Home Loan Balance Transfer
Home Loan balance transfer is a refinancing option to get your existing more expensive home loan transferred to a bank offering a competitive rate of interest. Though your existing bank also doesn't’t want to lose you as a customer, they might offer you a lower rate if you negotiate with your home loan provider. However still you might want to explore the refinancing option as you might have requirement for additional loan or you might just be looking at consolidating your existing leveraging. Or you might just want to take benefit of some attractive offer given by a new bank. In any of these cases you can get your existing home loan transferred and bring down your overall cost of acquiring a new home.
Why should one go for balance transfer of his existing Home Loan
Before going for balance transfer of your existing home loan carefully evaluate the pros and cons of balance transfer. Because the documentation and process involved is same as for availing a new Home Loan. Also the new lender would also evaluate your finances and you might also lose the benefit of income tax after getting the refinanced house further refinanced. In the following circumstances you might want to get your existing Home Loan transferred to a new lender:
- Your existing home loan is at a very high rate and despite discussing your existing lender is unwilling to reduce the rate of interest. Some lending institutions like LIC Housing Finance are still continuing with higher rate of interest (11.65% for existing customers and 10% offer rate for new customers) for the existing customers while offering lower rate of interest for new customers.
- If you had purchased the under construction property and at the time of first home loan the options in terms of home loan banks or housing finance companies were limited and you couldn't’t choose the lender of your choice. Once the sale deed is done in your favor you have all the options available and you want to choose the one as per your requirements.
- You have additional requirement for furniture & furnishing or you want to repay your other loans at higher rates and you cannot avail of further loan at Home Loan rates. You can avail a higher loan based on the market value of the property, part of the loan goes towards closing your existing home loan and the other part is paid to you; which you can use to pay off your higher debts or use it for furnishing the house at home loan rates.
- In case of financial difficulties simply restructuring your debts and home loan EMI also help in avoiding a major financial crisis. But do not delay in such circumstances, because a dwindling credit history reduces your ability to borrow.
- You might simply want to reduce your monthly EMI payments. However you might have a unique requirement and might not be the case mentioned above, still you can avail a refinancing of your home loan.
Home Loan balance transfer with a top – up
As the value of your property goes higher, you can raise more money at home loan rates on this. As you know the interest rates on home loans are lower than many other financing avenues, therefore it makes sense to repay your other loans at higher rates with the top – up available at the Home Loan Rates. You can refinance your existing home loan and also avail of a top up, which the bank generally pays to you directly. You can use this money to repay your existing personal loan or other such debts incurred during the purchase of the home.
Risks Associated with home loan balance transfer
- Mostly fixed rate loans charge a foreclosure penalty on foreclosure, you must carefully evaluate the costs associated with balance transfer and then take the decision accordingly. Our balance transfer savings calculator can help you calculate the amount of savings by balance transfer.
- New bank or housing finance company would charge you a processing fee for processing your Home loan balance transfer. Check out our special offers on home loan balance transfer.
- If you are reducing your EMI on new loan the cost of acquiring the new home would increase significantly, because reducing EMI would mean increasing the term of the loan and hence interest associated with it.
- Refinancing a home more than twice also takes away the income tax benefit associated with a home loan
- In case you are refinancing to thwart financial crunch, make sure that you’re saving in next few years and you start pre – paying the loan in parts as and when the condition improves.
Benefits of home loan balance transfer
- You reduce the cost of borrowing on home loan and save on interest cost and hence the cost of ownership of home. Calculate the savings on home loan balance transfer through the savings calculator.
- You can consolidate your higher costs debts into one home loan, significant savings on interest and ease of tracking.
- You can encash the increased market value of your home and free up some more cash, which you can utilize to expand your business or in other personal uses or maybe buy another property.
- You might want to take advantage of the market anomaly and get into a fixed rate home loan at lower rates.