Home loan balance transfer: benefits and factors to consider – what you need to know

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Home loan balance transfer: If your current home loan carries a higher interest rate, you can easily switch lenders. For this, you must opt ​​for the home loan balance transfer option. A balance loan transfer simply means that you transfer the existing loan from one bank to another.

The balance transfer process has become convenient since RBI removed foreclosure penalties. According to RBI guidelines, lending institutions cannot impose penalties for foreclosure or prepayment of home loans. Previously, borrowers avoided prepaying a loan due to higher prepayment charges.

But now, the RBI directive allows borrowers to take advantage of lower interest rates offered by other lenders by opting for a home loan balance transfer. The main reason most people opt for a home loan balance transfer is for a lower interest rate. If done wisely, it reduces EMIs and makes the home loan much more affordable.

Benefits of Home Loan Balance Transfer

Low interest rates

One of the main reasons people opt for home loan balance transfers is the low interest rate. If an existing loan carries a higher interest rate, a loan balance transfer is a good option.

Low EMI

Interest rates offered on the loan depend on credit profile and eligibility. If the credit rating is good, banks or lenders offer attractive interest rates. This helps reduce the EMI on the remaining loan.

Duration of the mortgage

It is suggested to consider income, financial obligations, interest rates, and other factors when choosing the term of the loan. A home loan balance transfer also provides an opportunity to review the term as the interest rate is lowered on the remaining principal amount. A loan balance transfer helps transition to better loan terms. Transferring or refinancing the home loan balance could help reevaluate the tenure.

Additional loan

In case of additional funds to finance a new home or renovate the existing property, an additional loan option could also be advantageous. Most lenders offer an additional loan facility at attractive interest rates on top of your existing loan.

(Disclaimer: Opinions/suggestions/advice expressed here in this article are investment experts only. Zee Business suggests its readers consult their investment advisors before making any financial decisions.)

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