Home loan balance transfer: Benefits and factors to consider - what you need to know

Home Loan Balance Transfer: If your existing home loan carries a higher rate of interest, you can easily switch lenders. For this, you have to opt for home loan balance transfer option. A balance loan transfer simply means you transfer the existing loan from one bank to another. 

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

But now, the RBI guideline allows borrowers to avail lower interest rates offered by other lenders by opting for a home loan balance transfer. The biggest reason why most people opt for a home loan balance transfer is a lower interest rate. If done wisely, this reduces EMIs and makes the home loan much more affordable. 

Home Loan Balance Transfer Benefits, Factors To Consider 

Low Interest Rates

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

Low EMI 

The 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 in reducing the EMI on the remaining loan.

Home Loan Tenure

It is suggested to consider income, financial obligations, interest rates and other factors while deciding the loan tenure. A home loan balance transfer also gives an opportunity to revisit the tenure as the interest rate is decreased on the remaining principal amount. A loan balance transfer helps in shifting to better loan tenures. Home loan balance transfer or refinancing could help in reassessing the tenure.

Top-Up Loan

In case of more funds to finance a new home or renovate the existing property, a top-up loan option could be also beneficial. Most lenders offer a top-up loan facility at attractive interest rates over and above your existing loan.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)