMI,  it also  increases  the  total  amount  you  pay  to  the  bank  because  the  interest  keeps  on  adding  to  the outstanding  loan  amount.  If  you  are  paying  higher  EMIs  with your  current  bank,  compare  the  total  outgo  for  both  banks  and  then  make  a  decision. The  longer  the  tenure, the  higher  will  be  the  interest  payments  and higher  will  be  the  chance  that  you  will  pay  more  interest  than  the  principal.

You  should  prefer  to  stay  with  your  bank  if  you  are  not  hard-pressed  for  money,  pay  a  larger  EMI  and  finish  off  your  loan  as  soon  as  possible  to  save  all  the  money  you  would  overpay  in  the  longer  tenure. Make  additional  repayments  to  save  you  interest  and  help  you  pay  off  your  loan  quicker.

Check  Credibility: Make  sure  that  the  new  lender  is  credible  and  the  current  lower  interest  rate  offered by  them  is  not  a  just  short  term  promotional  gimmick.

Bank’s  Service  Quality: Ensure  that  the  new  lender  is  good  when  it  comes  to  customer  support.

Terms  and  conditionsBefore  signing  on  the  agreement  letter,  you  must  read  all  the  terms  and  conditions of  both  banks.

Your  loan  transfer  is  only  possible  when  you  are  regular  in  loan  repayments  to  your  current  bank. Remember  that  for  a  home  loan  switch  over  you  need  to  go  through  all  the  procedures  involved  afresh. These  include  a  credit  appraisal, legal  verification  of  property  documents  and  technical  evaluation  with  the new  bank, etc. Therefore,  you  should  not  fall  for  only  an  interest  rate, or  benefit,  that  is  only  marginally  better  but  you  should  also  consider  other  factors  before  going  ahead  with  the  balance  transfer  of  your  home  loan.

Also  read: Housing  Loan  For  Indian  Property  Market

Balance Transfer of Your Existing Home Loan To Another Bank


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