Home Loan: How to make most of Home Loan Balance Transfer to save on EMIs

Home Loan Balance Transfer: As the Reserve Bank of India (RBI) lending rates are at a historic low, various public sector and private banks have been offering home loans as low as 6.7%. Many of these banks are offering these low interest rates not only on fresh loans but also on balance transfers. 

So, if you have a home loan and want to reduce EMI payments, you may consider Balance Transfer option. 

What is home loan balance transfer?   

In simple terms, balance transfer facility allows transferring your existing home loan from one lender to another lender.  

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Why one needs to consider home loan balance transfer? 

Home loan interest rates vary from one lender to another lender. And, with changes in RBI’s repo and reverse repo rates the interest rates on home loans keep changing.  

No doubt, you must have approached various banks/lenders before shortlisting the current lender for your home loans. However, one should note that with the change in market conditions some other lenders must have started offering home loans at a much competitive interest rate. 

When you transfer the loan from the existing lender to a new lender who is offering low interest rate, you will pay a less amount as EMI. 

Is low interest rate should be the only criteria while opting for balance transfer? 

No doubt, low interest rate is the prime reason that drive borrowers for opting balance transfer, a diligent borrower must evaluate other costs involved like penalties that one needs to pay during the foreclosure of the existing loan account, processing fees to be paid to new lenders, etc. 

According to experts, balance transfer is not profitable when you are approaching at the end of your home loan as the transfer costs offset the low EMIs payments. 

What are the other benefits of a balance transfer? 

Besides reduced EMIs, one can check other facilities like part-payment, top-up loans, foreclosure without any penalties, etc while choosing the new lender. 

Conclusion 

Before opting for the balance transfer, one can negotiate with the existing lender the terms of the loan. If you find a lender who is offering the transfer facility at a reduced interest rate one should evaluate the cost of transfer and take the decision accordingly.