A home loan balance transfer is an excellent facility offered by the financial organisation that eases the repayment burden for home loan borrowers. Read on to know more about it.
A home loan balance transfer is the process of moving your home loan from the existing lender to another one and repaying the outstanding amount at a lower interest rate.
If you have taken a home loan, and your lender is charging you a high interest rate, you can avert paying a high EMI by choosing the home loan balance transfer option. However, before you go for the balance transfer, you must consider a few essential things.
- Negotiate the interest rate
Before exercising the option to do balance transfer, it is better to negotiate with the existing lender to revise your interest rate. Suppose you have a loyal association and have a long-term relationship with them and have paid all the EMIs on time. In that case, the lender may consider your request based on your credit history and past repayment track records. This way, you can lower your EMI burden without paying any charges associated with the balance transfer.
- Check your credit rating
Your credit score plays a vital role in determining if you are eligible for the balance transfer or not. If you have paid all your EMI previously on time, your credit score must be high. However, if you have been inconsistent with your dues, it would reflect poorly on your credit score.
So, before you opt for the balance transfer, ensure to pay off your previous dues so that your credit score is high and you can complete the transfer process without any hassles.
- Be wary of the remaining loan tenure
Opting for a home loan balance transfer during the latter half of the tenure may not be worth it. If you have only a few years to pay off the existing loan, you may have already paid off a significant portion of the interest payable during the initial years. In this case, refinancing the home loan may not be a wise decision as you may end up increasing the interest cost on your new loan. So, it is better to use the home loan balance transfer calculator to compute the interest payable on the new loan before taking the final borrowing decision.
- Term and conditions of the new loan
Lastly, you must be aware of the term and conditions of the new loan. Make sure that you read the fine print carefully before you sign the home loan balance transfer papers. While the idea of repaying the balance amount at lower interest may seem enticing, you must fully understand the terms and conditions. You must refinance the home loan only if the terms and conditions are beneficial to you.