A home loan balance transfer becomes essential when the home loan borrower is unsatisfied with his/her existing lender’s interest rate on a home loan and is looking for a better deal at any other financial institution.
In fact, those borrowers who want to avail the advantages of a top-up loan; for them, it is a smart alternative as well. Home loan borrowers who want to opt for a balance transfer should consider some factors before doing so.
5 factors to consider before opting for a home loan balance transfer
Before switching to a new home loan lender, one should consider the five factors stated hereunder:
Negotiate for a lowest possible interest rate
Before opting to transfer your home loan, you need to negotiate with your new lender to get the lowest interest rate on the home loan. Though it depends upon a number of factors like credit history, income profile, property in question, and others, it is possible to negotiate better if the borrower has an existential relationship with the new lender.
Negotiate the best by leveraging the credit score
A credit or CIBIL score is the first thing that a lender considers when the borrower opt for home loan balance transfer. A CIBIL score higher than 700 is considered as good and those borrowers become the top choice of the lenders.
So, if the borrower does not default on their existing loans, then they can leverage this parameter for negotiating with the new lender with the best terms of borrowing. Thus, borrowers should always try know the best credit score for home loan and ways to improve it.
Fees associated with the home loan balance transfer
The process of transferring a home loan balance involves a set of charges and fees that include stamp duty, processing fees, application fees, and administration charges, along with some government charges like MODT and MOE (which might vary from state to state).
Also, there will be probably some charges that will be charged by both the new and the existing lender. So, make sure to calculate that the cost of the balance transfer does not outweigh the interest amount.
The new loan tenor
In case the borrower is planning to sell the home or property in the future for which the loan has been taken, then as per the expert’s recommendation, they should not opt for the balance transfer for the same.
Additionally, if the borrower is nearing the end of his/her home loan tenor, it is not advisable to go for a balance transfer of a home loan. They can also calculate their home loan savings using the home loan balance transfer calculator. The only way that it would be beneficial at this moment would be to get top up loan. It increases the tenor of a home loan with the new lender.
Terms and conditions of the new lenders
Before agreeing to the home loan balance transfer, the borrowers should be familiarised with the terms and conditions of the new lenders. This will evade them from entering into any contract that might hurt their finances in the future, like hidden charges, etc.
So, ensure to go through the terms and conditions thoroughly to check what the new lender has to offer as a sort of benefit.
Other than this, there are other situations as well when home loan borrower opts for the balance transfer option, like they do not like the customer service provided by their current lender.
Some reputed financial organisations and lenders are offering pre-approved offers for simplifying the loan process. These offers are applicable to varied loan products like home loans, property loans, personal loans, etc. Interested borrowers can check their pre-approved offers eligibility from the lender’s website by providing their name and contact number on the required fields.
Therefore, home loan borrowers who want to gain potential benefits out of their loans and at the same time want to avail of interest savings can opt for a home loan balance transfer from a new lender.