All about Balance Transfer on Home Loans
Home Loan Balance Transfer is the process of transfer of home loan from one bank with high interest rates to other with low interest rates. There are times the borrower determines that he or she is paying high interest rate on home loan. For example, a person was paying 10.5 percent rate per year.
This interest rate is higher in comparison to 9 percent rate offered by other financial institutions or banks. In such cases, borrowers can use 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.
Factors to consider during Home Loan balance Transfer:
1) Loan Tenure or Loan Period: The person only has to consider the balance transfer option if the remaining period is more than five years. In these cases, the person has the chance to gain some profits. There is no any advantage in Home Loan Balance Transfer from one financial institution to other 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 other bank.
2) 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 institute does not deal in the same way.
3) 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 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 loan, 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 need to be considered before accepting this option.