Have you taken a home loan a few years back and now find loan plans with much better terms? Don’t worry! You can always go ahead and apply for a home loan balance transfer. For those who are not aware of this, it involves transferring a current home loan plan to another lender. The outstanding loan amount is cleared with the existing lender and shifted to the new one. Now, there are numerous reasons why borrowers opt for this transfer. It could be for a lower interest rate, top-up loan, or even better repayment terms.
However, transferring a home loan might not always be beneficial. There are certain factors that one needs to consider before taking this step. This is to ensure that moving to a new lender saves money and is not a bad financial decision.
So, how do you decide whether going for a home loan balance transfer is a good option? Let’s find out!
- Is the repayment tenure of the loan reaching its end?
If the current home loan is already at the end of its tenure, it might not make much sense to transfer the home loan. This is because the number of monthly instalments remaining to be paid off is low, so you might not be able to take advantage of the revised terms of the new lender. It is better to go for a home loan balance transfer when most of the EMIs are left to be repaid.
- Are you getting a good deal on the revised interest rate?
The revised interest rate offered by the new lender is arguably the biggest benefit of a home loan balance transfer. Even a slight drop in the interest rate can have quite the impact on your loan EMIs. So, make sure to focus on the home loan balance transfer interest rate to understand how it benefits your repayment plan.
- Have you checked the additional charges involved in the transfer?
Many borrowers think that the interest rate is the only thing that they pay for while going for a loan transfer. However, financial institutions could also charge additional fees for the transfer of the home loan. This is why it is better to be aware of the additional charges such as the processing fees or application fees before going for a home loan balance transfer.
- Have you used a home loan balance transfer calculator?
The most important thing is to be sure that the loan’s EMIs can be afforded. If you are transferring your home loan, it is important to know about the new monthly instalments to avoid any financial complications in the future. Therefore, using a home loan balance transfer calculator can be useful as this tool helps in displaying the EMI results based on the new lender’s terms. You can then check whether the new EMIs are a better fit for your budget.
After considering all these factors and using the home loan refinance calculator, you can then decide whether transferring your home loan would be a wise decision or not.