What is a Home loan?
A house loan or home loan means a sum of money borrowed from a bank to purchase a house. Home loans consist of an adjustable or fixed interest rate and payment terms. This lender has to keep security until the repayment of the loan.
- Age 23 to 70
- CIBIL score min 750
- Must be an Indian resident
- Minimum income 25000pm
All about Balance Transfer on Home Loans
Home Loan Balance Transfer is the process of transfer of the home loan from one bank with high-interest rates to others with low-interest rates. There are times the borrower determines that he or she is paying a high-interest rate on a home loan. For example, a person was paying a 10.5 percent rate per year.
This interest rate is higher in comparison to a 9 percent rate offered by other financial institutions or banks. In such cases, borrowers can use the Home Loan Balance Transfer. The borrower can start this option with the existing bank or financial institution, under this the outstanding interest rates or unpaid amount of home loan would get transferred to the desired bank which offers low-interest rates.
Benefits of Home Loan Balance Transfer:
- You can get a top-up loan
- The interest rate is lower
- If the repayment track is good you may get you a good Rate of Interest.
Factors to consider during Home Loan balance Transfer:
- Loan Tenure or Loan Period: The person only has to consider the balance transfer option if the pending period is more than five years. In these cases, the person has the chance to gain some profits. There is no advantage in Home Loan Balance Transfer from one financial institution to another if the remaining tenure is less. The existing bank from where the person has taken the earlier loan charges the penalty on transferring the home loan. However, there are some banks that do not charge the penalty or any fee on Home Loan Balance Transfer. The person also has to pay the processing fee to another bank.
- Early payment charges connected to Home Loan Balance Transfer: Banks like SBI (State Bank of India), ICICI, and IDBI provide benefits like no early payment charges to the person’s existing bank if the person transfers the balance. Hence, the person must confirm the same with the new financial institution that are they prepare to deal with the same process. The deal is not profitable if the financial institution does not deal in the same way.
- Additional charges with the loan amount: The person has to confirm that the total amount in Home Loan Balance Transfer including the previous bank penalty and the processing charges should be less than the total loan amount of the previous bank. Hence, people have to consider the additional charges before starting Home Loan Balance Transfer.
People need to take adequate precautions for seeking option balance transfer of housing loans, and they have to study every feature in detail and in a careful manner before availing the balance transfer option. Each of the above factors needs to be considered before accepting this option.
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