Apparently, in today’s competitive world, borrowers are the ones who are facing the double whammy of inflation, be it soaring day-to-day expenditures or the rising interest rates of loans. Certainly, the former is beyond control but the latter can be managed through an effective measure. So, as a borrower, do you think that your home loan interest rates and charges are becoming more and more burdensome? Are high EMIs hampering your monthly budget? If it is so, then, it is time you look out for balance transfer of your home loan to another lender. This refinancing option will definitely help you lower your interest rate and make your EMIs comparatively affordable. And there are chances where you might also get certain additional benefits, such as no prepayment penalty, additional top-up amount, insurance cover, and more. Here is a step-by-step guide about what all you should consider before transferring your home loan.
1. Possibility of Home Loan Balance Transfer
First of all, before you start looking for new lenders to transfer your home loan, you should carefully read the terms and conditions provided by your current lender, as certain banks and financial institutions have a clause that restricts the transfer of home loan to another lender. So, if your lender has such a clause which prevents you from the same, then you are only left with the option to renegotiate your home loan interest rate with the current lender.
2. Negotiating for a Lower Home Loan Interest Rate
Another chance that you should probably take before opting for Balance Transfer is negotiating for a lower home loan interest rate with your current lender. This can be done on the grounds of good credit history and on-time repayment record. It is worth a try to consider negotiation as an option as some banks might agree to lower the interest rates in the concern of not losing customers. Also, if it turns in to your favour, it will save a lot of time, money and effort. There will be no need to run around for new formalities and documentation procedures.
3. Checking the Market for Affordable Interest Rates
If the above two options do not work out, it becomes necessary for you to avail the Balance Transfer facility. To start with that, go by checking for lower interest rates offered by various lenders available in the market. You could also try reaching out to certain preferred lenders to discuss better about your needs and get a personalized quote, which you may not find online.
4. Collecting Information About the Lender
Once you shortlist a few lenders, another parameter of comparison amongst them should be the benefits and services offered with Balance Transfer facility. Moreover, it is highly recommended to go through lenders’ reviews and testimonials on several real-estate platforms before arriving at a decision.
5. Calculating the Cost of Transfer of Loan
Transferring your home loan involves several charges such as processing fee, application fee, inspection charges, administrative charges, and more. In most of the cases, banks charge transfer fees which will be charged by both existing as well as the new lender. Calculate if the total costs involved in your transfer are less than the interest amount that you will save by making the transfer or not. If not, you should look out for another lender or settle with the current one.
6. Go Through the Terms and Conditions Carefully
It is crucial to be aware that once you transfer your home loan to a new lender, you will be bound to their terms and conditions. While a lower interest rate may seem tempting, it is also essential to be aware of all the conditions associated with your loan. This might include information about certain hidden charges as well. Therefore, you must read all the terms and conditions thoroughly to gauge how much you will benefit by transferring your home loan.
Process for Home Loan Balance Transfer
- Close the deal with your existing bank: Before starting off with the Balance Transfer process, it is necessary for you to get approval from the existing lender by sending a letter to your existing lender requesting home loan transfer. Once confirmed, you will get a No Objection Certificate (NOC) along with the loan statement mentioning the outstanding amount.
- Provide NOC to the new lender: Give the NOC (No Objection Certificate) to your new lender to get approval on the loan amount.
- Transfer documents: After the completion of the transaction, your property documents will be handed over to the new lender. The leftover post-dated cheques stand cancelled. Also, make sure that you do not leave any document from being transferred.
It is critical to thoroughly gauge the advantages and disadvantages of the transfer process before making the final call. In precise words, unless Balance Transfer brings long term benefits, you should consider sticking with your current home loan provider.