On May 2020, the Reserve Bank of India announced a repo rate cut of 40 basis points, subsequently leading to a reduction in the lending rates of financial institutions. This announcement bears good news for individuals looking to avail a home loan since the rates for this advance have currently hit a 15-year low.
Thankfully, individuals with existing home loans can also avail the benefits of these slashed interest rates by opting for a loan balance transfer and shifting their outstanding loan amount to a lending institution offering reduced interest rates.
It is one of the most notable home loan balance transfer advantages, which can make the advance easily repayable. Following is a look at such other benefits of a loan balance transfer facility, which can boost the convenience of availing a housing loan for borrowers.
Benefits of opting for a housing loan balance transfer
Home loans usually have a long tenor along with quite a high principal amount, which makes interest payment a long term financial liability for borrowers. That is why lower interest rates are much more desirable since they considerably reduce the repayment burden of borrowers.
A home loan balance transfer, in this regard, allows borrowers to shift their outstanding loan liability from their existing lender to another one offering lower interest rates. Once an individual opts for a balance transfer, the new lender settles the borrower’s outstanding loan amount with the first financial institution.
The borrower’s repayment liability then shifts to the new lender, and he/she has to pay EMIs as per the rate and terms set by the new financial institution.
Apart from the benefit of reducing interest payments, there are several other home loan balance transfer advantages that one must know about. These include –
- Top-up on the existing loan amount
Borrowers can not only reduce the EMIs through a home loan balance transfer but also avail a top up loan of up to Rs.50 lakh over and above the existing loan amount. This top-up amount comes without any end-use restrictions, which allows one to meet diverse financial requirements without any hassle. This top-up can especially come in handy during financial emergencies.
- Enjoy convenient repayment terms
When you transfer existing home loan, you can not only avail the benefit of a lower interest rate but also enjoy better repayment terms on your loan. This way, you can enjoy services from your lender that are more convenient for your finances. It is one of the most important reasons as to why you should be choosing a home loan balance transfer.
- No pre-payment or foreclosure charges
One of the most significant advantages of home loan transfer is that it allows individuals to switch their existing loans to a lender that does not levy any charges on the part-prepayment or foreclosure of advances. With this facility, one can easily save a substantial amount on interest payments, without having to pay any additional charges.
- Customised insurance benefits
Few financial institutions offer customised insurance policies alongside the home loan transfer facility that allows individuals to safeguard themselves and their families against unforeseen financial urgencies. This benefit under the balance transfer facility is, however, only offered by select financial institutions in India.
Some leading financial institutions in India also bring pre-approved offers on such advances, which streamline the process to avail them. These offers are available on several financial products, including home loans, loans against property, etc. One can check the pre-approved offer by providing his/her name and contact number.
These are, thus, some of the most notable home loan balance transfer advantages that one should be aware of before opting for the facility.
When should one opt for a housing loan balance transfer?
There are a few factors that you should analyse to effectually conclude for when you should do a home loan balance transfer.
These are –
- You should not opt for a home loan transfer every time a financial institution announces a rate cut since the balance transfer facility comes with terms and applicable charges.
- It is better to refrain from availing the balance transfer facility if the loan tenor is nearing its end as it would offer reduced advantages of such transfer while costing you the fees.
Apart from these, there are a few eligibility criteria set by financial institutions that borrowers have to comply with to avail this facility.
Typically, the balance transfer facility is available only for the loan options wherein the property purchased has already been occupied or is ready to be used. One should, thus, ensure that he/she is eligible to avail the home loan balance transfer advantages before opting for it, to avoid any hassles in the process.