A home loan balance transfer enables borrowers to move their present loan account to a different lending institution. By obtaining this facility, individuals can leverage additional benefits from a new lender, including the availability of a top-up loan, lower borrowing rate, active customer support, etc. However, they need to pay an initial processing charge to opt for this. So, before availing the facility, individuals must stay alert to a few things mentioned below to stay at an advantageous point.
Things to consider while seeking a home loan balance transfer
Before you opt to transfer your home loan, be mindful of the following factors:
- Interest rate of the new lender
The new lending institution’s applicable home loan interest rate is the primary thing that individuals need to consider. Only a lower borrowing rate can save a substantial interest outgo and the EMI amount.
Individuals can take the help of a home loan balance transfer calculator provided by various lenders on their website. It can help them understand how much they can save by switching their lenders.
- Remaining interest component
With a home loan balance transfer facility, borrowers can reduce their interest outgo only. The principal component remains unaffected. As they pay the maximum interest component in the first half of their loan tenor, the scope of decreasing the borrowing cost becomes lower in the latter half. So, borrowers need to leverage this facility in the first half. However, while doing this, checking their outstanding interest amount is a must.
Individuals can know how much interest they already have paid from the home loan account statements. It is a record of their paid instalment, applicable interest rate, remaining loan balance, and other details.
- Cost of home loan balance transfer
Individuals also need to know the several applicable charges of transferring a loan account to a different lender. Lending institutions may take various charges such as processing costs, administrative charges and application fees. All these may put an additional burden on borrowers by increasing borrowing costs. So, individuals must calculate all these charges and configure the overall cost of transferring the home loan balance before applying for this.
- Pre-approved offers of
Borrowers can obtain additional benefits by choosing a lender that provides pre-approved offers on its financial products, such as home loans and loans against property. Accepting these offers help borrowers meet immediate financial shortcomings as it expedites the loan application process. Individuals need to mention their credentials, such as names and contact details to check their pre-approved offers.
- Availability of top-up loans
Various lending institutions also extend substantial top-up credit advances to borrowers who transfer their loan balance to them. Choosing such a lender may help individuals meet their emergency liquidity requirements quicker. However, they must know various factors about these home loan top-ups before applying for this credit facility.
This way, individuals can make prudent decisions while switching their existing lenders.
Now that you know the points to check before opting for this balance transfer, you need to consider understanding its documentation requirements.
Documents required for a home loan balance transfer
Here are the documents individuals need to make available while opting for home loan balance transfer:
- Property documents
- Papers for proving identity, date of birth, address
- No objection certificate issued by the primary lender
- Savings account statement for last three months
- Each paystub that you received recently as proof of income
Apart from this, individuals need to know how this home loan balance transfer works. It can guide them while applying for this facility.
In conclusion, a home loan balance transfer can help individuals obtain various benefits. However, they must carefully check the interest rate, processing fees etc., as mentioned above, to ensure that this facility does not increase their borrowing costs.