Home loan: is it the ideal time to opt for a balance transfer?

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This could be the perfect time to opt for a balance transfer, especially for anyone who has purchased a home loan within the last 5 years or so and still has a significant tenure.

Home loans fall under the category of long-term loans with terms of up to 30 years. Therefore, most borrowers spend large sums on its maintenance.

Additionally, over 50% of the EMI component of a home loan over the life of the loan remains the amount of interest a borrower pays to the bank. Therefore, if you expect to pay high interest and EMI to your current bank, you may consider transferring your home loan to another bank.

Nonetheless, with home loan interest rates hovering around 7% and even below, it seems like the perfect time to opt for a balance transfer.

Industry experts suggest this could be a great time to opt for a balance transfer, especially for anyone who has purchased a home loan within the last 5 years or so and still has a significant tenure. Home loan interest rates are at their lowest in 10 years and have been on a downward trend.

Pramod Kathuria, co-founder and CEO of Easiloan, says: “While there can always be an upward fluctuation that is difficult to predict, lately there has not been a better opportunity for a transfer of balance.”

While balance transfer can save you money on your EMI or shorten your loan term, it’s critical that you take advantage of it at the right time. Indeed, a transfer process involves fees, paperwork and also the risk of potential hidden costs from the new lender.

That said, experts say borrowers should opt for this when they have substantial outstanding or at least 10 years remaining in their home loan and they get a much better deal from another lender.

Keep in mind that your loan balance is a combination of principal and interest and interest repayment is always anticipated by the lender. Therefore, you get maximum savings through a balance transfer only when you have a large balance outstanding. Therefore, “if you’re at such a stage where you get a much better deal from another lender with the repayment of your loan, you should go for it,” adds Kathuria.

That said, note that timing is critical and as a borrower you should opt for a balance transfer when you are in the first half of your loan term.

Experts say a borrower should always weigh the time and expense they will invest in against the savings they will realize. In such cases, a host of balance transfer calculators provided by bank websites could come in handy.

Once you have a lender in mind, experts suggest always doing a thorough check of the bank’s customer experience with relevant borrowers in your network could help you further.

Note that the key things to consider here are potential hidden fees, flexibility to react quickly to rate changes, and ease of documentation for the transfer process.

Additionally, says Kathuria, “it helps if the borrower’s home that this loan is against is an ‘APF-approved project’ by the target lender.” This speeds up your transfer process.

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