Over the past couple of years, home loan rates have been on the decline. This is the reason why so many borrowers looking to take advantage of the current rates are applying for home loans. Now, those who have already taken a home loan a few years ago and now find new plans offering lower interest rates can opt for a home loan balance transfer. This involves transferring their existing loan to a new lender that is offering a lower interest rate. Do keep in mind that interest rates are not the only reason that borrowers opt for such a transfer. Other reasons can also include getting a top-up loan, better services, or an extended repayment tenure.
However, before going for a transfer, it is important to consider certain things. Taking any decision regarding your loan without first thinking it through and considering all the expenses can lead to complications. This is why it is important to be aware of the following tactics before opting for a home loan balance transfer:
- Consider the revised interest rate
One of the main reasons why borrowers choose to transfer their home loans is the revised interest rate. Now, it is natural to look for the lowest home loan interest rate while looking for a new lender. Make sure to use a home loan balance transfer EMI calculator to understand the difference between the previous and new EMIs.
- Be aware of the charges levied on the home loan transfer
Most lenders generally include a processing fee for home loan balance transfers. It is very important to count this expense before opting for a home loan transfer. Once you are aware of this charge, look at the amount getting saved by opting to transfer the loan after all the expenses before making the final decision.
- Keep the current loan’s existing tenure in mind
One of the most important factors to focus on is the remaining tenure of the existing home loan. If the tenure is towards its end, going for a home loan transfer might not result in significant savings. This is because the number of remaining monthly instalments is anyways less, which means that the revised interest rate might not make much of a difference. It is better to refinance your home loan if a majority of its repayment is still pending.
- Make sure to have a good credit score
It is always important to have a good credit score, as any lender will review this score while deciding whether to approve a loan application. Now, even if you got a loan approved with an average credit score, it is quite likely that the lender might have charged a high interest rate. With an improved credit score, the new lender can offer a lower interest rate when you opt for a home loan balance transfer.
Lastly, make sure to check with the lender about the documents required for home loan balance transfer. Being aware of this beforehand will help you complete the entire process without any difficulty.
